Shares of Circle and Coinbase surged after the Senate passed the GENIUS Act, which proposes a federal framework for US dollar-pegged stablecoins.

Circle, the issuer of USDC, saw its stock jump 33% following its June 5 IPO.

Coinbase, which co-founded USDC and shares 50% of its revenue with Circle, gained over 16%.

The GENIUS Act allows private companies to issue stablecoins under strict regulations, including full reserve backing and monthly audits.

The bill now moves to the House of Representatives, where it may face delays due to differing versions and other legislative matters.

If enacted, the law could significantly expand the US$260 billion stablecoin market, benefiting key players like Circle and Coinbase.

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🔗 Source: CNBC

🧠 Food for thought

1️⃣ Regulatory clarity drives institutional adoption and market growth

The GENIUS Act represents a significant moment for stablecoins, providing the long-awaited regulatory framework for the $250+ billion market that institutions have been waiting for 1.

With clear rules on reserve requirements and regular audits, the legislation directly addresses the primary concerns that have kept traditional financial institutions from fully embracing stablecoins 2.

This trend of regulation leading to growth has historical precedents in traditional financial markets, where clear rules typically accelerate institutional participation rather than stifling innovation.

Similar regulatory clarity in other jurisdictions has already shown positive results, with 25 countries implementing stablecoin regulations by 2023, creating zones of regulatory certainty that foster growth 3.

The market response to Circle’s IPO and the Senate bill passage highlights investor confidence that regulation will expand rather than contract the market.

2️⃣ Stablecoins fulfill critical financial needs in emerging markets

Beyond regulatory developments, stablecoins have become essential financial tools in economies with high inflation and limited banking infrastructure, providing stability that local currencies often cannot 4.

Countries like India, Nigeria, and Indonesia are leading in stablecoin adoption, often correlating directly with currency devaluation and citizens’ need for dollar exposure 4.

This real-world utility explains the remarkable growth in the stablecoin market to $250+ billion despite regulatory uncertainty, demonstrating that these digital assets fill genuine economic needs rather than just speculative interest 1.

Cross-border remittances represent another critical use case, with stablecoins offering faster and cheaper alternatives to traditional money transfer services that often charge substantial fees in developing economies 1.

The legislation could accelerate this trend by providing a template for other countries to develop their own regulatory frameworks, potentially creating interoperable standards that further enhance stablecoins’ utility in global commerce 5.

3️⃣ Dollar-pegged stablecoins reinforce U.S. currency dominance

With approximately 99% of stablecoins pegged to the U.S. dollar, the GENIUS Act could strengthen the dollar’s position in the global financial system during a time of increasing currency competition 1.

As regulated dollar-pegged stablecoins become more widely adopted for international trade and settlements, they extend the reach of the dollar into digital finance, potentially countering efforts by other nations to reduce dollar dependence 2.

This dynamic aligns U.S. regulatory interests with global dollar supremacy, explaining the bipartisan support for legislation that might otherwise face ideological divisions 6.

The competitive landscape between stablecoin issuers like Circle (USDC) and Tether (USDT) reflects this dollar-centric approach, with both focusing on providing the most trusted and compliant dollar-pegged token rather than exploring alternative currency pegs 7.

PayPal’s entrance into the market with PYUSD further demonstrates how established financial companies see dollar-pegged stablecoins as strategic extensions of existing payment infrastructure 7.

Recent Coinbase developments

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