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Crypto’s Legal Makeover: GENIUS and the Rise of Regulated Stablecoins

Yogi Nelson

What Is the GENIUS Act?

Blockchain & AI Forum — June 2025
By Yogi Nelson

Welcome to the Blockchain & AI Forum, where your questions are answered!
As a bonus, every post includes a proverb from around the world.

Today’s question comes from Latasha, who asks: What is the GENIUS Act?

🔍 Overview

The GENIUS Act has been approved by the U.S. Senate! It was introduced by Senator Bill Hagerty of Tennessee, your home state. As expected, GENIUS is an acronym:
“Guiding and Establishing National Innovation for U.S. Stablecoins, 2025.”

Let’s walk through what this bill says—section by section—and what it could mean for stablecoin issuers, regulators, and the future of U.S. digital finance.

📘 Key Definitions

GENIUS defines 23 terms, but none more important than this one:

Payment Stablecoin: A digital asset designed for payments or settlement. The issuer must maintain a fixed redemption value (e.g., 1:1 with the U.S. dollar) and is required to redeem, repurchase, or convert the token on demand. It is not a national currency or a security.

🏛️ Who Can Issue Stablecoins?

If GENIUS becomes law, (waiting for the House of Representatives and the President to act) only permitted stablecoin issuers may issue payment stablecoins. That means:

No freelancers. No startups cutting corners.
If you’re unauthorized—you’re out. Or worse, facing federal prison time. 🫢

🧾 Requirements for Issuing Stablecoins

Issuers must:

  1. Maintain 1:1 Liquid Reserves
    Reserves must include:
    • U.S. dollars
    • Bank demand deposits
    • Treasury bills, notes, or bonds (≤ 93 days)
    • Short-term repurchase agreements (≤ 7 days)
    • Money market funds
    • Federal Reserve deposits
  2. Ensure Transparency
    • Disclose redemption policies
    • Publish monthly reserve composition
    • Establish clear redemption procedures
  3. Certify Compliance Monthly
    • Signed certifications by both CEO and CFO

What Stablecoin Issuers Can Do

Issuers are restricted to these activities:

  • Issue and redeem stablecoins
  • Manage reserves
  • Provide custodial or safekeeping services
  • Engage in directly related activities

No off-brand ventures allowed.

🏢 Who Will Regulate?

Good news: no new federal agency will be created. Oversight will remain with existing regulators:

  • National Banks: Supervised by the OCC (Office of the Comptroller of the Currency)
  • FDIC-Insured Banks: Supervised by the FDIC
  • State-Chartered Banks: Must follow GENISIS via state regulators
  • Qualified Nonbanks: Regulated by the OCC

This streamlined approach avoids regulatory overlap and confusion.

📄 Application & Approval Process

Once an application is deemed complete, regulators have 120 days to approve or deny.

The Catch:
The 120-day clock doesn’t start until the regulator says the application is complete. A hostile regulator could delay indefinitely by asking for more documents.

If the application is rejected, the regulator must:

“Explain all findings related to material shortcomings and offer actionable recommendations for improvement.”

My Take:
This is unusual—and potentially risky. It effectively requires regulators to teach applicants how to qualify. That raises a key question:

If an applicant can’t complete a solid application, can they really run a stablecoin program? 🤔
And if the program later fails, will they blame the regulator for “bad tutoring”?

⚖️ Rulemaking Timeline

GENIUS includes a standard Rulemaking section.

Congress gives agencies 180 days from enactment to issue final regulations.

🏁 In other words: regulators, start your engines.

