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GENIUS Act

GENIUS Act

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 This week we talk about stablecoins, crypto assets, and conflicts of interest.We also discuss the crypto industry, political contributions, and regulatory guardrails.Recommended Book: Throne of Glass by Sarah J. MaasTranscriptA cryptocoin is a unit of cryptocurrency. A cryptocurrency is a type of digital currency that uses some kind of non-central means of managing its ledger—keeping track of who has how much of it, basically.There have been other types of digital currency over the years, but cryptocurrencies often rely on the blockchain or a similarly distributed means of keeping tabs on who has what. A blockchain is a database, often public, of users and a list of those users’ assets that’s distributed between users, and it makes use of some kind of consensus mechanism to determine who actually owns what.Some cryptocurrencies ebb and flow in value, and are thus traded more like a stock or other type of non-fixed, finite asset. Bitcoin, for instance, is often treated like gold or high-growth stocks. NFTs, similarly, create a sort of artificial scarcity, producing unique digital goods by putting their ownership on a blockchain or other proof-of-ownership system.Stablecoins are also cryptocurrencies, but instead of floating, their value growing and dropping based on the interest of would-be buyers, they are meant to maintain a steady value—to be stable, like a national currency.In order to achieve this, the folks who maintain stablecoins often use reserve assets to prop up their value. So if you produce a new stablecoin and want to issue a million of them, each worth one US dollar, you might accumulate a million actual US dollars, put those in a bank account, show everybody the number of dollars in that bank account, and then it’s pretty easy to argue that those stablecoins are each worth a dollar—each coin is a stand-in for one of the dollars in the bank.In a lot of cases, the people issuing these coins aim for this approach, but instead of doing a direct one-for-one, dollar for coin system, they’ll issue a million coins that are meant to be worth a dollar apiece, and they’ll put one-hundred-thousand dollars in a bank account, and the other 900,000 will be made up of bitcoin and stocks and other sorts of things that they can argue are worth at least that much.As of mid-2025, about $255 billion worth of stablecoins have been issued, and about 99% of them have been pegged to the US dollar; Tether’s USDT, Binance’s BUSD, and Circle’s USDC are all tethered to the USD, for instance, though other currencies are also used as peg values, including offerings by Tether and Circle that are pegged to the Euro.Stablecoins that are completely or mostly fiat-backed, which means they have a dollar for each coin issued in the bank somewhere, or close to that, tend to be on average more stable than commodity or crypto-backed stablecoins, which rely mostly or entirely on things like bitcoin or gold tucked away somewhere to justify their value. Which makes sense, as while you can argue, hey look, I have a million dollars worth of gold, and I’m issuing a million coins, each worth a dollar, that asset’s value can change day-to-day, and that can make the value of those coins precarious, at least compared to fiat-backed alternatives.Because stablecoins are not meant to change in value, they’re not useful as sub-ins for stocks or other sorts of interest-generating bets, like bitcoin. Instead, they’re primarily used by folks who want to trade cryptoassets for other sorts of cryptoassets, for those who want to avoid paying taxes, or want to otherwise hide their wealth, and for those who want to transfer money in such a way that they can avoid government sanctions and/or tariffs on those sorts of transfers.What I’d like to talk about today is a new US federal law, the GENIUS Act, which was heavily pushed by the crypto industry, and which looks likely to make stablecoins a lot more popular, for better and for worse.—The Guiding and Establishing National Innovation for US Stablecoins Act, or GENIUS Act, was introduced in the Senate by a Republican senator from Tennessee in May of 2025, was passed in June with a bipartisan vote of 68-30—the majority of Republicans and about half of Democratic senators voting in favor of it—and after the House passed it a month later, President Trump signed it into law on July 18.Again, this legislation was heavily pushed by the crypto industry, which generously funded a lot of politicians, mostly Republican, but on both sides of the aisle, in recent years, as it serves folks who want a broader reach for existing stablecoins, and who want to see more stablecoins emerge and flourish, as part of a larger and richer overall crypto industries.Folks who are against this Act, and other laws like it that have been proposed in recent years, contend that while it’s a good idea to have some kind of regulation in place for the crypto industry, this approach isn’t the ...
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