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:
- 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.
- Issuers must also publicly disclose their redemption policy, establish procedures for redemption, and publish monthly composition of the issuer’s reserve. Disclosure!
- 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
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