The planned stablecoin law in the US is causing heated debate: Critics warn of a “privatization of the dollar,” while supporters see it as a necessary step to promote innovation and maintain dollar dominance.
The GENIUS Act, introduced by Republican Senator Bill Hagerty and Democrat Kirsten Gillibrand, proposes dual regulation for stablecoin issuers. Stablecoins are cryptocurrencies pegged to fiat currencies such as the U.S. dollar and are currently used primarily in crypto trading. The bill would allow issuers to apply to either state or federal regulators. Furthermore, stablecoin issuers would be required to maintain a one-to-one reserve. In the United States, the proposed GENIUS Act to regulate stablecoins is causing controversy.
Stablecoin Bill in Sight: Critics’ Concerns
Elizabeth Warren, Democratic Senator and well-known crypto skeptic, warns of the bill’s potential consequences in an analysis she provided to her Democratic colleagues and shared with MarketWatch. “Under this bill, Elon Musk could launch ‘X Money’ tomorrow and turn social media into a payments empire—with little oversight. We’re seeing the potential privatization of the dollar here,” Warren said. She fears that this could allow Big Tech to take control of the financial system, which would jeopardize the independence of the U.S. dollar.
Senator Gillibrand Defends the Bill: Promoting Innovation?
However, Warren’s opponents argue that her warnings are overblown. Senator Gillibrand has dismissed these concerns, emphasizing that the bill is “critical to maintaining the dominance of the U.S. dollar, promoting responsible innovation, and protecting consumers.” According to her, the legislative initiative is necessary to counter competition from foreign stablecoins and digital currencies and to secure the international influence of the US dollar.
Another key point that Gillibrand emphasizes is the creation of a clear regulatory framework that will enable the safe and transparent use of stablecoins without stifling the industry’s innovation.
Critics criticize consumer protection and financial stability
Critics also point to the lack of consumer protection in the law, as stablecoin issuers are not subject to the same regulations as banks or payment services. Jai Massari, Chief Legal Officer at Lightspark, explains according to MarketWatch: “The focus of stablecoin regulation should be on their use for payments, and we historically have not regulated payment intermediaries like banks.”
The financial impact of the law is still difficult to estimate, but experts fear it could lead to a destabilized financial landscape. Adam Levitin, a bankruptcy law expert at Georgetown University, warns that the creation of a new regulatory framework could make the federal government responsible for any problems in the market. “By creating a regulatory regime for stablecoins, the federal government will ‘own’ any problems that arise in the market,” Levitin wrote in a recent blog post. “It creates a situation where the government must provide security, or else pay its own way. In other words, it sets the stage for a bailout.”
Crypto Regulation: A Bill with Far-Reaching Consequences
The GENIUS Act could have significant implications for the US economy and the global financial system. While supporters see it as necessary to promote competition and innovation, critics warn it poses a threat to the stability of the US dollar. The upcoming debate in the US Senate could be crucial for the future of stablecoins and financial regulation in the US.
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