Important aspects of “genius behavior” have been revealed

The Stubcoin bill proposed by Republican Sen. Bill Hagerty, an updated version of “Genius Law,” is now being released today. However, the U.S. Senate Banking Committee discloses plans to change the bill on Thursday.

Important aspects of genius law

According to the proposal, the Genius Act sets requirements for issuing stable coins for payments in the United States. Allows certain entities, including insured banks, non-bank issuers, and subsidiaries of state-characteristic institutions, to legally issue payment stability. Issuers must comply with bank-like regulations, such as capital, liquidity, and privacy standards. Smaller issuers (market capitalization under $10 billion) can opt for state-level regulations if they are consistent with federal guidelines.

Excerpt from the Stubcoin Bill

Federal and state regulators oversee the issuers, the secretary handles federal non-bank issuers, and the Federal Reserve is limited in power.

The law makes it clear that payment stability is not a security, but its status as a product remains unknown. Prioritizes bankruptcy proceedings for Stablecoin holders and excludes Stablecoins issued on private blockchains.

Furthermore, the Act does not require access to issuers to a master account in the Federal Reserve system and does not impose new accounting requirements as under SAB 121. It also encourages international cooperation in Stablecoin trading.

The Genius Act provides an overview of the regulations for authorized payments Stablecoin issuers and offers three main registration options:

1. Subsidiaries of Insured Deposit Institutions (IDIs): These require approval from federal regulatory authorities to issue stables.
2. Non-Bank Issuers Without Federal Qualification: Non-Bank Entities approved by the Director may issue Stablecoins.
3. Eligible State Issuers: Entities approved by state regulators can issue stubcoins within the state framework.

Issuers must comply with the reserve requirements, ensure that the stubcoin is fully supported, and disclose the backup details each month. The redemption process must be in place and the issuer cannot reconstruct the reserves. Payment stable holders can be prioritized in the event of an issuer’s bankruptcy.

The Act also establishes supervision and enforcement rights for regulators, including the Directors and the Federal Reserve, for federal and state publishers. It will limit the activities of issuers to stable functions, establish capital and liquidity requirements, and introduce privacy regulations under the Gramm-Leach-Bliley Act.

State and federal regulators are authorized to establish rules for stablecoin issuers, as per the supervision, enforcement and backup authorities’ provisions. The Act also encourages international cooperation on stable interoperability, requires research into algorithm stability, and creates rules for management of wallet providers.

Finally, “reciprocal relationships of payment stability issued in overseas jurisdictions” include “preliminary requirements, supervision, characteristics of money laundering and counterterrorism, sanctions compliance standards, liquidity requirements, risk management standards, international transactions, and risk management standards to promote intracationalization that encouraged US dollar-controlled eviction.”