Despite criticism, US Congress passes law regulating stablecoins

In the US, both houses of Congress have passed a bill that sets new rules for stablecoins pegged to the US dollar or other reliable assets. When voting on the so-called Genius Act, almost all Republican representatives and half of the Democrats voted in favor, giving it a broad majority. Now all that's needed is Donald Trump's signature. The law specifies who is allowed to issue a stablecoin in the US and that federal laws apply once the total value exceeds US$10 billion. Under certain circumstances, foreign entities may also launch stablecoins in the US.

Perceived as more stable

Stablecoins are cryptocurrencies whose price is pegged to another value, usually established currencies such as the US dollar. As a result, they are not subject to the same price fluctuations for which Bitcoin, for example, is known. This makes them appear more stable in value. However, this does not mean that even large stablecoins cannot collapse, as TerraUSD has shown. In May 2022, the value of what was then the fourth-largest stablecoin plummeted from US$0.99 to around US$0.01 in a very short time, causing numerous other cryptocurrencies to lose massive value. Those responsible are accused of fraud.

As the BBC explains, the US law on stablecoin regulation that has now been passed is one of three with which the ruling Republicans want to respond to demands from the industry. Critics say that the Genius Act would allow those responsible for stablecoins to engage in activities that are otherwise only permitted to banks, while at the same time not subjecting them to the same supervisory obligations. Consumer advocates warned back in the spring that the law would promote the spread of cryptocurrencies that are mistakenly perceived as safe. According to reports, Trump is expected to sign the law on Friday.

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(mho)