Stablecoins Welcome Regulatory Breakthrough, May Become a Milestone Moment for Crypto Assets

Stablecoins, as an important pillar of on-chain finance, are about to receive legal recognition from U.S. regulators. This is seen by industry insiders as the "ChatGPT moment" for Crypto Assets, marking the emergence of the first encryption product with mainstream practicality and clear institutional status.

The "Guiding and Establishing the American Stablecoin National Innovation Act" (GENIUS Act) may become the most influential legislation in the history of Crypto Assets. This bipartisan bill establishes the first federal framework for payment stablecoins, aiming to instill confidence, clarity, and institutional legitimacy in the stablecoin market valued at over $260 billion.

Main Content of the Bill

1. Asset Backing: The issuer must fully back the stablecoin with high-quality liquid assets at a 1:1 ratio, including USD cash, insured bank deposits, money market funds, or short-term government bonds.

2. For payment purposes only: The issuer shall not pay interest to stablecoin holders, ensuring that the stablecoin is used solely as a digital cash equivalent.

3. Bankruptcy Protection: In the event of the issuer's bankruptcy, stablecoin holders have priority claim rights over the reserve assets.

4. Transparency and Auditing: Issuers are required to disclose reserve status monthly and undergo regular audits.

5. Anti-Money Laundering Compliance: Strict AML and KYC measures are required, and issuers must implement compliance plans under the Bank Secrecy Act.

6. Regulatory Structure: Federal and state regulatory agencies are authorized to oversee issuers, with the U.S. Department of the Treasury as the primary regulatory agency.

7. Issuer Qualifications: Banks, fintech companies, and even large retailers can issue stablecoins, but publicly traded companies primarily engaged in technology, social media, or e-commerce are prohibited from issuing them.

Impact on USDC and USDT

Although the bill has strict requirements for asset backing, its impact on offshore issuers like USDT may be limited. As long as their rules align with U.S. standards, they can continue to operate in the U.S. market. It is expected that multiple stablecoin issuers will compete, driving down issuance costs. Future winners may emerge by providing services around stablecoins, such as payroll payments and rapid payments.

In emerging markets, stablecoins themselves hold value and protect holders from the effects of high inflation. USDT dominates these markets and is expected to maintain its advantage.

Impact on Fintech Companies

In the coming years, major financial technology companies are expected to launch their own stablecoins. These companies have large user bases, global infrastructure, and strong balance sheets and banking partners. Stablecoins can provide them with a global 24/7 payment channel, reduce costs, and bring new sources of revenue.

Impact on American Banks

Traditional banks are facing challenges. Future banks may be financial technology companies built on crypto assets tracks. Innovative banks and financial technology companies will thrive, while slow-moving banks may lose competitiveness in the coming years.

Impact on Payment Giants

Stablecoins can be settled almost instantly, supporting global peer-to-peer transactions at a low cost. This poses a significant threat to the traditional card payment industry. Payment giants may need to transform into "trust and tools" providers to adapt to the new market environment.

The Impact on the Dominance of the US Dollar

Stablecoins are extremely beneficial for the United States and the dollar. They expand the global network effect of the dollar and also diversify the holding base of U.S. debt. Offshore stablecoin issuers are particularly important as they bring in new buyers of U.S. debt and provide financial services to the unbanked population.

Investment Advice

1. ETH and SOL are considered the safest long-term stablecoin investment options.
2. COIN and HOOD can be used as alternative options, but are currently at historical highs.
3. Circle's valuation is relatively high, and it is not recommended to chase the price.
4. Ethena and Sky(MakerDAO) are considered high-risk, high-reward options.

Overall, the supply of stablecoins, on-chain transaction speed, prices, and volatility are all on the rise, making the development in this field worthy of close attention.