Bitwise: The impact of the GENIUS Act is comparable to that of a BTC spot ETF
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Bitwise: The impact of the GENIUS Act is comparable to that of a BTC spot ETF
The approval of stablecoin regulations paves the way for the world's largest institutions to issue stablecoins and use them for payments.
Navigating Web3 tides with focused insightsBy: Matt Hougan, Chief Investment Officer at Bitwise
Translation: AIMan@Jinse Finance
Politicians in Washington did the right thing.
I haven't had the chance to write that sentence in a while, but today I finally can.
On Monday, the U.S. Senate voted 66 to 32 to end debate on the GENIUS Act, with 16 Democratic lawmakers crossing party lines to support it. The bill provides a solid regulatory framework for stablecoins in the United States.
I don't want to get ahead of myself, but it looks like we'll pass America's first comprehensive crypto legislation this summer.
This is a big deal.
Aside from the approval of spot Bitcoin ETFs in January 2024, this is the most significant regulatory development in crypto history—and possibly even more important than that.
I believe this lays the foundation for sustained long-term growth in crypto assets beyond Bitcoin. The biggest beneficiaries will be Ethereum (ETH), Solana (SOL), and various decentralized finance (DeFi) assets such as Uniswap (UNI) and Aave (AAVE).
Before I explain why, let's briefly go over what this is all about.
What is the GENIUS Act?
Stablecoins are one of crypto’s killer applications. They are digital representations of the U.S. dollar that can move across blockchains like Ethereum. While bank wire transfers take 24 hours, stablecoins settle in seconds—just like text messages or emails.
Stablecoins barely existed in 2019; today their global market cap exceeds $200 billion.
But stablecoins have long operated in a regulatory gray area. Issuers like Circle must comply with multiple regulations, but there is currently no overarching federal framework. The GENIUS Act provides exactly that.
The bill ensures:
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Stablecoins will be backed 1-to-1 by U.S. Treasuries and dollar equivalents;
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Large stablecoin issuers will register with federal banking regulators;
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These issuers will undergo regular audits to ensure soundness; and
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Stablecoin issuers will implement anti-money laundering restrictions on their tokens.
In other words, the bill grants federal backing to stablecoins, allowing major banks to issue them and merchants to accept them.
To my surprise, stablecoins grew to over $200 billion in assets without participation from the world’s largest financial institutions, and consumers had no easy way to distinguish “good” stablecoins like USDC from “bad” ones like TerraUSD.
With these safeguards in place, I expect this market to quickly reach $2.5 trillion. Close your eyes and imagine a world where JPMorgan Chase and Bank of America issue stablecoins; where Amazon gives you a 2% discount if you shop using stablecoins instead of a Visa card; where accepting stablecoins is as common as accepting Venmo or PayPal.
This is the world we’re about to live in.
Just the Beginning
While I’m excited about stablecoins themselves, I believe this is only the beginning. Once we achieve seamless movement of dollars across blockchain networks—with participation from the world’s largest financial institutions—moving stocks, bonds, and other financial assets on the same rails is just a small next step.
This is the fundamental case for investing in non-Bitcoin crypto assets like Ethereum and Solana: over $100 trillion in financial assets will eventually migrate onto blockchains. This legislation accelerates that trend.
I suspect the impact here will resemble that of the Bitcoin ETF.
The approval of spot Bitcoin ETFs normalized crypto as an investment vehicle, and now some of the world’s largest institutions offer Bitcoin ETFs and include them in portfolios. I believe the approval of stablecoin regulation normalizes crypto as a financial tool, paving the way for the world’s largest institutions to issue stablecoins and use them for payments.
Truly genius.
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