GLOBAL SHIFT
GENIUS Act PASSES, RedefineS EVERyTHING.
Behind the scenes: genius
“Hey, I have a friend at Treasury who says you know a lot about stablecoins. Can I ask you some questions?”
This was the first thing that was said to me by Senate staff working on the Genius bill, on a lazy weekend where I had thought things were going to be quiet. They were not. And it was the start of a process that was alternately blazingly fast, slow and suspenseful, highly organized, linear, highly disorganized, and complete pasta-against-the-wall level chaos.
This week, on July 17, 2025, Genius was passed into law, after clearing a giant procedural mess in the Senate to get to a bipartisan vote, and then clearing an equally gnarly procedural mess in the House to, once again, get to a bipartisan vote.
For me, this has been quite the process, given I first testified about this topic in April of 2023, and have been talking about stablecoins since my time at Citi. I’ve talked to staff and members in the House and in the Senate. I’ve talked to industry participants. I’ve talked to policy groups. I’ve talked to companies. I’ve written things, I’ve been on various media outlets and podcasts, and I’ve been screamed at by the far-left. To stand here, where Congress (in a surprising refutation of the doom and gloom of our inability to legislate) has passed what might be the most significant bipartisan financial regulation legislation since Dodd-Frank and it concerns stablecoins is quite the moment.
We’re going to talk about how the space is going to change based on this, but first, I want to start by pulling back the curtain on how some of these things actually happen, because it’s not what comes through in the press.
congressional Playbook
For those who have never walked in the halls of Congress (and let me tell you, it’s much easier than you think, and more people should do it to get a sense of how our government actually works), there are a few things that strike you.
First, and I say this with affection, these buildings are not well designed to get around. They are beautiful from the outside, but navigating the interior is a maze of underground tunnels, maintenance hallways, construction detours, rotundas that appear to have been designed by someone with a violent, vicious grudge against efficient pedestrian traffic, and just general random placement of things like offices or cafeterias (inexplicably in a corner of the basement or literally dominating the wing of a building, with no intermediary step of being, you know, normal).
Second, there’s a lot of well-dressed young people wandering around in these halls. Not because Congress has been swarmed with Mormon missionaries, but rather, these are the staff. I raise this because, from the outside, you see members of the House or Senate on TV, they are the ones giving speeches, they are the ones making comments in the press, but the reality is that behind each of them exists a small army of very overworked, overextended young people attempting to get things done. The divisions among these people are also notable - you have staff for offices, you have staff for campaigns, you have staff for specific committees, and more. All of them (especially legislative staff in various forms) have jobs that range from difficult to laughably impossible, as they are attempting to become experts on 40 things at once, because if you care about crypto, let me remind you that Congress also has some other major concerns on their mind. You know, like the budget? Immigration? War? I’m not going out on a limb to say that stablecoins were not the number one concern of most people in Congress.
What this means is that to get anything done well, amidst this both physical and mental chaos, you have to be able to cut through the noise and educate. If you understand that backdrop, it’s actually much easier to see why getting something done on crypto has been so difficult for Congress. On one side, you have a group of Alex Jones level cranks who have positioned themselves as “experts” poisoning the discourse on the Democratic side with obvious falsehoods (mostly for personal gain and power, but some are delusional enough they believe what they are saying). On the other side, you have hype merchant crypto pushers who are themselves making claims so deranged and fantastical that any reasonable person should not just kick them out of the room, but possibly off the continent. In the middle, there are like twenty of us, looking increasingly exasperated, wondering what the fuck is wrong with all of these people that they can’t just at least agree that our starting frame of reference should be reality.
Unsurprisingly, it took the staff, themselves mostly 20-somethings and 30-somethings, some time to sort through who they could trust, who they could not trust, and who was saying things that were, you know, even tangentially connected to reality and truth. This was a multi-year battle waged across fronts like the banking lobby, the community bankers association (a particularly interesting case, with leadership on the policy side there actually going totally rogue on their membership in my view), the crypto lobby, the incoherent screaming that is Twitter, robust discourse across the financial regulators, and more.
However, in the end, sanity appears to have won out. It’s hard to argue with things like the fact that the NYDFS framework for stablecoins has produced zero failures or peg stability issues since 2018 (a way better track record than banks during the same period!), or that multiple financial experts have been talking to Congress about demystifying the debate around “tokenization” to the point that people understand what it is, which is literally the process of using a slightly different ledger to record financial assets. I’m not kidding about this - whenever you hear someone talking about blockchain, substitute in your head “shared excel spreadsheet” and see if what they are saying makes any sense. If you swap that in and listen to Elizabeth Warren rail about the dangers of Microsoft Excel, or Gary Gensler saying everything recorded in Microsoft Excel is a security, you suddenly get a very different view of both the level of understanding and what is going on.