🌍 Proverb of the Day

Before I head out, here’s your bonus proverb:

🐻 “A hungry bear does not dance.”
– Turkish Proverb

Until next time,
– Yogi Nelson
Blockchain & AI Forum

AI Agents, AI Tools, Artificial Intelligence, Blockchains, Science, Uncategorized

Understanding Decentralized Science: A New Era for Research Funding

Yogi Nelson

Welcome to the Blockchain & AI Forum, where your technology questions are answered.  Is there an alternative to the existing science research funding model? The answer is yes–there is an alternative, it’s called Decentralized Science (DeSci) and the best example is called Unbound Science.  We begin with what is science research funding, who funds science, and conclude with a very brief mention of Unbound Science.  An exhaustive examination of Unbound Science will be presented in parts two-and-three of this three-part series over the course of the next three weeks.

What is science research funding? There is no precise definition of science research funding that is universally accepted.  However, using a general consensus definition, I think we can say science research funding:  

is the financial support provided to researchers and institutions to conduct studies, experiments, and investigations that push the boundaries of human knowledge. This crucial resource enables scientists to explore new ideas, develop cutting-edge technologies, and tackle some of the world’s most pressing challenges. It typically covers expenses such as personnel salaries, laboratory equipment, data collection, publication costs, and travel for conferences

Who Funds Science Research.  Please draw your attention to the critical phase in the definition, “… financial support provided…”.  The statement begs the question, “provided” by whom?  The answer to that question follows.

According to the National Science Foundation, science research funding by category and percentage of the total science budget is: 

  • Private Sector, i.e., Corporate Research and Development                           50%
  • Federal Government Agencies                                                                       35%
  • Academic institutions                                                                                     11%
  • Private foundations                                                                                            3%

Clearly the top three funding sources dominate the landscape.  If you add the four funding sources the sum equals 99%.  Where is the missing one percent?   You will find it in something called emerging decentralized science platforms.  What are decentralized platforms within a science research funding content?  I’ll explain that next and start by naming this phenomenon—it’s called decentralized science or DeSci.     

What is Decentralized Science (DeSci). DeSci is an emerging movement and technological framework that uses blockchain, cryptographic tools, and decentralized governance to improve how scientific research is funded, conducted, validated, shared, and rewarded. DeSci aims to address long-standing inefficiencies and inequalities in traditional science by enabling open, transparent, and community-governed research ecosystems.  DeSci operates in the web-3 ecosystem; thus, separating it from existing models.  Web-3 ecosystems are characterized by decentralized technologies, i.e., smart contracts, tokens, and governance via decentralized autonomous organizations (DAOs), not top-down hierarchies.  In DeSci, the emphasis is fund, govern, and distribute scientific research in a transparent, open-access, and community-driven manner. In other words, when operating as intended, DeSci is antithesis to the status quo and disrupts the big donor science research funding model. 

How Does DeSci Work.  Under ideal circumstances DeSci is characterized by the following six traits:

  1. Funding Research via Blockchain.  Scientists can raise funds directly from across the globe using crypto-currencies, NFTs, or project-specific tokens.
  2. Decentralized Governance.  Funding decisions can be made through DAOs and/or community members.
  3. Tokenized Incentives.  Contributors are rewarded with tokens for participation, publication, peer-review, data sharing, and many other activities.
  4. Open Access and Data Transparency.  Research outputs are stored on decentralized storage platforms, making the research permanently accessible.
  5. Reputation and Credentialing.  With DeSci verifiable credential, on-chain peer review, and reputation scores are all possible and that helps assess the credibility of researchers without relying solely on traditional academic gatekeepers.
  6. Interoperable and Modular.  Generally speaking, DeSci platforms are composable.  Composable platforms allow interoperability across funding tools, DAOs, publishing platforms, and decentralized identity systems.

What is Unbound Science.  Unbound Science is a prime example of a DeSci platform.  Unbound Science is designed to check every box on the checklist above when it reaches full maturity. Next week a deep dive into Unbound Science.

Until next time,

Yogi Nelson

Artificial Intelligence, Blockchains, cryptography, Digital Currency, international aid, International Finance, Uncategorized, Yogi Nelson

Understanding Blockchain Adoption in Uzbekistan

Yogi Nelson

Welcome to the Blockchain & AI Forum, where your technology questions are answered!  Today’s question: are blockchain and crypto currency adoption all the rage in Uzbekistan?

