US lawmakers have made some interesting changes to the GENIUS stablecoin regulation act.
These changes could possibly limit major tech companies like Meta, Amazon, Google and Microsoft from getting involved in the stablecoin market.
One of the reasons for this update was the USD1 stablecoin issuance from Trump-affiliated WLFI.
The bill also restricts high-profile individuals in government advisory roles from launching or getting involved with stablecoins.
While this bill makes the crypto market safer, it does impose some heavy restrictions.
The US government continues to wrestle with how best to regulate the crypto space, and the GENIUS Act (short for the Guiding and Ensuring National Interest in Unified Stablecoins Act) has become one of the biggest battlegrounds for this fight.
After an initial failure to pass the Senate earlier this month, lawmakers have returned with a revised version of the GENIUS Act, with major bipartisan amendments.
These changes are aimed at addressing issues related to fraud, enforcing stricter regulations.
Most importantly, major tech companies like Meta, Amazon, Google and Microsoft are likely to get restricted from the stablecoin market.
Here are the details.
Stablecoins have become wildly popular in the US, especially with President Donald Trump’s rejection of a US based CBDC.
However, this asset class has also raised red flags among regulators, especially concerning consumer protection, market stability and their possible misuse in illegal activity.
New updates to the GENIUS Act
The GENIUS Act was introduced to tackle this challenge by providing a clear legal framework on how to issue and control stablecoins.
Despite initially gaining traction, the bill failed a Senate vote on 8 May due to a combination of Democratic resistance and Republican defections.
Critics mentioned issues with Donald Trump’s World Liberty Financial (WLFI) and the launch of the controversial stablecoin branded as “USD1,” as one of the reasons for this rejection.
The new amendments to the GENIUS Act have several new controversial provisions.
However, one of the biggest of these is its mention of tech giants.
According to lawmakers, publicly traded firms like Meta, Amazon, Google, and Microsoft should be prohibited from issuing stablecoins.
At least, unless they can meet a strict set of requirements like financial risk controls, strong consumer data privacy safeguards, as well as fair business practices
This new update was designed to keep banking and commerce separate in the U.S.
In essence, it is designed to prevent financial power from being concentrated in the hands of large, non-financial corporations.
There is even some discussion of barring these companies from holding stablecoins altogether, even though the final update of the bill is still under review.
If this stricter version is eventually adopted, these big tech companies will become locked out of the stablecoin economy unless they divest.
One of the reasons that such a harsh bill is being passed, was the controversy around the WLFI stablecoin, USD1.
Critics argued that the token misled consumers by implying that the stablecoin was somehow affiliated with the US government through Donald Trump.
The updated GENIUS Act was created to directly target this type of branding. In essence, it is seeking to prevent stablecoins from mimicking official U.S. assets or taking advantage of political influence.
In addition, the bill includes more ethics provisions for special government employees (like Elon Musk and other high-profile individuals), who may have conflicts of interest between government advisory roles and private crypto ventures.
Even though the GENIUS Act’s 8 May failure was a setback for crypto regulation in the U.S., the new bipartisan amendments show that supporters are determined to pass the bill before the upcoming Memorial Day recess.
The revised bill is an attempt to strike a balance between innovation and protecting the financial system.
While it opens the door for Big Tech companies to participate in the stablecoin market, it also does so under heavy restrictions.
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