"On July 18, President Donald Trump signed into law the boastfully named GENIUS Act. If the law wreaks havoc on the financial system, as seems highly likely, that name will become a grim joke: What genius thought that letting the cryptocurrency industry write its own rules would be a good idea? The Guiding and Establishing National Innovation for U.S. Stablecoins Act purports to create a regulatory framework for a type of cryptocurrency called stablecoins."
"Stablecoins are meant to do away with these fluctuations, yet they pose what may be a larger threat to the wider financial system. The GENIUS Act, like the Markets in Crypto-Assets regulation adopted by the European Union in 2023, offers safeguards that will likely enlarge the stablecoin market considerably. If-or when-the coins explode, the GENIUS Act more or less ensures that the U.S. government will have to bail out the stablecoin issuers and their holders on a scale of hundreds of billions of dollars."
The GENIUS Act establishes a federal regulatory framework for stablecoins and legitimizes industry-written rules. Stablecoins promise a constant value relative to fiat currencies, most commonly the U.S. dollar, yet their designed safety creates systemic vulnerability. Perceived low risk can concentrate exposure, invite leverage, and amplify losses across the financial system. Comparable safeguards in the EU's Markets in Crypto-Assets regulation are likely to expand the stablecoin market as well. Widespread devaluations or runs on stablecoins could compel government intervention and bailouts on a scale of hundreds of billions, repeating past financial-alchemy failures.
Read at The Atlantic
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