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The GENIUS Act marks a significant milestone as the first comprehensive crypto legislation approved by the U.S. Congress, establishing regulatory guidelines for stablecoins and their issuers. This development paves the way for institutions and major banks to capitalize on digital assets.
Beyond the advantages for large financial entities, the GENIUS Act also opens doors for technology firms engaged in tokenization, offering them a structured regulatory environment.
In a tweet, the U.S. Senate Banking Committee GOP highlighted the transformative nature of the GENIUS Act, emphasizing its role in bringing regulatory transparency to payment stablecoins.
Regulatory Certainty for Tokenization Firms
Dave Hendricks, CEO of Vertalo, shared with Cryptonews that while the GENIUS Act provides a green light for large financial bodies to adopt distributed ledger technology (DLT), the primary beneficiaries are tech companies.
“Firms like Vertalo, which support institutions in issuing and managing tokenized assets and stablecoins, are the true victors,” Hendricks remarked. “The race for stablecoin dominance will drive investment in technology, primarily benefiting tech innovators rather than banks, who might opt to purchase rather than develop in-house.”
Although the focus has been on banks leveraging stablecoins, Hendricks pointed out that the GENIUS Act now grants Vertalo—a platform for real-world asset tokenization—regulatory freedom to implement DLT without fear of sudden regulatory actions.
“Developing DLT platforms that align with both established and emerging securities regulations and can handle enterprise-level scale is challenging and demands years of effort,” Hendricks noted. “Banks and financial entities aiming for rapid market entry may need to seek external partnerships.”
This sentiment is echoed by Walter Hessert, strategy head at Paxos, who told Cryptonews that the GENIUS Act acknowledges the company’s extensive work in building compliant infrastructure alongside industry giants like Stripe, Mastercard, and PayPal.
“We can now immediately capitalize on our GENIUS-compliant stablecoins, such as USDG and PYUSD, to meet institutional demand,” Hessert said, adding that the Act’s scope extends beyond stablecoins, laying the groundwork for large-scale tokenization of real-world assets.
Hessert emphasized that stablecoins are crucial for on-chain settlements, and with regulatory oversight in place, institutions can confidently scale RWA tokenization.
This shift is particularly advantageous for tech companies like Paxos, already compliant with the GENIUS Act requirements. “Our Global Dollar (USDG) and PayPal USD (PYUSD) adhere to the Act’s standards,” Hessert confirmed.
A recent tweet from Paxos announced Visa’s support for its USDG and PYUSD stablecoins in Visa’s settlement offerings, highlighting the collaborative potential between tech firms and financial innovators.
Collaboration between RWA Platforms and Financial Institutions
The GENIUS Act fosters new opportunities for both tech companies and financial institutions. Hessert noted that the legislation is equally transformative for banks, granting them clarity to hold digital assets and issue stablecoins through subsidiaries while leveraging existing client relationships.
The real opportunity lies in partnerships, with banks bringing client connections and regulatory knowledge, and tech firms offering established blockchain infrastructure and compliance frameworks.
“Global Dollar Network exemplifies this partnership model, merging traditional financial institutions’ distribution and trust with our stablecoin technology,” Hessert explained. “GENIUS fosters a collaborative ecosystem where banks and tech companies can focus on their strengths.”
Florian Nöll from IBM LinuxONE told Cryptonews that the Act allows stablecoin issuers to venture into retail payments, thanks to the transparency and cost-efficiency offered by stablecoins compared to traditional payment systems.
Nöll added that commercial banks might respond with their own digital currencies, requiring tokenization providers to bridge traditional banking with the digital economy, ensuring compliance and interoperability.
With this vision, IBM is developing a tokenization framework for enterprise assets, addressing technical and governance challenges, and offering robust digital asset custody solutions for financial institutions.
Considerations and Challenges
Despite the opportunities the GENIUS Act presents, challenges remain. Ryan Zega from Aptos Labs highlighted the need to bridge the gap between on-chain networks and traditional financial systems for broad adoption of tokenized assets and programmable money.
Zega emphasized the importance of educating policymakers, financial institutions, and the public on the practical benefits of this technology to drive long-term adoption.
Hessert noted that while compliant tech companies like Paxos face fewer hurdles, the Act will influence international stablecoin regulations, potentially making stablecoins a global product.
Hendricks cautioned that while tech firms benefit from the GENIUS Act, it may not be favorable for the wider crypto industry, potentially centralizing power with large financial institutions.
“The GENIUS Act might be a strategic move to support large financial institutions in expanding their offerings beyond stablecoins,” Hendricks concluded.
The original article appeared on Cryptonews.
