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Genius Act Grants Stablecoin Holders Bankruptcy Priority, Potentially Heightening Banking System Risks
Summary: A bill passed by the U.S. Senate, known as the 'Genius Act,' is drawing attention from the financial and legal sectors. The bill grants stablecoin holders priority claims on their backed assets in bankruptcy situations, which is seen as potentially detrimental to traditional bank customers. Adam Levitin, a law professor at Georgetown University, pointed out ...
A bill passed by the U.S. Senate, known as the 'Genius Act,' is drawing attention from the financial and legal sectors. The bill grants stablecoin holders priority claims on their backed assets in bankruptcy situations, which is seen as potentially detrimental to traditional bank customers.
Adam Levitin, a law professor at Georgetown University, pointed out that such arrangements essentially involve 'subsidizing stablecoin issuance at the expense of bank deposits,' particularly when stablecoin issuers or their custodian banks go bankrupt, which could erode the rights of ordinary depositors.
The current draft of the bill requires stablecoins to be backed by highly liquid assets (such as U.S. Treasury bonds), issuers to disclose reserves monthly, and possess the ability to freeze tokens. If passed, banks and other institutions will be able to issue compliant stablecoins.
While the bill aims to boost user confidence and strengthen the connection between stablecoins and the traditional financial system, the bankruptcy priority arrangement has sparked discussions on regulatory logic and financial stability. Some analysts believe that the bill could be a crucial turning point for stablecoin development, while also exacerbating structural impacts on the traditional financial system. (DL News)
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