GENIUS Act Transforms Stablecoins and Drives Innovation in US Startups

• GENIUS Act Streamlines Licensing of Stablecoins in the US
• Crypto startup gains security with remote fiat assets
• 1:1 backed stablecoins strengthen the use of the digital dollar

Foresight Ventures released an analysis on the recent enactment of the GENIUS Act, a U.S. legislation that promises to reshape the stablecoin industry and foster a more favorable environment for startups and fintechs. The measure is designed to remove operational barriers, raise compliance standards, and strengthen the role of the U.S. dollar as a benchmark for digital transactions.

One of the main advances brought about by the Law is the creation of a dual licensing regime. With it, stablecoin issuers will be able to operate nationally through a state license considered “substantially equivalent” by federal authorities, eliminating the need for multiple licenses in different states.

Another critical point of the legislation concerns the security of reserves. All assets backing stablecoins must be held as remote fiduciary, protecting users in the event of bankruptcy of the issuing company. This requirement seeks to ensure priority of users' claims and increase confidence in digital assets.

The regulation also prohibits the payment of interest directly to end users, which prevents these cryptocurrencies from being classified as securities or banking products. However, issuers are allowed to use interest from reserves for initiatives such as marketing and business development programs, as long as this does not involve direct financial transfer to holders.

A central requirement of the GENIUS Act is full backing in highly liquid assets and U.S. dollars, which reinforces the dollar’s ​​status as a digital settlement currency. Agora’s AUSD, for example, is a model of this new standard: fully collateralized with cash, U.S. Treasuries, and overnight repos, with reserves held in remote fiduciary structures and under the custody of recognized institutions.

Zac Tsui, Chief Investment Officer at Foresight Ventures, said: “The GENIUS Act represents a significant step forward in stablecoin regulation, providing clarity and fostering innovation.” He believes fintechs and startups are now in a better position to scale solutions that are compliant with the new regulatory environment.

Foresight Ventures continues to actively support its portfolio companies, aiming to maximize the opportunities created by this regulatory transformation and promote the evolution of the digital financial ecosystem.