From the outside, you don’t see this. You don’t know that there are a bunch of individual two-legged humans, with names like Allison and Paul, that have been running around behind the scenes and doing insane amounts of research, drafting, iteration, and work on these issues for years while navigating complicated interpersonal dynamics among members. You wouldn’t know that senior staffers for one of the most R-leaning Republicans and one of the most D-leaning Democrats were sweating, together, in a windowless room with “air conditioning” that could best be described as a human rights violation over the weekend, banging out huge parts of a draft across multiple hour-long phone calls with experts to comb through sections for bugs, just to advance legislation.
You might also not know that there was intense scrutiny from groups like the Treasury, not on the basis of partisan agenda, but on the basis of deep questions about American financial market structure, wanting to understand how things could be exploited, if it would damage the functioning of fixed income and funding markets, or what loopholes exist that would allow banks to increase risk, and then making sure that as many of those as humanly possible were closed (nothing is perfect, but that’s not a reason to give up on improving things). I am talking about long-term employees burning many, many, many hours researching and talking to everyone under the sun to iterate not based on partisanship, but on craftsmanship.
In the end, the work product was surprisingly non-partisan, and I think the fact that nobody is completely happy with Genius (crypto is mad there are too many controls, banks are mad the business model is allowed even though money market funds already exist, stablecoin issuers have mixed feelings across things like yield, reserves, and structure, etc.) is a good sign. A compromise is when everyone gets part of what they want, but has to give up on the parts that were not in the general interest.
So I will end with this: it’s been a privilege to be part of these discussions, and I think this is a bill that will stand the test of time. It will be legacy defining for many who fought for this, both the Republicans who championed it across multiple sessions of Congress (McHenry, Toomey, Hill, Davidson, Hagerty, Lummis, and many more I do not have space to name) and also the Democrats who were brave enough to reject the financial Amish wing of the party attempting to lock our financial system into the big-bank favoring rules of 2011 as though it were a sacred point in time that will never change (and here, in particular, we owe a debt of gratitude to Representatives Torres, Nickel, Soto, and Senator Gillibrand for being willing to lead when others were too scared to stick their neck out).
Hopefully this is the start of more effective, bipartisan legislation on some of the other low-hanging fruit in the financial reform space. Time will tell on that.
But I know what you care about: what is the impact of Genius going to be?
WINNERS
Big Banks
“What!?” I hear you scream at this being the number one thing on my list.
First, let me say I’m not saying all big banks. There are going to be plenty of them that will faceplant on this and, ultimately, begin a path of decisions that may lead to the death of their institutions. But there will be some big winners.
Why? Stablecoins are a major competitor for payment businesses, and over time, they will likely compete for basic bank deposits. However, they do this by having portfolios of securities underneath the hood in unlevered fashion, rather than highly levered loan portfolios on the other side like banks. This is probably better for stability, but also, they have to buy something. The main thing they will do is reverse repo against treasuries, and who has all the treasury collateral and is good at repo borrowing? That’s right, the big banks.
If you are JPM, if you are BofA, if you are Citi, if you are Wells Fargo, if you are Standard Chartered, you should be watching this space as the market grows. You can bank the stablecoin issuers to provide traditional rails, you can facilitate trading and their repo activity to earn fees in your markets business, you can manage the assets (if you have an asset manager), you can provide custody, and you can probably handle a lot of the FX.
You could also potentially issue your own stablecoin, and you have the distribution.
In short, these firms have a clear pathway to seizing market share and winning. Now, will they actually do it? Some of them will. It would require a few of these CEOs to change their views on the market from incredibly negative to neutral, but more importantly, it would require them to take the expertise of some of the better folks in crypto seriously and hire some crypto natives to run businesses, but also into their risk and legal functions in particular (there are close to zero folks in risk functions across the entire banking industry who genuinely know or understand the crypto space and the tools well enough to effectively manage risk).
