Crypto Week wrapped with a Crypto Weekend rager celebrating the recent passage of several bills in the House of Representatives laying down the law on virtual currency. In case you need a refresher, here’s the gist:
- The GENIUS Act, already passed by the Senate in June, allows banks and other institutions to acquire licenses to issue stablecoins—a type of crypto that, as its name suggests, is more reliable than its volatile kin like bitcoin since its value is tied 1:1 to the US dollar.
- The Digital Asset Market Clarity Act creates a clear set of regulatory guidance for crypto, splitting oversight duties between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).
- The Anti-Central Bank Digital Currency Surveillance State Act prevents the Federal Reserve from creating its own cryptocurrency. This one’s a head-scratcher, since the Fed doesn’t seem to give a hoot about minting a JeromeCoin—but then again, President Trump does love giving “Mr. Too Late” Powell a hard time.
While the crypto-conscious congratulated themselves on a job well done, average people were more likely to shrug at the news. Only 8% of Americans used some form of crypto in 2024, according to the Federal Reserve—but these new bills could pave the way toward more mainstream use. Amazon, Walmart and a host of other familiar names are already discussing how they’d roll out their own currencies to sidestep pesky fees from banks.
But although these three bills have been hailed as a big step toward making crypto safer and more accessible for all, others see a path riddled with pitfalls that could trip up even a seasoned investor.
Who let the wildcat out of the bag?
Some fear that the rise of stablecoins could plunge the US financial system back into “wildcat banking,” a chaotic pre-Civil War era when banks issued their own currencies. Not surprisingly, this mixed bag of semi-legal tenders vacillated in value all over the map, leading to panicked bank runs and savings evaporating overnight. Thankfully, President Lincoln passed the National Banking Acts of 1863 and 1864 to issue stricter regulations, which eventually led to Americans sticking with one national currency known as the US dollar.
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But with new legislation opening the door to stablecoins, is all that work about to unravel?
“The wildcat banking era failed because there were too many issuers with weak controls, poor reserves, and no consistent oversight,” Maple Finance CEO Sidney Powell told Brew Markets. “These bills attempt to avoid that, but the risk returns if regulatory enforcement is lax or if too many underregulated issuers flood the market. If every fintech can issue a stablecoin, we could see instability that undermines the very credibility these bills aim to create.”
One murky area centers around what happens after you buy a cryptocurrency, then want to exchange it for your old greenbacks. Although regulations may require disclosures about how and when you can redeem your crypto, the fine print of when and how could be easily overlooked (translation: you’ll see those sweet dollars… someday).
Bottom line: Don’t assume crypto regulations = safety, or that compliance = quality. It’ll take more than three bills to tame crypto, so watch your back.—JD