Senate Passes Landmark Stablecoin Bill, Boosting Crypto Stocks
Shares of major cryptocurrency companies, including exchange giant Coinbase and stablecoin issuer Circle, saw significant surges on Wednesday following a key legislative development in the U.S. Senate. The Senate successfully passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or “GENIUS Act,” marking a pivotal moment for crypto regulation and sending positive signals to the market.
The bill, which aims to create a comprehensive federal framework for U.S. dollar-pegged stablecoins, cleared the Senate with a decisive 68-30 bipartisan vote late Tuesday. This passage represents the first major piece of legislation specifically addressing the digital currency industry to advance through Congress, a significant win for the crypto industry after considerable lobbying efforts.
Coinbase and Circle Stocks React Strongly
Wall Street responded enthusiastically to the news. Circle (CRCL), the primary issuer of the USDC stablecoin, experienced a dramatic surge, with its shares climbing over 30% on Wednesday, reaching intraday gains as high as 34%. This builds on an already remarkable run for Circle since its stock market debut on June 5, where it reportedly gained as much as 238% on its first day and was up nearly 120% in the month prior to this week’s rally. The stock closed trading up 33.82% at $199.59, making it the “talk of the town” among some market participants.
Coinbase (COIN), which co-founded USDC with Circle in 2018 and shares in a significant portion of its revenue, also saw its stock price jump. Coinbase shares gained more than 16%, closing up 16.32% at $295.29, and leading gainers within the S&P 500 index during afternoon trading with an earlier 11% rise. This rally pushed Coinbase’s year-to-date gain to 20%.
Understanding the GENIUS Act
The GENIUS Act is designed to establish clear federal “guardrails” for stablecoin issuers. Key provisions include:
Mandating full reserve backing for stablecoins.
Requiring monthly audits of issuers.
Enforcing robust Anti-Money Laundering (AML) compliance measures.
Allowing regulated private companies, including banks and fintech firms, to issue stablecoins under these strict guidelines.
Prohibiting yield-bearing consumer stablecoins.
Centralizing oversight with the Treasury Secretary.
The legislation is expected to reduce regulatory uncertainty, potentially paving the way for broader adoption and integration of stablecoins like USDC into mainstream financial systems. Treasury Secretary Scott Bessent has even projected the U.S. stablecoin market could expand significantly, potentially reaching over $2 trillion in value in the coming years from its current estimated size.
Why This Bill is Crucial for Coinbase and Circle
The strong positive reaction in Coinbase and Circle stocks is directly tied to the economics of stablecoins, particularly USDC. Stablecoins have become a crucial revenue driver for both companies.
Revenue Sharing: Coinbase and Circle have a revenue-sharing agreement on the substantial dollar reserves that back USDC. While Circle holds the reserves, both companies split the interest earned on these assets. Reports indicate Coinbase earned $297 million from this agreement in the first quarter alone.
On-Platform Revenue: Coinbase earns 100% of the interest generated from USDC held directly on its own platform.
- Business Expansion: Stablecoins are Coinbase’s second-largest revenue source, trailing only behind crypto trading revenue. The company views stablecoins as a major pillar of its long-term growth strategy and recently announced a new merchant payments product allowing businesses to accept stablecoin payments with near-instant settlement and lower fees, directly challenging traditional payment networks.
- cointelegraph.com
- www.investopedia.com
- decrypt.co
- markets.businessinsider.com
- tokenist.com
Analysts have likened Coinbase’s stablecoin revenue stream to operating as a “quasi-bank,” earning a spread on interest from short-term Treasury bonds held as reserves.
Industry and Political Support
The bill’s passage has garnered support from various figures. Circle Chief Policy Officer Faryar Shirzad noted in an interview that the GENIUS Act could provide regulatory clarity and unlock a wave of investment in the sector. “Here you have a bipartisan majority clarifying the rules around the issuance of dollar-denominated stablecoins,” Shirzad stated. Coinbase CEO Brian Armstrong has also publicly supported the bill and expressed aspirations for USDC to become the world’s top stablecoin. Political figures, including former President Donald Trump, have voiced support for stablecoin legislation to position the U.S. as a crypto capital.
What’s Next? Challenges Remain
While the Senate passage is a major milestone, the bill is not yet law. It now heads to the House of Representatives, which has its own version of stablecoin legislation, the “STABLE Act.” The two bills have differences, particularly regarding regulatory authority (Treasury vs. split authority), and reconciling them could take time.
Furthermore, despite the regulatory tailwinds, potential economic factors loom. Analysts caution that a significant factor impacting the profitability derived from stablecoin reserves is the Federal Reserve’s interest rate policy. A reduction in interest rates would directly shrink the interest income earned on these reserves, potentially offsetting some of the benefits from increased clarity and adoption.
Despite these potential headwinds and some market observers cautioning that new stablecoin companies may be overvalued (with one even labeling Circle’s current price as “insanely overvalued”), the legislative progress is seen as a crucial step. The market reaction, coupled with increasing institutional engagement – from JPMorgan launching a stablecoin-like token to reports of major retailers exploring stablecoin payments – signals growing acceptance and potential for a paradigm shift in digital finance driven by regulated stablecoins.