Seventeen years.  Yes, only 17 years.  In just 17 years, blockchain based projects, including bitcoin, starting from nothing, and all the while battling powerful incumbents, have spread far, wide, and fast to reach places, and spaces, that are distant and unfamiliar to most Westerns.  Today, I’ll highlight just one example of this phenomenon, the nation of Uzbekistan.  Let’s start with the obvious—where is Uzbekistan?

Uzbekistan is located in Central Asia.  Along with Kazakhstan, Kyrgyzstan, Tajikistan, and Turkmenistan, they were all former USSR republics.  Uzbekistan was part of the ancient silk road–a trade networks that connected China with Western Europe.  Although the silk road occurred more than half a millennia ago, Uzbekistan remains connected to the broader world, this time via blockchain and crypto-currency.  Let’s jump five centuries to the 21st.

Setting the Regulatory Stage: The National Agency of Perspective Projects, (NAPP) is the government body that regulates and licenses crypto in Uzbekistan.  In 2022, Uzbek President, Shavkaat Mirziyoyev, ordered NAPP to develop crypto regulations.  NAPP listened and took action.  By early 2023, crypto regulations were in place; by year’s end the first crypto license was issued!  Impressive.  Hold on, the news gets better.  Earlier this year, NAPP authorized Biance, the world’s largest crypto currency exchange, to offer services in Uzbekistan.  Customers are now able to deposit and withdraw funds in the national currency, the Soum, and conduct a wide range of transactions.  More on that in a moment.

What Happened After Crypto Regulations Were Adopted: Since adoption of clear and reasonable crypto regulations, development and usage of crypto in Uzbekistan has skyrocketed.  According to Coin Geek, a journal dedicated to the crypto world, Uzbekistan lacked behind its four Central Asian neighbors prior to 2022.  Not anymore.  Now it’s a leader.  As of this date, there are 15 licensed firms in Uzbekistan and total transactions surpassed $1B in 2024.  Awesome. Moreover, over 500,000 Uzbeks have digital assets—about 2% of the population.  The Uzbek government collected over $3M in fees and revenues in 2024.  This year the government announced an increase in crypto related fees.  What a surprise!  Lol.

Why Crypto Surged—3 Reasons:  Did a crypto friendly government policy trigger the crypto tsunami?  In part, yes.  When Uzbekistan created clear and stable regulations there was a favorable market reaction.  However, government regulations did not create demand; a market for these assets and products existed a-priori.  Crypto in Uzbekistan, and in every nation, is a counter narrative to the existing status quo and a solution to market demand. I’ll give you three specific reasons for the flood of crypto in Uzbekistan, starting with seamless cross-border transactions.

Uzbekistan has a long history of cross-border finance transactions, going all the way back to the silk road, as previously noted.  United Nations data reveals that in 2024, $14B worth of remittances occurred in Uzbekistan.  Stable-coins facilitate fast, easy, and affordable cross border transactions, hence the demand for crypto. 

Reason two is inflation.  Inflation in Uzbekistan ran at 10% in 2024.  Inflation is effectively a “hidden tax” because it erodes purchasing power of middle/lower-income families.  Almost all stable coins are denominated in U.S. dollars. Therefore, although the has been inflation in the US, it is nowhere near 10%, hence that makes dollar based stable coins a hedge against currency inflation. 

Third reason is speculation, plain and simple.  An honest analysis must acknowledge reality—many crypto projects amount to gambling and speculation.  Not a judgement; just an honest assessment.  Apparently folks in Uzbekistan like risk and freedom to choose.   

Time to end with a proverb from Uzbekistan, where they say: “it is not the eyes that are blind, but the heart”.

Until next time,

Yogi Nelson

Uncategorized

Tornado Cash Legal Update: OFAC Sanctions Lifted

Yogi Nelson

Welcome to the Blockchain & AI Forum, where your questions are answered!  Today I answer Malik’s question: “what’s the latest news in the Tornado Cash legal case”?

