On Thursday, the U.S. House of Representatives took a significant step towards mainstreaming cryptocurrency by passing the first major piece of nationwide legislation aimed at regulating this burgeoning sector. This move is anticipated to bring cryptocurrencies further into the mainstream economy, addressing uncertainties that have long surrounded the treatment of the crypto industry.
The value of the cryptocurrency market has soared to an impressive $3.7 trillion, yet it has largely remained a niche investment primarily favored by risk-tolerant investors. With the House's recent vote, the federal government is on the cusp of establishing its initial set of rules governing how financial institutions can issue crypto tokens, focusing particularly on a less-volatile category known as stablecoins. Stablecoins are typically pegged to the value of the U.S. dollar, making them a more stable option for transactions.
The legislation, known as the Genius Act, received bipartisan support, passing with a vote of 308-122, and is now poised to be signed into law by President Donald Trump. Trump has publicly endorsed the bill and expressed his commitment to fostering a more lenient regulatory environment for cryptocurrencies while promoting his own crypto ventures.
Under the provisions of the Genius Act, issuers of stablecoins, which may include banks and crypto companies, are mandated to maintain reserves of sufficient U.S. dollars or equivalent assets to ensure the coins' value remains stable. Furthermore, these issuers will be required to disclose detailed information regarding their reserves, a move aimed at enhancing transparency and consumer protection.
This legislation is part of a broader initiative that House Republicans have dubbed “crypto week.” Alongside the Genius Act, two additional proposals were also passed: the Clarity Act, which designates the Commodity Futures Trading Commission as the primary regulator for crypto activities, and the Anti-CBDC Surveillance State Act, which aims to prevent the Federal Reserve from issuing a digital currency.
The focus of the Genius Act is on stablecoins, which are viewed as a more suitable option for everyday transactions due to their relative stability. Unlike more volatile cryptocurrencies like Bitcoin, stablecoins are typically pegged to a government-issued currency at a 1:1 ratio, making them less susceptible to drastic market fluctuations. While stablecoins are commonly used as a medium for purchasing other cryptocurrencies, proponents argue that increased adoption could pave the way for their use in routine purchases.
Despite the promise of stability, some stablecoins, such as TerraUSD, have faced catastrophic collapses. Supporters of the Genius Act argue that the legislation establishes a much-needed regulatory framework for the issuance of stablecoins, thereby helping the United States remain competitive in the burgeoning $260 billion stablecoin market while ensuring consumer protections are codified.
However, the Genius Act has faced criticism for lacking sufficient safeguards against potential corruption. Critics point to President Trump's involvement in the crypto industry and his financial interests, raising concerns about possible conflicts of interest. Notably, Trump disclosed earning $57.3 million from his stake in the family-owned World Liberty Financial, which issues the stablecoin USD1.
Since the launch of a separate meme coin in January, Trump-affiliated businesses have reportedly generated at least $312 million from crypto sales and accrued $43 million in fees. During a recent House Rules Committee hearing, Rep. Maxine Waters (D-California) voiced her concerns, stating, “The one thing that stands out about everything else is the president is definitely in conflict of interest. This is corruption in its finest form.”
In response, White House spokeswoman Anna Kelly asserted that Trump’s crypto holdings are managed in a trust by his adult children, suggesting that these do not pose a conflict of interest. “President Trump is dedicated to making America the crypto capital of the world and revolutionizing our digital financial technology,” Kelly stated.
The Trump administration's supportive stance on cryptocurrency regulation marks a stark contrast to the previous Biden administration, which took a more aggressive approach by suing major crypto companies for alleged violations of investor protection rules. The Biden administration also pursued several high-profile cases against prominent figures in the cryptocurrency space, including Sam Bankman-Fried, who was convicted of fraud related to his collapsed crypto exchange, FTX.
In light of the challenging regulatory environment, the crypto industry has ramped up lobbying efforts to advocate for more favorable oversight. Supporters within the crypto community have also contributed financially to Trump’s 2024 presidential campaign, as he continues to pledge to establish the United States as the “crypto capital of the planet.”
