The Intent and Implications of the US Stablecoin Bill

Authors: Shen Jiangguang, Zhu Taihui, Wang Ruohan

Abstract

The new U.S. government's cryptocurrency policy framework has returned to the mainline of "supporting innovative development," and this bill clearly reflects the U.S. intention to lead the development of the global stablecoin market.

Recently, the U.S. Senate passed the "National Innovation Act for Guiding and Establishing U.S. Stablecoins" (hereinafter referred to as the "Stablecoin GENIUS Act"), which has been handed over to the House of Representatives for review. Although it is not the final version yet, the main content of the "Stablecoin GENIUS Act" is largely consistent with the "Stablecoin Act" proposed by the House of Representatives, and it is expected that there will not be major adjustments to the subsequent framework.

Analyzing the core contents of the "Stablecoin GENIUS Act" and combining it with the recent communications we have had with relevant institutions in the United States, it appears that the new U.S. government's cryptocurrency policy framework has returned to the main line of "supporting innovative development." This act clearly reflects the U.S. intention to lead the development of the global stablecoin market: aiming to establish the dominance of the U.S. dollar stablecoin as well as the dominance of U.S. issuers.

In view of the rapid development trend of the global stablecoin market in recent years, as well as the recent legislative plans of major countries such as the UK, Australia, South Korea, Turkey, and Argentina, the policy considerations for stablecoins in various countries are no longer about whether to develop them, but rather about how to develop them.

In light of the current market and policy trends, it is recommended that relevant Chinese departments conduct a comprehensive analysis of the technical characteristics and functional attributes of stablecoins, clarify the relationships between stablecoins and crypto assets, central bank digital currencies, the internationalization of the Renminbi, and the prevention and control of illegal cross-border financial activities, eliminate relevant misunderstandings, and design and launch a development plan for China's own stablecoin. In line with China's specific national conditions, it is suggested that China first support the Hong Kong Special Administrative Region to quickly pilot the launch of an offshore Renminbi stablecoin, and then promote the offshore Renminbi stablecoin from the Hong Kong Special Administrative Region to gradually develop into the mainland free trade zones and free trade ports according to a progressive model of "first offshore, then domestic offshore", providing a new engine for the internationalization of the Renminbi.

Restrictions on Issuance by Foreign Entities

The Stablecoin GENIUS Act clearly states that "payment stablecoins" are digital assets that are issued for payment or settlement, and can be exchanged at a fixed face value (such as $1), not securities or commodities; At the same time, there are requirements for payment stablecoin issuers: they must be U.S.-registered entities and belong to one of three categories of institutions - subsidiaries of insured depository institutions, federally approved non-bank entities, and state-approved issuing entities. At the same time, the bill imposes strict restrictions on foreign issuers' access to the U.S. market: they must be registered with the Office of the Comptroller of the Currency (OCC) and meet strict compliance requirements. In deciding whether to approve the issuance registration of a foreign entity, the OCC will consider a number of factors, including assessing whether the regulatory framework in the country where the foreign issuer is located is comparable, the financial and administrative resources of the issuer operating in the United States, the information submitted to the OCC, potential financial stability risks, and illegal financial risks; At the same time, the bill also proposes to implement a reciprocal policy with the regulatory authorities of foreign issuers, that is, the foreign regulatory authorities support the issuance of US dollar stablecoins by US issuers in the country.

Although requiring stablecoin issuers to be localized is a trending requirement for global stablecoin regulation, the requirements in the United States are very different. The stablecoin laws introduced by the European Union, the United Arab Emirates and other places require stablecoin issuers to set up entities in their own countries/regions, while also restricting the scope and amount of stablecoins. For example, the European Union's Regulation of the Crypto Assets Market (MiCA) stipulates that only euro stablecoins can be used for everyday payments for goods and services, and that the issuance of ART must be stopped when the daily trading volume of the asset reference token (ART) in the single currency area exceeds 1 million transactions or the transaction volume reaches 200 million euros. However, while the Stablecoin GENIUS Act in the United States puts forward localization requirements for stablecoin issuers, it does not restrict the supported currencies, scope and scale of stablecoins. The reason behind this is that the current US dollar stablecoin accounts for more than 95% of the global stablecoin market, and the issuer will naturally issue US dollar stablecoins in the United States, and the use of stablecoins in daily commodity and service transactions will not weaken but strengthen the sovereignty and international status of the US dollar.

Influenced by the localization orientation of stablecoin issuers supported by the legislation, leading global stablecoin issuers and cryptocurrency exchanges have rushed to establish entities in the United States. Recently, Tether, the issuer of the world's largest USDT, has explicitly stated that it is actively considering the creation of a new stablecoin registered in the U.S.; cryptocurrency payment platform MoonPay announced the establishment of a new U.S. headquarters in New York, serving as a core hub for its operations in the U.S. Prior to this, the cryptocurrency exchange OKX established a regional headquarters in California while promoting the launch of centralized cryptocurrency exchanges and wallets in the U.S. Additionally, it has been revealed recently by Crypto America that at least 15 cryptocurrency and fintech companies are applying for banking licenses from the Office of the Comptroller of the Currency (OCC) in order to conduct business in compliance with U.S. regulations in the future.

