U.S. legislators have enacted the nation’s inaugural comprehensive cryptocurrency regulation.
This marks a significant turning point for an industry that has long sought Congressional oversight, investing millions to support candidates during last year’s elections, including Donald Trump.
The newly approved legislation establishes a framework for regulating stablecoins, a type of cryptocurrency that is pegged to stable assets like the U.S. dollar.
Trump is anticipated to endorse the bill into law on Friday, following its passage in the House on Thursday. The Senate had earlier approved the legislation last month.
Dubbed the Genius Act, this bill is one of three cryptocurrency-related proposals currently progressing in Washington, all receiving support from Trump.
Although the president previously dismissed cryptocurrency as a scam, his view evolved as he secured backing from the sector and became associated with the industry, partnering with companies like World Liberty Financial.
Advocates for this legislation argue it will provide necessary guidelines for an expanding industry, enabling the U.S. to keep up with innovations in payment technologies. The crypto sector has been urging for such regulations to encourage wider adoption of digital currencies and integrate them more fully into mainstream finance.
Key provisions stipulate that stablecoins, which serve as an alternative to cryptocurrencies like Bitcoin, must be fully collateralized by U.S. dollars or other low-risk assets. These stablecoins facilitate traders in transferring funds between various cryptocurrency tokens.
The popularity of these less volatile coins has seen a rapid increase over the past few years.
However, detractors claim the legislation could introduce additional risks into the financial infrastructure, legitimizing stablecoins without adequate consumer protections.
Critics argue that it may lead to increased involvement of tech companies in bank-like functions while evading equivalent regulatory scrutiny, potentially leaving consumers vulnerable in the event a stablecoin provider goes bankrupt.
Opponents have also attempted to galvanize resistance to the legislation by suggesting that voting for it would implicitly support Trump’s business interests, including his family’s promotion of their own cryptocurrency ventures – a move that raised ethical questions.
Despite these concerns, the bill received substantial backing from Democrats, with roughly half supporting it, along with a majority of Republicans.
“Some representatives may think that passing this legislation, despite its flaws, is preferable to the current situation. However, we perceive this as a fundamental misunderstanding of the associated risks,” a coalition of consumer advocacy groups wrote in correspondence to Congress earlier this spring.
They cautioned that approving the bill would “encourage the proliferation of assets consumers may mistakenly view as safe.”
Analysts had predicted that all three bills would be passed by Congress earlier this week, but unforeseen complications resulted in delays.
The two additional bills have cleared the House and are now progressing to the Senate, where Republicans maintain a slim majority. These bills would block the U.S. central bank from developing a digital currency and create a regulatory framework for various forms of cryptocurrency.
This development coincides with reports that Trump is drafting an executive order that could enable retirement funds to invest in private assets, including cryptocurrencies, gold, and private equity.
Bitcoin’s value surged to an unprecedented high this week, exceeding $120,000 (£89,000).
However, Terry Haines of Pangaea Policy, a Washington-based analysis firm, expressed doubts about the potential success of the other two bills, which carry greater significance.
“This marks the conclusion of crypto’s victories for the foreseeable future – and it’s the only one,” he stated. “When the relatively simpler issue of stablecoins takes around four to five years and barely survives industry controversies, it’s not something to celebrate.”