With the passage of the GENIUS Act, the United States now has a dedicated regulatory framework governing one of the digital asset industry’s biggest sectors: stablecoins.
There are two ways of looking at the Act’s passage.
One is the view taken by the bipartisan legislators who authored it, together with many mainstream pundits: GENIUS provides a comprehensive rulebook for stablecoins, the need for which has only ballooned in recent years as stablecoins have come to play a central role in the digital asset ecosystem—and increasingly, the mainstream financial system.
The reasons for that view are apparent. The legislation does provide clarity around who can issue stablecoins and how they can issue them. It mandates that issuers can seek regulatory authorization at a federal level under GENIUS or, if the total issuance is less than $10 billion, can seek authorization via any applicable state process. It requires that stablecoins are backed 1:1 with USD or short-term treasuries, and issuers must publish regular reports on the composition of their reserve backing. It also specifies that in the event of a bankruptcy, stablecoin holders get priority over all other creditors.
Considering the size of the stablecoin industry—the total transfer volume involving stablecoins eclipsed the combined volume of Visa (NASDAQ: V) and Mastercard (NASDAQ: MA) transactions in 2024—it’s clear that some kind of rulemaking was desperately needed. The GENIUS Act delivers that.
However, another, more critical view can be taken of the GENIUS Act and similar items of legislation around the world. This view focuses more on the concentration of power within the digital asset industry. Already, it’s dominated by highly recognizable key players: the likes of Binance (which has such a lead in terms of daily trading volume that it regularly eclipses the combined volume of the next six highest exchanges on the list). The list of the largest stablecoin issuers is similarly top-heavy: Tether (USDT) and USDC have market capitalizations of $161.7 billion and $64.5 billion, respectively; if you combined a dozen of the next-largest stablecoins, they still wouldn’t come close to matching either of those leaders.
In other words, the winners of the digital asset industry and stablecoins specifically are already well-entrenched. The GENIUS Act will act as a boon to stablecoin activity generally, with the primary beneficiaries being not just those entrenched issuers, but the established exchanges and digital asset pairs who will enjoy increased volume involving their products and, as a result, an increase in fees.
In other words: the rich will get richer.
This idea has taken on renewed urgency recently as fights over who owns the intellectual property at the industry’s foundation have broken out and gained prominence.
In the haze-like state of the early digital asset industry, nobody was paying too much attention to who owned the patents, such as decentralized exchanges or the mechanisms of peer-to-peer transacting. Between the U.S. government’s embrace of the industry and legislative efforts like the GENIUS Act, we’re now emerging from the haze, and IP holders are looking to cash in.
For instance, two digital asset miners—Mara (NASDAQ: MARA) and Core Scientific (NASDAQ: CORZ)—were sued earlier this year by a company that claims to hold the patents to the elliptical curve cryptography used in Bitcoin. That company said it acquired the patents in 2023 from patent giant BlackBerry (NASDAQ: BB) and claimed that those companies—and presumably many others within the BTC sphere —violated the patents by virtue of their use of the BTC software.
Similarly, the developer behind decentralized exchange Bancor sued fellow decentralized exchange Uniswap, claiming that it holds the IP rights to the core technology underpinning the entire DeFi industry.
These lawsuits may or may not end in success for the plaintiffs. But they highlight the new frontier in the battle for dominance over the industry: intellectual property. The industry is built on extraordinarily valuable intellectual property, which only gets more valuable as the mainstream embraces digital assets and sweeping legislation like the GENIUS Act enters into law. The IP may be owned by one company or a few may own it, but it is owned by someone or some group.
Thus, the stablecoin boom is most likely to benefit already-established players like Binance. It’s also likely to favor people who have already held a select number of key patents for a long time rather than create a true path for new players and winners.
The same can be said for similar legislation being passed around the world. Whenever any proposed legislation seeking to bring the digital asset industry closer to traditional finance is discussed, it should be viewed against this backdrop: that no matter who wins the battle of the day, no matter which asset dominates the daily trading volume or which exchange has the highest market cap, it’s all susceptible to being taken over and divvied up by the real people who hold the cards—the IP holders, whoever they may be.
In other words, any growth that can be expected off the back of the GENIUS Act is more like the fattening of a pig for someone else’s slaughter.
Who gets to reap the ultimate rewards? Maybe it’s Malikie, the entity suing Mara and Core Scientific. Perhaps it’s Bancor. Maybe it’s nChain and its much-publicized trove of blockchain patents. Maybe it’s Satoshi Nakamoto himself. But it won’t be the newcomers hoping to capitalize on the certainty afforded by the GENIUS Act.
Watch | Spotlight On: Centi Franc—the truly stable stablecoin
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