Why do I say this? I run an advisory firm that is helping some folks with these concerns, so I see this firsthand. If you are a senior executive at a large bank and you think you have the talent in house, let me be clear with you: you don’t, and if your people are telling you they have it, they don’t know what they are talking about. Why should you listen to me? Well, I’m one of two people who built the economic and financial model and operations for a stablecoin that went above $10B and back to zero, and the only one who didn’t lose anyone’s money and isn’t in jail.
Small Specialist Banks
There are going to be some really, really big winners here. The entire sector is not going to win (and is staring down the barrel of long-needed creative destruction), but small banks can move faster, bring in outside expertise more easily on the cultural front, and will be able to iterate. They are also more trusted by the crypto community, given every single large bank has been some variety of complete and total jerk to them over the past eight years.
So if you are running a 24/7 payments business, if you have an asset management partner and sub-custodial arrangement, if you have the ability to work with people to build API access to key services, to improve product offerings, or just to listen like a normal human being and work through problems without taking 9 months to tell someone if you can give them a bank account, you are going to get a lot of business over the next two years.
Someone in this space is going to be the next bank that starts rapidly climbing up the ranks, going from being a niche local branch (Chemical) to a world-spanning behemoth (JPM Chase) in a series of mergers, growth, and timely gains due to competitor failures. Who is that going to be?
Well, if you are in crypto, need real banking services, and aren’t talking to someone like Dart, you might be making a mistake.
Asset Mangers
Hey, stablecoins are about to generate a ton of assets as they grow, and you know what? Someone actually needs to manage those things. While we managed them internally at Paxos (something I remain proud of, given the ability of the firm to unwind a >$23B bond portfolio with no peg stability issues or market disruption), most issuers can’t and won’t do this. They are going to hire outside help. That outside help will be asset managers like Blackrock (already working with Circle) or Van Eck (already working with Agora) and so on.
More assets = more fees for those companies, so they are going to be winners here. However, that’s not the only reason. There is also a growing class of tokenized money market funds, and all the asset managers are going to need to get their feet wet if they want to operate in this space. Those who are working with the stablecoin issuers will have the best info about what is going on with the onchain world, and those who are used by multiple stablecoin issuers let those stablecoins interoperate as the reserves themselves become transferrable to mint and burn tokens. Getting this right could be a big line of business for more than one manager.
Payments: WHOEVER GOES FIRST
Every legacy payments network is now facing a significant threat. If you are at Visa, Mastercard, American Express, Discover, and more, you’ve been putting a brave face on so far, and trying to make it seem like you are probably going to be fine because, obviously, you’re going to co-opt this new technology into your rails and people will keep using your stuff.
Do you know who else said that? Borders. That did not stop Amazon from destroying them. Ultimately, legacy institutions are usually too slow to change and the innovator’s dilemma is too strong for them to overcome the inertia that prevents them from truly reinventing their business models in the face of an outside threat.
I don’t think that will be any different here, because that is just how things work. There’s going to be a similar problem for the correspondent banks that handle international wire volumes (and why the banks who don’t get into the game I mentioned above have a problem on their hands).
However, not everyone is going to fail. You could be Barnes & Noble instead. If you’re looking for the likely winners in the payments market, it is those who understand the real value of the payments side is no longer going to be coordinated, slow, centralized rails that charge walled garden level fees, but rather those that provide great UI/UX, which normal people can use, and which understand the way stablecoin reserves work means you can generate revenue from people who are not explicitly your customers. Think social media, not wire transfers.
Early leaders there include PayPal (they already have a stablecoin) and Stripe (with the Bridge acquisition). That’s not a prediction they will win, but rather if you are looking for signals, that’s the kind of thing you should look for.
However, the point is that whoever gets it and moves first will win. There is a network effect to these things, after all.
Consumers
Let’s get to the bottom line about what matters here: the consumer benefits. Right now, if you’re an American, your bank offers you a terrible value proposition. When you deposit, they pay you nothing, they make a bunch of risky loans, and if it works, they pay themselves huge bonuses, and if it doesn’t work, they stick you with the losses if you were above the FDIC limit (and even maybe below, if the situation gets bad enough across the board). Who wouldn’t want to own a Fidelity government money market fund as the basis of your payments balance vs. having Eighteenth Bank of Five Chuckleheads YOLO’ing your money into their cousin’s brother’s roommate’s construction business at favorable terms? This is sort of the core of the Savings & Loan crisis, and we still haven’t fixed it at the industry level. This is also not a critique of all banks (there are some really good ones) or all bankers (there are also people who genuinely help their local community), but it is a critique of not even having the option to do something else.
