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In a pivotal moment for the cryptocurrency landscape with fresh regulations emerging from the US, prominent financial institutions are focusing on stablecoins, attributed to the recent enactment of the GENIUS Act.
This regulatory structure, part of President Donald Trump’s aim to establish the US as a global frontrunner in cryptocurrency, has encouraged banks like Bank of America, Fiserv, and Morgan Stanley to investigate the uptake and implementation of stablecoins.
Should Enterprises Develop Their Own Stablecoins
Though the GENIUS Act paves the way for new possibilities in stablecoin utilization, experts warn that the path toward effective execution will be complex. The allure of immediate payments and settlements that stablecoins offer is captivating, particularly given that conventional banking transactions can require several days.
Firms such as Walmart and Amazon are reportedly weighing the possibilities of their own stablecoin ventures, indicating a noteworthy transformation in how retail and financial services might function going forward.
Nonetheless, a recent article by Reuters points out that the GENIUS Act does not instantly resolve the challenges linked to launching stablecoins.
Businesses must navigate a maze of strategic and technical obstacles. A key choice is whether to establish their own stablecoin or utilize existing options.
The intended function of the stablecoin will likely have a more significant impact on this decision; for example, a retail platform may create a stablecoin to bolster customer interaction, whereas others might deploy them for internal cross-border dealings.
Stephen Aschettino, a partner at Steptoe, underscored the significance of purpose in this decision-making process. “Is this genuinely aimed at driving customer engagement with the issuer, or does the issuer primarily aim to have a stablecoin that is more widespread?” he queried.
For non-banking entities, the embrace of stablecoins will inevitably introduce new compliance responsibilities. The GENIUS Act obliges issuers to follow anti-money laundering (AML) laws and know-your-customer (KYC) procedures, which may add further costs and oversight requirements.
Regulatory Frameworks Remain Ambiguous
According to the report, the ramifications of possessing dollar-pegged cryptocurrencies for these organizations extend to regulatory adherence as well. Banks must evaluate how these digital assets will influence liquidity standards.
Julia Demidova, head of digital currencies product and strategy at FIS, indicated that stablecoins listed on bank balance sheets might require increased capital reserves in line with current regulations.
“The GENIUS Act is commendable, but if the bank is categorizing its stablecoin on the balance sheet under prudential banking regulation, one must still consider the asset’s risk weight,” she added.
An additional vital element for organizations diving into these cryptocurrencies is the selection of blockchain technology. Stablecoins can be launched across various blockchain networks, with Ethereum (ETH) and Solana (SOL) being favored choices.
However, banks might prefer private, permissioned blockchains to maintain governance and oversight over transactions. Demidova mentioned that banks would likely emphasize clear structures and regulation, which are often sparse in public blockchain environments.
Despite the enthusiasm surrounding the GENIUS Act, its effective date remains unclear, with federal banking regulators anticipated to issue guidelines that will clarify compliance and risk management standards.
For example, the Office of the Comptroller of the Currency (OCC) is reportedly expected to outline rules that will tackle these matters, while the Treasury Department will need to evaluate international dollar-pegged cryptocurrency regulatory structures in alignment with US norms.
Featured image from DALL-E, chart from TradingView.com
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