GENIUS Act blocks Big Tech, banks from dominating stablecoins: Circle exec

GENIUS Act: Will it Level the Playing Field in India’s Burgeoning Stablecoin Market?

A new piece of legislation in the United States, known as the GENIUS Act, is generating significant buzz in India’s fintech circles. Experts believe it contains provisions that could significantly impact the future of stablecoins, particularly concerning the entry of large technology corporations and established banks into the market.

The ‘Libra Clause’: Keeping Big Tech in Check

According to reports, the GENIUS Act includes a key clause, sometimes referred to as the ‘Libra Clause’, which aims to prevent the monopolization of the stablecoin market by tech giants. This clause reportedly mandates that any non-bank entity intending to issue a dollar-pegged stablecoin must establish a legally separate and independent entity. This new entity needs to mirror established stablecoin issuers, ensuring adherence to stringent regulatory frameworks.

• The law introduces antitrust hurdles for large tech firms venturing into stablecoins.
• A committee within the Treasury Department could possess veto power over the launch of new stablecoins.

Banks Face Strict Scrutiny Too

The GENIUS Act doesn’t just target tech giants; it also places restrictions on banks looking to issue stablecoins. The legislation requires banks to house their stablecoin operations in a legally distinct subsidiary. Crucially, this subsidiary must operate with a highly conservative balance sheet.

• The subsidiary is barred from engaging in risk-taking activities.
• Leverage and lending related to the stablecoin issuance are prohibited within the subsidiary.

Impact on the Indian Market

While the GENIUS Act is US legislation, its implications could reverberate globally, influencing regulatory approaches in countries like India. The act’s focus on preventing market dominance and promoting responsible innovation in the stablecoin space could serve as a valuable lesson for Indian regulators as they navigate the evolving digital asset landscape. The Reserve Bank of India (RBI) is already actively exploring the development of a Central Bank Digital Currency (CBDC), and the regulatory framework for privately issued stablecoins remains a topic of ongoing discussion.