Latest news with #GuidingandEstablishingNationalInnovationforUSStablecoins
Economist
2 hours ago
- Business
- Economist
The world should follow Trump's lead on stablecoins
America's new law on stablecoins is so good, 'They named it after me,' joked President Donald Trump as he signed the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act on July 18th. While the administration and the crypto industry celebrate the dawn of a golden age, the mood across the Atlantic is darker. Stablecoins, tokens backed by conventional assets, are seen as scammy, deeply destabilising—or both. Andrew Bailey, governor of the Bank of England, has warned commercial banks against issuing their own coins. Christine Lagarde, head of the European Central Bank (ecb), cautions that stablecoins could become private money that risks one day dislodging central banks.
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Business Standard
2 days ago
- Business
- Business Standard
Why JPMorgan may offer crypto loans despite CEO Dimon's bitcoin doubts
JPMorgan Chase is exploring the idea of lending directly against clients' cryptocurrency holdings, such as bitcoin and ethereum, the Financial Times reported. This would be a significant move for the US headquartered bank and reflects a growing acceptance of digital assets within the traditional banking system. The bank could begin such lending as early as next year, although the plans are still under discussion and may change, the news report said. Why is this move surprising for JPMorgan's CEO Jamie Dimon? The potential policy shift marks a major turnaround for JPMorgan CEO Jamie Dimon. Eight years ago, Dimon called bitcoin a 'fraud' and said it would 'eventually blow up'. He also claimed it was mainly used by 'drug dealers and murderers', and even threatened to fire any trader caught dealing in bitcoin. However, Dimon has recently softened his stance. Speaking in May this year, he said, 'I don't think you should smoke, but I defend your right to smoke. I defend your right to buy bitcoin. Go at it.' His earlier strong opposition put off some clients who had earned their wealth through crypto or were long-term supporters of its potential. What steps has JPMorgan already taken in crypto? JPMorgan has gradually taken steps to engage with the crypto space. It already plans to offer loans backed by crypto exchange-traded fund (ETF) holdings — a more regulated way to gain crypto exposure, the news report said. Lending against the actual crypto assets themselves would be a bigger leap, especially as rival banks like Goldman Sachs still do not accept crypto as collateral. Why are more banks warming up to crypto now? The shift in attitude among big banks is partly due to a changing political climate. A possible second Trump administration is seen as more favourable to light-touch crypto regulation than President Joe Biden's. On July 18, President Donald Trump signed the GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins). This is the country's first federal framework for regulating stablecoins. The act requires full reserve backing in liquid assets, regular audits, and stronger consumer protections. Large banks welcomed the legislation as it provides regulatory clarity and makes it easier for them to engage with digital assets. What makes stablecoins different from other cryptocurrencies? Stablecoins are a type of digital asset pegged to a stable reference, like the US dollar. Unlike cryptocurrencies like bitcoin — which are highly volatile and not backed by tangible assets — stablecoins are designed to maintain a consistent value. They are used widely in payment systems, particularly in regions with limited or poor banking infrastructure. Stablecoins also play a key role in decentralised finance (DeFi) ecosystems, like: -Serve as collateral for crypto-backed loans. -Support liquidity in decentralised exchanges and lending protocols. -Help users hedge against cryptocurrency price volatility. What challenges does JPMorgan face in lending against crypto? One of the major hurdles is figuring out how to handle digital assets seized from clients who default on their loans. Cryptocurrencies require specific custody solutions, and most banks, including JPMorgan, do not hold crypto directly on their balance sheets. To solve this, JPMorgan would likely partner with a third-party custodian — companies like Coinbase, which offer secure storage for crypto on behalf of institutional clients, the news report said.
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Business Standard
3 days ago
- Business
- Business Standard
Decoded: What are stablecoins, and why is the US regulating them?
