Can the Genius Act save banks from stablecoins?

Key Points

1. Stablecoins are seen as a new form of money with potential systemic impacts, similar to money market funds in the past.

2. Regulation Q, established in 1933, was designed to prevent banks from competing on interest rates, which had destabilized the banking system in the 1920s.

3. Money market funds circumvented Regulation Q by paying dividends instead of interest, leading to a shift of deposits from traditional banks to shadow banking systems.

4. The Genius Act is expected to address the integration of stablecoins into the banking system, potentially repeating historical patterns of regulatory adaptation.

5. Stablecoin issuers and DeFi protocols may find ways to bypass existing regulations, similar to how money market funds did in the past.