Well, now you have it. But more importantly, you know who else has it? People globally. Because if you think the problem I raised above is bad here, imagine being in a corrupt country where your government locks the doors with capital controls and then inflates the currency constantly while giving handouts to their cronies. Pretty bad, huh? Now you have an option to get away from that, so long as you have the internet.
Put simply: well-regulated USD stablecoins will be one of the largest expansions of human rights in the past 50 years.
LOSERS
Tether & Circle
“Austin,” I hear you say, “Congress just passed a stablecoin act. What is wrong with you? Why do you think the two largest issuers of stablecoins are the losers of this?”
Well, you see, they are the two largest issuers because they haven’t had real competition. This is not a knock on Tether (identifying this opportunity in 2014 and just putting one foot in front of the other is something almost everyone failed at, and lead to one of the most profitable trades of human history other than buying BTC in 2009-2010). But it is to say that Tether is in a totally different world when they have to compete against the combined might of the entire US financial system.
I’ll start with this: craftsmanship and trust matter. Tether has had a long history of playing games with their reserves and disclosures. Witness the false starts on audits, the refusal to tell people exactly where everything was, and the continued offshore-ness of the whole operation. That has to stop with Genius, or they are slowly going to be forced out of the US market and, likely with regulators finally being forced to constructively engage with rules on the space vs. just screaming LALALALALAICANTHEARYOU, going to come down on the people transacting with them if Tether doesn’t improve.
Tether will either look radically different in five years, or this will be the beginning of the end. I think the folks at Tether know this, and Paolo has even spoken about it publicly, but the rubber is now meeting the road. You’d much rather compete alone where everyone is scared vs. having to go toe to toe with titans like Blackrock and JP Morgan in financial markets.
Circle is perhaps an even more extreme case. Has anyone looked closely at this thing? Seeing it rip with Genius passing was one of my favorite moments telling me that, you know, maybe the market still doesn’t really understand this stuff and I’ve done the right thing starting my own firm. Circle has a very deep entanglement with Coinbase, and is kind of a one-trick pony. Where does most of their income go? Where do most of their customers come from? What drives the volume in USDC? The answer is the same for all of these questions: Coinbase. Does that mean Circle is a bad thing? Well, it does mean they kind of have a critical exposure problem. Has Circle done a good job outside of that? They haven’t diversified their distribution. They haven’t, and I am being polite here, managed their reserves particularly well. They just kind of existed and managed not to be totally dumb or illegal (which is quite the achievement in crypto, in a way, compared to some of their competition).
But once again, now they are going to face a real battle. Will a bunch of companies adopt USDC as the payment rail? I find that hard to believe when others will be offering a better deal with better infrastructure, and possibly a larger customer base.
I think it gets harder, not easier, from here for both of these companies. A lot harder. That’s not a prediction of imminent demise, but it’s entirely possible we look back on Tether and Circle as more MySpace (sorry Tom) than Facebook in the long run.
Decrepit legacy banks
Remember where I said above that the value proposition that many banks offer to their depositors is terrible? Well, if that’s all you are doing, functionally, you are going to have a problem.
I want to start here by saying a lot of people in the banking space are going to tell you this is a bad thing, but as a former banker myself, I find that unconvincing at best. Yes, it’s a bad thing for the bonuses of those bankers, especially the executives, but is it a bad thing for society writ large? The argument you will hear is that banks lend to local communities based on deposits, and without those deposits, how can they lend? This would be persuasive if the only lending was from deposits, or most of those loans were retained on bank balance sheets, but the massive securitization market for mortgages and the rapidly growing alternative lending and private credit space tell you that the bank deposit model is hardly the only way to lend.
What is going to happen is an unbundling of banking services. Instead of 8 dudes in Arkansas at a legacy bank having to make local loans (the part they are good at) and manage interest rate risk against their liabilities (they are bad at this), run a KYC/AML/CTF program that can evaluate businesses trying to onboard from SE Asia (really bad at this), and keep their technology stack up to date (also bad at this), they will just be making the loans. The rest will be done by other entities. That is a good thing, not a bad thing. It’s not so much that we need consolidation as we need a re-organization of who is doing what.
This also doesn’t apply to all banks. The fintech specialists, the payments experts in niche markets, those who actually have a diversified depositor base and invested in the tech stack? They will be fine. They will be winners. It’s the local bank of a town of 2,000 that is still running a COBOL ledger and double checking everything by hand (e.g. causing more errors than they catch) that’s going to have a problem (and they should).
