Stable Act vs Genius Act: A Crypto Bill Comparison

Overview of the STABLE Act

The STABLE Act represents a significant legislative effort to bring structure and oversight to the $130 billion stablecoin market. This proposed legislation takes a stringent, bank-style approach to regulating dollar-backed stablecoins. Under this framework, issuers would be required to obtain banking licenses, maintain full reserves, and adhere to rigorous anti-money laundering (AML) and know-your-customer (KYC) regulations. The primary goal is to ensure the stability and reliability of these digital assets for everyday transactions.

One of the key features of the STABLE Act is the requirement for proper licensing, whether at the federal or state level, for any entity looking to issue stablecoins. Both traditional banks and nonbank entities could participate in the stablecoin market, provided they meet the necessary credentials. However, the Act strictly prohibits the payment of interest to stablecoin holders, which is a notable restriction compared to other approaches.

Overview of the GENIUS Act

In contrast, the GENIUS Act presents a more flexible and inclusive framework for the stablecoin market. This bill aims to foster innovation while still ensuring robust consumer protections. It allows both banks and approved non-banks to issue stablecoins, creating a more open environment for market participants.

Key features of the GENIUS Act include:

• Bank Participation: Banks can now engage in the crypto space by offering stablecoin custody and tokenized deposits.
• State Regulation: Smaller issuers with a market cap below $10 billion can operate under state regulation, providing them with more flexibility to grow.
• Clear Supervisory Boundaries: The Act establishes clear lines of supervision, reducing confusion and ensuring that each entity knows who is overseeing them.
• Classification Clarity: The GENIUS Act addresses the ongoing debate over whether stablecoins are securities or commodities by explicitly defining them as neither.

Key Differences Between the STABLE and GENIUS Acts

Regulatory Oversight

The GENIUS Act offers a more adaptable regulatory structure. Smaller stablecoin issuers can remain under state regulation, while those with a market cap exceeding $10 billion must register at the federal level. This allows states to retain authority while also enabling collaboration with federal agencies like the Federal Reserve through memorandums of understanding.

In contrast, the STABLE Act does not provide this choice. It mandates federal oversight for all stablecoin issuers, granting enforcement power to agencies such as the National Credit Union Administration. This approach excludes state regulators from formal decision-making processes.

Issuer Eligibility

The GENIUS Act introduces a tiered model for issuer eligibility. Smaller players can operate under state regulators, while larger entities must meet federal standards. This encourages innovation and welcomes a broader range of market participants.

The STABLE Act applies a uniform standard across the board. All issuers, regardless of size, must deal directly with federal regulators. This one-size-fits-all approach may limit opportunities for smaller innovators.

Reserve Assets

Both bills require monthly reserve attestations to ensure transparency and accountability. However, their requirements differ significantly. The GENIUS Act mandates that reserves include short-term Treasury bills (93 days or less), providing a safety net similar to money market funds. Both acts require reserves to be held at insured banks and managed under strict guidelines.

Additionally, the GENIUS Act ensures that stablecoin holders are prioritized during bankruptcy proceedings, offering greater protection compared to the STABLE Act’s approach.

Algorithmic Stablecoins

The STABLE Act imposes a two-year ban on algorithmic stablecoins, aiming to prevent potential instability in the market. On the other hand, the GENIUS Act takes a more measured approach, asking the Treasury Department to conduct thorough research before making any decisions regarding algorithmic stablecoins. It also clarifies that these digital assets should not fall under the jurisdiction of the Securities and Exchange Commission (SEC).

Consumer Protection

While both acts aim to protect consumers, their methods differ significantly. The STABLE Act enforces strict federal rules, including clear penalties and strong bankruptcy safeguards. The GENIUS Act balances security with flexibility, allowing for innovation while maintaining oversight. This balanced approach was supported by a bipartisan vote of 66-32.

Scope of Allowed Activities

The STABLE Act limits the activities of stablecoin issuers by banning interest payments to holders and imposing tight operational restrictions. This creates a more controlled but narrower environment for market participants.

The GENIUS Act, however, allows for more flexibility. It avoids an outright ban on yield and uses a tiered system that tailors rules to the size of the issuer. This approach provides more room for innovation and reduces the feeling of being constrained by rigid regulations.

Final Thoughts

Congress is currently evaluating two major pieces of legislation—STABLE and GENIUS—that could shape the future of the U.S. digital economy. The STABLE Act’s strict federal oversight may benefit larger players but risks excluding smaller innovators. The GENIUS Act’s “pick your regulator” approach could drive more innovation but may lead to a patchwork of regulations.

Either way, the stablecoin market is entering a new phase of maturity. Understanding the rules is essential, but protecting your investments requires additional knowledge. For those looking to enhance their crypto strategies, exploring risk management tips and staying informed through real-time alerts and insights can be invaluable.