GENIUS Act Sets Strict Limits on Big Tech and Banks in Stablecoin Market

New U.S. legislation known as the GENIUS Act aims to prevent large technology companies and major financial institutions from gaining excessive control over the stablecoin market, according to Circle Chief Strategy Officer Dante Disparte. Speaking on the Unchained podcast, Disparte described a provision in the act—referred to as a "Libra clause"—that requires non-bank stablecoin issuers to establish independent entities, undergo antitrust review, and obtain approval from a Treasury Department committee before launching dollar-pegged tokens.

Banks that wish to issue stablecoins must also create separate subsidiaries and maintain strict balance sheet requirements, with no risk-taking, leverage, or lending permitted. Disparte noted that this structure is "more conservative" than models proposed by some major banks, arguing that the rules benefit U.S. consumers, market participants, and the dollar itself.

The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act passed the House with broad bipartisan support, including over 100 Democratic votes. The law maintains state-level regulation for smaller issuers but requires a national charter for those holding more than $10 billion in assets. It also bans interest-bearing stablecoins, enforces strict disclosure requirements, and introduces criminal penalties for unbacked tokens.

Disparte said the act provides long-sought regulatory clarity for the crypto sector, stating, "Crypto is finally getting what it wanted: legitimization, a path for legal and regulatory clarity in the United States and an opportunity to compete."

Some analysts and critics have raised concerns that prohibiting yield on stablecoins may limit consumer adoption and give an advantage to foreign issuers. Disparte argued that yield is better delivered through decentralized finance (DeFi) protocols once the foundational regulatory framework is in place. Industry observers predict that the ban could shift investor demand toward DeFi platforms, especially among institutional investors seeking returns, potentially increasing capital flows to Ethereum-based DeFi services.