GENIUS Act Could Reshape US Stablecoin Regulation, Impacting USDC Issuers and DeFi Environment

Key Points

1. The GENIUS Act encourages stablecoin issuers to obtain national banking charters, with the OCC providing a streamlined regulatory pathway.

2. A key provision bans stablecoin issuers from offering yield or incentives to users, impacting practices like Circle’s USDC rewards.

3. The Act does not fully address stablecoin usage in DeFi, leaving regulatory ambiguity until complementary legislation like the CLARITY Act is enacted.

4. Stablecoin issuers must maintain 1:1 reserve backing and disclose reserve composition publicly to enhance market transparency.

5. Non-approved and foreign stablecoin issuers will face prohibitions or stringent requirements to operate in the US market after three years.

6. A multi-agency oversight framework is established, involving the Treasury, Federal Reserve, OCC, FDIC, and NCUA, with options for state-level regulation for smaller issuers.