What is Tornado Cash. Before jumping to the answer, first a moment to understand what is Tornado Cash.  Tornado Cash is a non-custodialprivacy protocol allowing permissionless shielded transactions on Ethereum and derivative networks. In plain English, Tornado Cash is an application that does not hold your crypto currency–you own it, you store it.  Tornado Cash facilitates transactions on the Ethereum blockchain without requiring permission while maintaining your privacy.  How does Tornado Cash maintains privacy?

Tornado Cash = Privacy.  Tornado Cash achieves anonymity by breaking the on-chain link between source and destination addresses through “anonymity pools”.  However, Tornado Cash does not preserve privacy by comingling assets; it uses zero knowledge cryptography.  What’s more, Tornado Cash relies on Ethereum—a decentralized protocol where transactions neither can be changed or altered.  Hence, nobody – including the original developers – can modify or inhibit the protocol or the transactions. What more information about how Tornado Cash works?  Click   How does Tornado Cash work? and Tips to remain anonymous.

What is the Office of Foreign Assets Control—OFAC.  OFAC is an office within the U.S. Treasury Department.  It claims to enforce economic and trade sanctions against specific countries, regimes, individuals, and entitles that pose threats to U.S. national security, foreign policy, or economy.  In other words, the enemy de jour of the U.S. government.  By the way, although OFAC was formally created in 1950, the use of sanctions by the U.S. government goes back to 1812! 

Tornado Cash Placed on OFAC Sanction List. August 8, 2022, OFAC placed Tornado Cash on the sanctions list.  According to the OFAC press release https://home.treasury.gov/news/press-releases/jy0916, “Tornado Cash, is a crypto currency mixer which has been used to launder more than $7 billion worth of virtual currency since its creation in 2019.”  However, OFAC’s statement is partially incorrect on the facts.  Tornado Cash is not a currency mixer nor is it property.  This error, deliberate or not, is materially important as we will see in a moment.  Let’s move on to what happened last week.

OFAC Removes Tornado Cash from the Sanction List.  Last week, the U.S. Treasury removed Tornado Cash from its sanctions list.  That’s a big deal. To understand what happened let’s take a moment to examine a recent court ruling that led to OFAC removing Tornado Cash from the sanctions list.

Last November, the 5th District Court of Appeals ruled that OFAC exceeded its authority when it put Tornado Cash on the sanctions list.  Essentially, the Court of Appeals reversed an earlier decision by a lower federal court.  The Court of Appeals stated the executive branch’s authority to “block ‘property’ in which a foreign ‘national’ or ‘person’ has an ‘interest’” did not apply in the case of Tornado Cash.  In other words, OFAC has no jurisdiction.  Why?  Because the use of immutable smart contracts — lines of autonomous code on the blockchain intended to preserve anonymity in transactions — do not qualify as property and OFAC can only sanction property.  And, smart contracts, despite their names, are not actually contracts. By the way, Tornado Cash’s legal fees were paid by Coinbase.  Wonderful to have friends with cash! 

No surprise—Tornado Cash value catapulted by 73% after the OFAC full scale retreat.  The story ends with OFAC deciding to “exercise its discretion” by dropping legal actions against Tornado Cash.  Lol! 

Until Next Time,

Yogi Nelson

Artificial Intelligence, Banking, Blockchains, cryptography, International Finance, Uncategorized

GENISUS Act: Implications for Stablecoin Issuers

Yogi Nelson

Namaste Yogis.   Welcome to the Blockchain & AI Forum, where your questions are answered!   As a bonus, a proverb is also included.  Today’s question comes from Latasha and she asks what is the GENISUS Act?

The GENISUS Act is a proposed federal law, introduced by Senator Hagerty of Tennessee–your home state.  To no surprise, GENISUS is an acronym: “Guiding and Establishing National Innovation for U.S. Stablecoins, 2025.” (Feds have the best acronyms!  Lol.)  Let’s review GENISUS Act section-by-section, beginning with definitions.

