The Potential Impact of the Genius Act on the Crypto Assets Industry

Recently, the U.S. Senate passed the "Guidance and Establishment of the United States Stablecoin National Innovation Act," also known as the Genius Act. This is the first comprehensive federal regulatory framework for stablecoins, marking an important step in the regulatory process. The bill has now been submitted to the House of Representatives for review, and if it passes smoothly, it could officially become law this fall, which will have a profound impact on the Crypto Assets industry.

1. Payment-type Crypto Assets may face elimination

The Genius Act proposes strict reserve requirements and a national licensing system. Under the Act, each stablecoin must be backed 1:1 by cash, U.S. Treasury bonds, or overnight repurchase agreements, and issuers with a circulation exceeding $50 billion are required to undergo annual audits. This sharply contrasts with the current situation, which has almost no substantial guarantees or reserve requirements.

Currently, stablecoins have become the main medium of transaction on the blockchain, accounting for about 60% of the value of Crypto Assets transfers. For daily payments, stablecoins with stable value are obviously more practical than traditional Crypto Assets with larger price fluctuations.

Once the stablecoins licensed by the United States can legally circulate across state lines, it will be difficult for merchants accepting volatile Crypto Assets to justify the additional risks they are taking. Therefore, in the coming years, the practicality and investment value of these traditional Crypto Assets may decline significantly unless they can successfully transform.

2. New regulations may reshape the industry landscape

The new regulations will not only provide legitimacy for stablecoins but will also effectively guide stablecoins towards blockchains that can meet auditing and risk management requirements.

Ethereum currently hosts approximately $130.3 billion in stablecoins, far surpassing other competitors. Its mature decentralized finance ecosystem provides stablecoin issuers with a wealth of tools and resources to help meet regulatory requirements.

On the other hand, the XRP ledger is positioning itself as a compliance-first tokenized currency platform. Recently, the stablecoins launched on the XRP ledger have built-in features such as account freezing, blacklisting, and identity screening, which align closely with the requirements of the Genius Act.

If the bill becomes law in its current form, large issuing institutions will need to perform real-time verification and plug-and-play "Know Your Customer" ( KYC ) mechanisms to remain compliant. In this regard, Ethereum offers flexibility but the technical implementation is complex, while XRP provides a streamlined platform and top-down control.

3. Reserve rules may bring institutional funds to the blockchain

The bill requires that every dollar stablecoin must hold equivalent cash-like asset reserves, which effectively ties the liquidity of Crypto Assets to U.S. short-term debt. Currently, the stablecoin market size has exceeded $251 billion, and if it continues to develop along the current path, it could reach $500 billion by 2026.

This regulation has two impacts on blockchain: first, the increased demand for reserves means that more corporate balance sheets will hold government bonds while also holding native coins to pay network fees, thereby driving organic demand for tokens such as Ethereum and XRP. Second, the interest income from stablecoins may provide funding for incentives for aggressive users, prompting more investors to choose stablecoins over traditional payment methods.

However, this also means that the Crypto Assets market will be more sensitive to changes in monetary policy. If regulators adjust collateral eligibility or the Federal Reserve changes the supply of government bonds, the growth of stablecoins and the liquidity of Crypto Assets will fluctuate in sync.

Although this brings new risks, it also indicates that digital assets are gradually integrating into mainstream capital markets, rather than existing independently of them. With the advancement of the Genius Act, the Crypto Assets industry may enter a new stage of development.