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

The GENIUS Act's Impact on Stablecoin Market

According to Circle Chief Strategy Officer Dante Disparte, the GENIUS Act includes a provision that prevents technology giants and Wall Street behemoths from monopolizing the stablecoin market. Disparte referred to this provision as a "Libra clause" during an interview on the Unchained podcast. The act requires any non-bank entity looking to create a dollar-pegged token to establish a separate entity resembling Circle rather than a traditional bank. Additionally, these entities must navigate antitrust regulations and obtain approval from a Treasury Department committee with the power to veto the token's launch.

Regulations for Banks and Lenders

The GENIUS Act also imposes restrictions on banks and lenders issuing stablecoins. For instance, banks must store stablecoins in a legally distinct subsidiary and maintain them on a balance sheet that prohibits risk-taking, leverage, and lending activities. Disparte highlighted that these regulations are stricter than the deposit-token models previously proposed by major financial institutions like JPMorgan. He believes that these rules will benefit US consumers, market participants, and the stability of the dollar.

Potential Impact on DeFi and Institutional Investors

The prohibition on interest-bearing stablecoins under the GENIUS Act could drive investor interest toward decentralized finance (DeFi) platforms, particularly those built on Ethereum. Analysts anticipate that the absence of yield incentives in stablecoins will prompt institutional investors to seek passive income opportunities in DeFi protocols. This shift may lead to a significant influx of institutional capital into DeFi, with Ethereum likely to benefit due to its dominance in the sector.