A New Era of Stablecoin Regulation: The Transformation and Challenges of Financial Technology

Stablecoins, as an important pillar of on-chain finance, are about to receive formal recognition from U.S. regulators. This is seen by industry insiders as a milestone moment for cryptocurrencies, marking the birth of the first crypto product with mainstream utility and a clear regulatory status.

Overview of the New Legislative Framework

The "Guiding and Establishing the American Stablecoin National Innovation Act" (GENIUS Act) establishes the first federal regulatory framework for payment stablecoins, aiming to inject confidence and legal certainty into this market worth over $260 billion.

Key points of the bill:

• Asset backing: Issuers must fully back stablecoins with high-quality liquid assets at a 1:1 ratio, including US dollar cash, insured bank deposits, money market funds, or short-term government bonds.
• Function Restriction: The issuer shall not pay interest to the holder, ensuring that the stablecoin is only used as a digital cash equivalent.
• Bankruptcy protection: stablecoin holders have priority claims on reserve assets.
• Transparency requirements: Issuers must disclose reserve status monthly and undergo regular audits.
• Anti-money laundering compliance: requires strict AML and KYC measures.
• Regulatory framework: Authorizes federal and state regulatory agencies to supervise issuers, with the US Department of the Treasury as the primary regulatory agency.
• Issuance qualifications: Banks, fintech companies, and even large retailers can issue, but publicly traded companies primarily engaged in technology, social media, or e-commerce are prohibited.

This bill combines the reliability of the US dollar with modern public blockchain networks, laying the foundation for the widespread application of stablecoins in the commercial and financial sectors.

Impact on Major Stablecoins

The impact of the GENIUS Act on the issuer of Circle(USDC may not be as expected. Although Tether)USDT('s current asset composition does not fully meet the standards of the Act, this is not a fatal issue. The Treasury can conduct compliance comparative testing on offshore issuers, and as long as the rules are consistent with U.S. standards, Tether can continue to operate in the U.S. market.

The dominance of the U.S. market in the future may depend on which fintech company can be the first to integrate stablecoins into mainstream products. It is expected that there will be multiple stablecoin issuers, and competition will drive down issuance costs. The ultimate winner may prevail through innovative services surrounding stablecoins, such as smart contract payroll payments and faster payment speeds.

In emerging markets, Tether currently holds a dominant position. The demand for stablecoins in these markets mainly stems from their ability to hedge against inflation, rather than to generate returns. Tether is expected to continue to dominate this field, while its relationship with the U.S. government may become closer.

Opportunities and Challenges for Financial Technology Companies

In the coming years, it is expected that every major fintech company will launch its own stablecoin. Paypal has taken the lead, and Stripe may follow closely behind. Companies like Block, Robinhood, and SoFi are also potential participants.

These companies have a large user base, global infrastructure, and strong balance sheets. Stablecoins provide them with a global 24/7 payment channel, which can lower costs and create new revenue streams.

Impact on Traditional Financial Institutions

) The challenges faced by the banking industry

Traditional banks face insufficient innovation and the potential disruption of their business models by stablecoins. Future banks may resemble fintech companies built on cryptocurrencies. Innovative banks and fintech companies will thrive, while slower-moving banks may lose competitiveness in the coming years.

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) Transformation pressure of payment giants

Traditional payment giants like Visa and Mastercard face direct challenges posed by stablecoins. Stablecoins offer lower-cost and faster settlement options, potentially bypassing traditional card payment networks. These companies need to transform into multi-rail infrastructure providers and develop new services to remain competitive.

The Impact of Stablecoins on the Dollar's Status

Stablecoins are extremely beneficial to the United States and the dollar. Tether has become an important buyer of U.S. debt, and this trend is expected to continue. Stablecoins not only expand the global network effect of the dollar but also diversify the holding base of U.S. debt, which aligns with the interests of the U.S. government.

Investment Strategies for Stablecoins

Stablecoins are mainly distributed on Ethereum and its L2 networks. Investment recommendations include:

• Long-term investment in ETH and SOL
• Consider COIN and HOOD as alternative options.
• High-risk high-reward options like Ethena and Sky###MakerDAO(

Overall, the supply of stablecoins, on-chain transaction speed, prices, and volatility are all on the rise, indicating rapid development in this field.