On July 18, United States (US) President Donald Trump signed the GENIUS Act—Guiding and Establishing National Innovation for US Stablecoins—introducing America's first federal framework for dollar-pegged cryptocurrencies. The act mandates full reserve backing in liquid assets, monthly audits, and stronger consumer safeguards. While signing the act into law, Trump said that it creates "a clear and simple regulatory framework to establish and unleash the immense promise of dollar-backed stablecoins". He further stated that the act "could be perhaps the greatest revolution in financial technology since the birth of the internet itself". What are stablecoins? Stablecoins are digital assets, which means they have a value attached to them and can be used for transactions. They are designed to maintain a stable value relative to a specific reference asset, like a fiat currency such as the US dollar. Unlike cryptocurrencies, which experience significant price fluctuations due to speculation and limited supply mechanisms, stablecoins intend to provide price predictability. What backs stablecoins? Stablecoins can be broadly categorised based on their collateral mechanisms. Each category presents a different method for maintaining price stability: 1. Fiat-collateralised stablecoins: These stablecoins are backed by reserves of fiat currency held in bank accounts or other arrangements. The most common examples—such as Tether (USDT) and USD Coin (USDC)—are pegged to the US dollar. For every unit of stablecoin issued, an equivalent amount in fiat currency is supposedly held in reserve. These stablecoins rely heavily on trust in the issuer and the auditing of reserve holdings. Concerns have been raised in the past regarding the transparency and adequacy of these reserves, prompting countries to explore regulatory frameworks for the same, like the GENIUS Act. 2. Crypto-collateralised stablecoins: These are backed by other cryptocurrencies, which are typically over-collateralised to account for price volatility. For example, DAI, a widely known decentralised stablecoin, is backed by Ethereum and other crypto assets held in smart contracts on the blockchain. Blockchain is a distributed digital ledger that records transactions in a secure way, allowing assets to be tracked across a network. Smart contracts are digital contracts stored on a blockchain that are automatically executed when predetermined terms and conditions are met. For example, DAI is liquidated when the value of the cryptocurrency backing it falls below a certain threshold. These are still exposed to the inherent volatility of the underlying crypto assets and may face issues during market stress. 3. Algorithmic (non-collateralised) stablecoins: Algorithmic stablecoins use mathematical formulas and incentive mechanisms to manage the coin supply and maintain a peg without relying on actual collateral. They automatically expand or contract the supply of tokens based on demand. TerraUSD (UST), which collapsed in 2022, was one such example. 4. Commodity-collateralised stablecoins: Some stablecoins are backed by physical commodities such as gold or silver. These include coins like PAX Gold (PAXG), where each coin represents ownership of a specific amount of physical gold held in reserve. Uses of stablecoins Stablecoins serve several purposes across retail, institutional, and decentralised finance sectors: Payments: Due to lower transaction fees and faster settlement times, stablecoins are increasingly used for cross-border transfers, particularly in regions with limited access to banking infrastructure. Stablecoins are also integral to decentralised finance platforms, where they serve as collateral for loans, liquidity provision, and decentralised exchanges. Hedging against volatility: Investors often convert volatile crypto holdings into stablecoins to preserve value during market downturns. Risks associated with stablecoins Despite their intended stability, stablecoins are not without risks. As their market capitalisation has grown, regulators and policymakers have raised several concerns. One of the most prominent concerns is whether stablecoin issuers actually hold sufficient, liquid, and accessible reserves to honour redemptions. Here's where legislation like the GENIUS Act steps in. It requires 100 per cent reserve backing with liquid assets like US dollars or short-term Treasuries and requires issuers to make monthly, public disclosures of the composition of reserves. According to the White House press release, "In the event of insolvency of a stablecoin issuer, the GENIUS Act prioritises stablecoin holders' claims over all other creditors, ensuring a final backstop of consumer protection". Alternatives to stablecoins As stablecoins gain popularity, several alternatives are being explored to address their risks and limitations—particularly by regulators and central banks. Central Bank Digital Currencies (CBDCs) are the most prominent alternative. Unlike stablecoins, CBDCs are issued by central banks and carry sovereign backing. They aim to offer secure, programmable digital payments without the volatility of crypto. India also has a CBDC backed by the Reserve Bank of India, known as the digital rupee or e-rupee. Tokenised deposits: These are digital versions of regular bank deposits issued on blockchain platforms, allowing instant settlement and integration with smart contracts. E-money and digital wallet balances, while not blockchain-based, are widely used. These are backed by fiat reserves and regulated under existing financial rules. As countries continue to shape regulatory frameworks and central banks explore digital alternatives, the journey ahead for stablecoins will likely depend on their ability to operate securely and transparently within the financial system.
