How Would These Laws Affect Consumers?
The GENIUS Act defines a “payment stablecoin” as a digital asset that is redeemable at a fixed monetary value, but it is not treated as a deposit, commodity, or security under federal law. It also requires that all U.S. stablecoins be backed by low-risk assets such as dollars or short-term U.S. Treasurys. Stablecoins can be issued only by federally or state-approved entities, not directly by a bank or credit union.
That means if a consumer purchases stablecoins from a financial institution, the coins are not subject to FDIC protection. Once you own stablecoins, you can use them to buy and sell goods or services, much like traditional currencies, but limited merchant acceptance, as well as transaction fees and other frictions, has so far kept direct retail payments with stablecoins relatively uncommon.
So even though stablecoins have yet to take off with most American consumers, the new law has done a great deal to legitimize stablecoins and prompt interest by the traditional finance industry.
In fact, most of the usage of stablecoins in the U.S. right now is by professional and institutional traders. But some experts see potential for consumers when it comes to cross-border transactions.
“Right now, if you want to make an international payment, it is very expensive,” says Prasad. “It is very slow, it is very cumbersome, and a stablecoin helps you get around all of that.”
If the CLARITY Act passes the Senate as written, it would formalize how digital assets are classified, with many cryptocurrencies qualifying as commodities rather than securities. CLARITY also gives primary oversight of crypto exchanges to the CFTC. The CLARITY Act would codify crypto exchanges as Digital Commodity Exchanges, distinguishing them from brokerages, which operate under SEC regulation with a different set of consumer protections. For instance, brokerages are covered by Securities Investor Protection Corporation (SIPC) insurance, which covers customers’ investments up to $500,000 and cash up to $250,000 in case a brokerage fails. There would be no such insurance for customers of crypto exchanges.
Brokerage failures are relatively rare, but high-profile crypto failures have been quite common. In just the past four years, major crypto platforms such as Voyager Digital Holdings, Celsius Network, BlockFi, FTX, and Bittrex have all declared bankruptcy, and investors’ only recourse for reclaiming lost funds from these failures is through the courts.