GENISUS defines 23 terms but none more important than Payment Stablecoin. According to GENISUS, a payment stablecoins is a digital asset that is designed to be used as a method of payment/settlement, and which the issuer is obligated to convert, redeem, or repurchased for a fixed amount of monetary value and represents it will maintain or creates the reasonable expectation that it will maintain, a stable value relative to the value of a fixed amount of monetary value, and is not a national currency or a security issued by an investment company.” We now move on to Sections 3 – 7.

Permitted Stablecoin Issuers:  If GENISUS becomes law only a permitted stablecoin issuer can issue stablecoins.  No free lancers permitted!  Don’t even consider it unless you enjoy living in a 6 x 9-foot prison cell with a dude name Buba!  Lol.

Requirements for Issuing Payment Stablecoins. There are a litany of requirements to issue a payment stablecoin.  Below are a few highlights of what issuers must do:

  1. Maintain reserves backing the issuer’s payment stablecoins outstanding on an at least 1 to 1 basis comprising of: U.S. Dollars, demand deposits held in U.S. banks, treasury bills, notes, and bonds of 93 days or less, repurchase agreements of seven days or less, money market funds, Central Bank reserve deposits.  In other words, liquid reserves that are 1-to-1. 
  2. Issuers must also publicly disclose their redemption policy, establish procedures for redemption, and publish monthly composition of the issuer’s reserve. Disclosure!
  3. Monthly compliance certificates from the issuers, CEO and CFO.

Limitations of Stablecoin Activities.  Stablecoin issuers are limited to the following activities:

  • Issue payment stablecoins
  • Redeem payment stablecoins
  • Manage related reserves
  • Provide custodial or safekeeping services for payment stablecoins
  • Other directly related work.

Stablecoin Regulators.  GENISUS does not establish a new federal stablecoin regulator.  Relief! Consequently, if a nationally chartered bank, e.g. Bank of America, issues a stablecoin the same federal banking regulator, Office of the Comptroller of the Currency, (OCC) that supervised Bank of America for safety and soundness, will be tasked with regulating the bank’s stablecoin operations.  Simple.  The same applies if the bank has a FDIC banking charter.  State chartered banks can issue stablecoins, provided their corresponding state banking regulators follows the GENISUS Act. Standard practice in banking.  What if a federal qualified nonbank wants to issue a stablecoin you ask?  OCC will be the regulator of those nonbank stablecoin issuers.  Let’s move on.

Application and Approvals.  From the date the stablecoin regulator deems the application complete, the applicant must be approved or denied within 120 days.  The catch is from the date the application is deemed complete.  A malicious regulator can string an applicant along with a constant request for additional information. 

If the regulator deems the application unsafe it can reject the application but it must explain with specificity, including all findings made by the regulator with respect to all identified material shortcomings in the application, including actionable recommendations on how the applicant could address the identified material shortcomings.  I find this last section unusual and troublesome.  Essentially GENISUS requires the regulator to explain to the applicant how to do their “homework”.  This is problematic.  Afterall, if an applicant is incapable of preparing a coherent application, doesn’t it portent an institution incapable of running the program effectively?  I think so.  Moreover, if the stablecoin issuer fails, will it blame the banking regulator for its failure given the issuer could reasonably claim it followed the regulator’s instruction? 

Rulemaking.  Did you know that when Congress passed a law it writes into the law a section titled rulemaking?  The purpose of this section is to authorized and require the executive branch to write the regulations necessary to implement the letter and spirit of the law.  In the case of GENISUS, Congress directed the various stablecoin regulators to issue the regulations within 180 days from the day GENISUS becomes law.  Regulators, you better step on the gas!

Time for me to make a genesis appearance at my next engagement but before I go, I leave you with this proverb from Turkey: “a hungry bear does not dance”.

Until next time,

Yogi Nelson