Dominic Basulto, The Motley Fool
5 min read
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The Senate just passed new legislation laying out the rules of the road for stablecoins.
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The legislation could give a huge boost to the stablecoin industry, which could grow to $2 trillion in a few years.
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For investors, the most attractive opportunities right now are stablecoin issuers such as Circle.
On June 17, the U.S. Senate officially passed the Guiding and Establishing National Innovation for U.S. Stablecoins (Genius) Act, which will create a federal regulatory framework for stablecoins. The bill will now head to the House for review, with a final signature by President Donald Trump expected before the end of the summer.
As might be expected, crypto market participants widely hailed the news, and stocks tied to stablecoins surged. Here's what you need to know.
The Genius Act will become the first major piece of crypto legislation passed by the Trump administration, which came into office promising a huge overhaul of the crypto sector. Previous actions, such as creation of the Strategic Bitcoin Reserve, occurred only via executive order.
The Genius Act legislation is important because it helps to define the playing field for stablecoins, which have been one of the fastest-growing sectors of the crypto market. In 2020, stablecoins were valued at about $20 billion; today, they're valued at $250 billion. According to Treasury Secretary Scott Bessent, they have the potential to be worth as much as $2 trillion in just a few years.
Simply stated, stablecoins are digital currencies that are pegged 1:1 to the value of another asset. In 90% of the cases, stablecoins are pegged 1:1 to the U.S. dollar. But there's no reason a stablecoin couldn't be pegged to, say, the Japanese yen.
These stablecoins can be used to facilitate international trade, make digital payments, and participate in the world of decentralized finance (the blockchain version of traditional finance). The Treasury Department has even hinted that stablecoins could become a tool to reduce the nation's $37 trillion debt load and bolster the value of the dollar.
The good news is that there are several different ways to participate in this growing investment trend. The most obvious way, of course, is to invest in one of the top stablecoins. Right now, the two big stablecoins are Tether (CRYPTO: USDT) and USDC (CRYPTO: USDC), and together, they account for nearly 85% of the value of the $250 billion stablecoin industry.