Time of India
5 days ago
- Business
- Time of India
Donald Trump's Genius Act: Major crypto bill for stablecoins passed in US; here is what to know
US President Donald Trump on Friday signed the "GENIUS Act," a new law aimed at regulating payment stablecoins, marking a significant step toward bringing legitimacy and oversight to the cryptocurrency industry. The law, officially titled "Guiding and Establishing National Innovation for US Stablecoins," represents a major policy shift for digital assets in the US. The new law received strong support in both the House and Senate, passing with wide bipartisan backing. Speaking at a White House signing ceremony attended by around 200 people, including prominent crypto executives and top Republican lawmakers, Trump called the law a 'massive validation' of the industry's efforts. 'For years you were mocked and dismissed and counted out,' he told the attendees. 'This signing is a massive validation of your hard work and your pioneering spirit," the US president added. Later, taking to Truth Social, he wrote "I pledged that we would bring back American liberty and leadership and make the US the crypto capital of the world—The Genius Act creates a clear and simple regulatory framework to establish and unleash the immense promise of dollar-backed stablecoins…" What is Trump's GENIUS Act? The 'Guiding and Establishing National Innovation for US Stablecoins" or GENIUS Act is a set of regulatory frameworks aimed at establishing oversight and consumer protections for stablecoins, cryptocurrencies tied to traditional assets like the US dollar to reduce price volatility. It lays down foundational rules for stablecoin issuers, aimed at improving consumer confidence in a segment of crypto that has seen explosive growth, as per AP. The new law is a big step for an industry that has quickly gained political influence in Washington, thanks to heavy lobbying and campaign donations. Political stance A notable provision in the new law prohibits members of Congress and their families from profiting off stablecoins, a move intended to address concerns over conflicts of interest, according to AP. However, the ban does not apply to the president or his family. Trump's family is known to hold a significant stake in World Liberty Financial, a crypto firm that launched its own stablecoin earlier this year, backed in part by an investment fund from the United Arab Emirates. The House also advanced two additional crypto-related bills on Thursday. One proposes a new market structure for the broader cryptocurrency space, while the other seeks to block the Federal Reserve from issuing a central bank digital currency. Both measures now await consideration in the Senate. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
DW
5 days ago
- Business
- DW
US: Trump sings law paving way for dollar-based stablecoins – DW – 07/19/2025
US President Donald Trump has signed a law to create a regulatory regime for US-dollar-based stablecoins. This could see the cryptocurrency coming into regular use. US President Donald Trump signed a law to create a regulatory framework for stablecoins. This could create a way for the US-dollar-based cryptocurrencies to come into regular use for making payments and moving money. The bill, also known as the GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins), passed in the House of Representatives by a vote of 308 to 122 after being approved by the Senate earlier. "The GENIUS Act, they named it after me," Trump said at the bill-signing ceremony at the White House, where a few government officials, lawmakers, and crypto industry leaders were present. "It's good for the dollar and it's good for the country. That's why I backed you at an early stage. And I also did it for the votes," he added, referring to the crypto industry. This law is a huge victory for the crypto industry and its supporters. They have pushed for such a legislation for a long time, to legitimize the use of cryptocurrencies and make banks, retailers and consumers more willing to use them. The industry donated more than $245 million (€210 million) in last year's elections to boost pro-crypto candidates such as Trump. Stablecoins are designed to maintain a constant value, typically at a 1:1 peg to the US dollar. The GENIUS law requires them to be backed by liquid assets. According to CoinGecko, the stablecoin market is valued at more than $260 billion (€223 billion). Under the new law, Standard Chartered bank says it could grow to $2 trillion by 2028. "This groundbreaking technology will buttress the dollar's status as the global reserve currency, expand access to the dollar economy for billions across the globe, and lead to a surge in demand for US Treasuries, which back stablecoins," Treasury Secretary Scott Bessent said in a statement. However, critics say the law should have included stronger anti-money laundering protections and prohibited foreign stablecoin issuers. They are also wary of the growing influence of a sector that is already powerful. "By failing to close known loopholes and protect America's digital dollar infrastructure, Congress has risked making the US financial system a global haven for criminals and adversarial regimes to exploit," Scott Greytak, deputy executive director of Transparency International US said. Trump has signed an executive order to establish a strategic bitcoin reserve in March this year. He partly owns crypto company World Liberty Financial and launched a meme coin called $TRUMP in January.
