On Thursday, July 17, capping off what was dubbed “Crypto Week” by Congress, the US House just passed three digital assets related bills. Here is a breakdown of all that was passed:
The GENIUS Act:
The Senate’s stablecoin bill, by a vote of 308-122. By bringing regulatory clarity to the asset class, the law is expected to stimulate the growth of the stablecoin industry. The GENIUS Act first passed the Senate on June 17 by a vote of 68-30, with 18 Democrats supporting the bill and 2 Republicans (Senators Hawley and Paul) voting against it. Two Senators were not present (Senators Cotton and Kelly). Broadly, the GENIUS Act creates a regime for the issuance and regulation of U.S. dollar-backed payment stablecoins. By bringing regulatory clarity to the asset class, the legislation, if passed into law, is expected to stimulate the growth of the stablecoin industry.
What the bill does
- The bill sets forth standards for regulatory oversight, striking a balance between federal and state authorities.
- The bill allows payment stablecoins to be issued by subsidiaries of banks and non-bank entities. Banks would be overseen by their primary federal regulator, while non-bank entities would be overseen at a federal level by the Office of the Comptroller of the Currency (OCC) or under qualifying state regimes.
- Sets up reserve requirements, supervision and enforcement, ie at least 1 to 1 backing with U.S. dollars, short-term Treasuries (93 days or less), or similarly liquid assets.
- Requires Bank Secrecy Act (BSA)/Anti-money Laundering (AML) compliance for issuers.
- Mandates insolvency requirements with customer protections.
Other Key Provisions of the bill
- Bank Permissibility:
- Banks can issue stablecoins and act “as a principal or agent with respect to any payment stablecoin and payment of fees to facilitate customer transactions.”
- Preserves current custody practices, allowing banks to hold stablecoin reserves under existing rules.
- Carves out tokenized deposits from the legislation.
- Federal licensing preemption: Federal licensing supersedes and preempts any state licensing requirement for any federally chartered payment stablecoin issuer.
- Bank Secrecy Act / Anti-Money Laundering Requirements: Issuers shall be treated as a financial institution for the purposes of the Bank Secrecy Act; Issuers (domestic and foreign) must demonstrate the ability to freeze or burn tokens.
- “SAB 121” prevention clause: Prevents federal regulators from requiring custodied digital assets to be held on balance sheet.
- Capital treatment: A non-permitted stablecoin can NOT be treated as a cash or cash equivalent for accounting purposes.
- Fed Master Accounts: The bill stays neutral on Fed account access and does not alter who is currently legally eligible for Federal Reserve services or deposit access.
- Interest Payments: Prohibits domestic and foreign issuers from offering interest to holders, although it does not address 3rd parties or affiliates.
- Licensing: Provides both a state and federal (OCC) licensing path for non-bank issuers, although state issuers must get federal license once over $10B in assets.
- Reserve Authentication: Monthly public disclosures of reserve composition; Annual financial audits for issuers with market capitalizations exceeding $50 billion.
- Activity Limits: Creates limits on the types of activities a non-bank stablecoin issuer can conduct (ie issue & redeem stablecoins; manage reserves; and custody stablecoins).
- Non-Security clarification: Payment stablecoins are explicitly excluded from being classified as securities.
- Marketing restrictions: Prohibits the use of “USG”, “United State Government” or “legal tender” as part of materials and naming conventions; allows the use of “USD”.
- International Stablecoins: Non-compliant foreign issuers may be barred from U.S. markets unless they comply with U.S. regulations and/or are licensed by an approved similar regime.
- Conflict of Interest: Clarified that financial conflict of interest standards apply uniformly to both regular and special government employees, although the referenced statute in the bill carves out the President and Vice President.
- Big Tech company issuance: Restricts issuance by large U.S. public or foreign companies not primarily engaged in financial services, unless they meet certain standards (TBD by the Stablecoin Certification Review Committee (SCRC), which is made up of the Treasury Secretary, FDIC Chair, and Fed Chair or Vice Chair) and are unanimously approved by the SCRC.
Hellbound and Down 