THE GENIUS ACT: ENTER CRYPTO CURRENCY REGULATION

Written by Michael Thervil

[Genius Act Crypto Currency] While cryptocurrency has been all the rage for people all over the world for nearly a decade because of the technological advancements made in mining, ease of use, payment systems, and autonomy that is associated with digital currencies, as anyone guessed, it would only be a matter of time before governments all over the world would not only throw their hats in the ring, but to establish ways to regulate the use of digital payment systems. In America, it would be the Genius Act; a new governing legislative bill  that was recently passed earlier this month by the Senate with a bipartisan vote of 66-32.

According to the Genius Act, it’s a bill that “establishes a regulatory framework for payment Stablecoins (digital assets which an issuer must redeem for a fixed value). What this means is that American citizens who are authorized issuers can issue payments for what is known as “Stablecoins”.  The insurers will have to be “a subsidiary of an insured depository institution, a federally qualified, nonbank payment Stablecoin issuer, or a state-qualified payment Stable coin issuer.”

The Genius Act bill also goes on to state that the permitted issuers must “maintain reserves backing the Stablecoin on a one-to-one basis using U.S. currency or similar liquid assets”. Issuers will also be required by law to inform Stablecoin users of their redemption policy as well as publish the details of their reserves on a monthly basis. As an added bonus, the Genius Act also allows foreign issuers of Stablecoin to sell and offer Stablecoins in America.

It should also be noted that Stablecoin will not be considered as a type of securities instrument and will require that issuers subject themselves to what is known as the bank secrecy act for the purposes of anti-money laundering and other illicit financial practices. For users and investors in digital currencies, this is where alarm bells start to ring. One of the hallmarks of crypto currencies was the lack of both governmental oversight and government overreach and fiscal privacy.  

The question is why the sudden push for the regulation of a national digital currency now? Well many digital currency users will say that it is a way for the government, especially the American government to collect taxes. Others feel as if the Genius Act will provide some form of consumer protection. Sprinkled in the crowd is a select few that think that the only real reason why the government is passing any law or giving any serious attention to the crypto market is because President Trump directly benefits from it. Maybe there's some truth to that, maybe there isn’t.

But what is known is that President Trump has backed a crypto-currency firm through his personal business dealings. It was reported that Abu-Dahbi crypto-firm backed by President Trump named World Liberty Financial operated Stablecoin USD1 and used the $2 billion earned to invest in “Binance” once a Chinese company that was forced to relocated to Japan because of the Chinese government's invoking policies that restricted the operation of crypto-currency  companies.

Binanace, which was started in 2017 by Changpeng Zhao, was a former Developer of High-Frequency trading software. The Chinese government embarked on policies restricting the use of high frequency trading software for reasons surrounding the high risk of market manipulations, unfair advantage and the rigging of financial markets, and heightened market volatility amongst other reasons. Could Stablecoin go in the same direction of HFT (High Frequency Trading) during the 2008 housing collapse that rocked america? Although HFT was not the cause of the 2008 housing collapse, it did play a monumental role in accelerating the volatility of the housing market.