Technical Requirements of the Issuer

To maintain financial stability and protect consumer rights, the "Stablecoin GENIUS Act" provides clear capital, liquidity, and risk management requirements for stablecoin issuers, and explicitly states the priority claim rights of stablecoin holders in the event of issuer bankruptcy. It also increases the requirement for the Financial Stability Oversight Council (FSOC) to assess stablecoin-related risks in its annual financial stability report. More importantly, the act requires issuers to have the necessary technical capabilities to comply with regulatory requirements and administrative orders regarding the seizure, freezing, destruction, or prevention of the transfer of issued stablecoins.

Stablecoins are issued and traded based on blockchain technology, characterized by decentralized trading, globalization, and irreversibility, which complicates the regulatory landscape for illegal financial activities such as anti-money laundering and counter-terrorist financing. Based on the previous regulatory policies from regions such as the European Union, Singapore, and Hong Kong, it has become a global trend to transplant the anti-money laundering and counter-terrorist financing requirements of traditional financial institutions and stock exchanges into the stablecoin and crypto asset sectors, in compliance with the standards of the Financial Action Task Force (FATF) and implementing the "travel rule."

However, based on this, the "Stablecoin GENIUS Act" embodies the regulatory concept of utilizing emerging technologies to prevent potential illegal financial risks behind stablecoin transactions. On one hand, the Act designates issuers as the "first responsible party" for anti-money laundering and combating illegal financial activities, emphasizing that all stablecoin issuers must possess the technical capabilities to comply with regulatory requirements and combat illegal financial activities, and it outlines relevant civil fines and criminal penalties; on the other hand, "regulation cannot lag behind technological innovation applications," requiring the Financial Crimes Enforcement Network (FinCEN) in the U.S. to develop new tools to monitor illegal cryptocurrency activities while formulating new anti-money laundering rules for digital asset activities, review issuer compliance programs, and require issuers to formally prove that they have effective anti-money laundering and sanctions frameworks. Prior to this, the U.S. Securities and Exchange Commission (SEC) also clearly expressed support for a regulatory sandbox mechanism to assess the risks and applicability of regulatory tools for stablecoins, bond tokenization, and more.

Insights for China

Although the "Stablecoin GENIUS Act" still needs to be reviewed by the U.S. House of Representatives, and some provisions may be further modified or face challenges during implementation, the main content of the bill is largely consistent with the "Stablecoin Act" proposed by the House. The U.S. policy line supporting "compliant innovation and development of stablecoins" is unlikely to change easily, and the intention to use USD stablecoins to strengthen the dollar's position in the international monetary system is quite evident. At the same time, the "Stablecoin GENIUS Act" requires stablecoin issuers and regulatory authorities to use technological innovations to mitigate potential risks in the application of technological innovations, and to regulate the development of stablecoins with a developmental perspective, reflecting a strong concept of "technological neutrality," which is also worthy of attention from various countries.

At the same time, with the continuous growth of the stablecoin market and the number of users, and the continuous expansion of the integration and development of the payment system, banking institutions and capital markets, the stablecoin policies of various countries have also undergone significant changes. At present, the European Union, Japan, Singapore, the United Arab Emirates, Hong Kong, China and other countries/regions have introduced bills to regulate the innovative development of stablecoins, and since 2025, in addition to the United States, more than 10 major countries such as the United Kingdom, Australia, and South Korea have announced relevant legislative plans. The policy considerations of various countries for stablecoins are no longer a question of whether to develop, but a question of how to develop; The regulatory framework for stablecoins is the same in different countries, but the difference is that the degree of attention to preventing risks and supporting innovation is different.

In the context of market development and policy trends, it is recommended that relevant Chinese departments reassess and redesign their development policies. This first requires an in-depth and objective analysis of the business model, functional positioning, and stability attributes of stablecoins, the relationship between stablecoins and central bank digital currencies, as well as the impact of stablecoins on monetary sovereignty, currency internationalization, and illicit financial activities, among others. Based on this, a development plan and policy framework for the issuance of a RMB stablecoin should be designed and introduced in accordance with China's national conditions.

As a starting point for development, offshore RMB stablecoins should be piloted in Hong Kong as soon as possible. Hong Kong is an offshore RMB trading center, and the amount of offshore RMB has been continuously increasing in recent years. Issuing offshore RMB stablecoins in Hong Kong has a good market foundation. At the same time, Hong Kong has already released the "Stablecoin Regulation" and established a relatively complete regulatory framework for stablecoins and crypto assets, providing institutional guarantees for the issuance and trading of offshore RMB stablecoins.

Currently, Hong Kong, China has regarded the development of stablecoins and cryptocurrency services as an important means to boost its status as an international financial center. However, Hong Kong implements a currency board system that pegs the Hong Kong dollar to the US dollar, and the Hong Kong dollar has traditionally been considered a US dollar stablecoin. The market demand for a Hong Kong dollar stablecoin is relatively limited. For Hong Kong to establish an international cryptocurrency trading center, it also requires a Renminbi stablecoin as support. After accumulating experience and improving regulatory mechanisms in Hong Kong, we can promote the gradual development of offshore Renminbi stablecoins from Hong Kong to the mainland free trade zones and free trade ports according to a progressive model of 'first offshore then onshore', providing a new engine for the internationalization of the Renminbi.

(Author Shen Jiangguang is the Chief Economist of JD Group, Zhu Taihui is the Senior Research Director of JD Group, and Wang Ruohan is a Researcher at JD Group; Editors: Zhang Wei, Yuan Man)