Payments: the slow
So on the payments note: this does look to me like when Amazon burst onto the scene selling books. A fundamentally different and better method of distribution (open-access and open-source ledgers that everyone can plug into and build on) from walled gardens with high fees just showed up for consumers.
This demands a response. The problem is going to be those who don’t respond. If your strategy at a payments firm is to spin up endless R&D and innovation teams, hire the big consulting agencies (who have zero real experience or track record of success in blockchain) to tell you that yes, the future is a bank-controlled hyperledger environment, and then you spend five years telling your shareholders you are “innovating” by improving your margins .1% while Tether continues to be the most profitable company in the world, you are going to go the way of Borders. This is not a moment for tepid responses.
I would, in fact, tell investors this: if a payments company does not have products deployed on public blockchains, is not running percentage points of their business through some open-access chain (note: this doesn’t have to be ETH, but it can’t be a purely private chain, at least we need an open consortium model), and has teams in this space led by crypto natives with actual experience as opposed to promoting internal bureaucrats (especially beyond the business team), they are going to fail.
This should be your tell. Do they try to use bureaucracy and internal politics to solve an external innovation problem? Disaster incoming. That’s how you become Borders.
Elizabeth warren & anti-crypto army
For the anti-crypto army, this was a crushing defeat. From 2022 onwards, they have been attempting to make crypto illegal, engaging in both lawfare and outright illegal actions (see the SEC being sanctioned in Debt Box or the unfolding investigations into Operation Chokepoint 2.0) to attempt to block, delay, harass, intimidate, and otherwise shut down a legal industry in the United States of America.
Note that this is not a defense of all people in crypto (there are definitely some criminals!), but this is a statement that a musician releasing songs in the form of an NFT is not a crime, no matter how much Elizabeth Warren and Gary Gensler wanted it to be one, because the average American should not have been allowed to use a slightly different electronic ledger than the previous one.
This week, they were routed. After pissing off virtually everyone under the age of 29 who has ever used technology (and I will remind everyone that men 18-29 outright voted for Trump and that one of the best predictors of a vote switching from Biden in 2020 to Trump in 2024 in that group was “I own crypto”) and everyone who cares about rule of law (myself included), the anti-crypto extremist cabal was routed as the Democratic party itself roundly rejected their viewpoint. There remain some geriatric politicians (seriously - look for yourself, being 70+ years old is probably the best predictor of a politician hating crypto) who rail against it, but significant numbers of Democrats voted for Genius in the House and the Senate.
It might be time for the Warren cabal to re-think their strategy of outright falsehoods, lawfare, and aligning themselves with the big banks while claiming to be the champion of the little guy. Nobody is buying what they are selling anymore.
THIRD WORLD DICTATORS
Lastly, if you have been operating under the old rules of “my currency, my territory, my control”, you are in a world of trouble. Citizens of nations that have built deeply corrupt banking systems that consistently just straight up steal the money of those not politically favored, those with rampant inflation and outright expropriation of value from citizens, and those with systems that just simply do not function reliably all now have another option.
Why? All you need to acquire a US dollar stablecoin is the following:
1 - The internet
2 - Something of value to trade for it
Stopping that is nearly impossible. In my time at Paxos, the only country where I was certain the average citizen could not get stablecoins was North Korea. In short, you have to take the internet away (which is likely to have other negative consequences for your economy).
Think of stablecoins as giving every single person on Earth the option, but not the requirement, to be part of the US dollar system. This is a massive expansion of human rights, and is essentially the goal of most open borders advocates and in line with thinking around things like the Nation State. Essentially, you may now choose, voluntarily, to affiliate with this system of money instead of others.
The net effect is that every single country that has been inflicting economic pain on their citizens through their local currency is now in deep danger. You have to either behave better, or people will flee the system.
And to this, I say: good riddance to those that are swept away by that tide.
WHAT ARE WE UP TO
AUSTIN: Well, I am mainly recovering from the final push of the Genius act. After that, it’s right back in the saddle as the great game has begun, and I’m going to be keeping a close eye on who among the Tradfi crowd can get their act together first. This is, perhaps, the first time that crypto writ large will start to impact public equity markets, and eventually, it’s going to bleed into bank, asset manager, and payment company valuations. We’re just getting started.
DAVID: David has been covering the Roman Storm (of Tornado Cash fame/infamy) trial, where the sloppiness of the government’s case has already opened the door for a potential mistrial. Follow along for all the madness.
