Introduction:
- United States of America stablecoin law called the Genius Act was finally passed both in the bicameral USA Congress: House and Senate. All that's left is the work of the reconcilliation committee, a body which looks at both approved bills and creates a final law acceptible to both the House of Representatives and the House of the Senate.
New Stablecoin law called Genius Act
Imagine you have a special kind of digital money called stablecoins. The idea is that these digital coins are always worth the same amount, like one US dollar. This makes them useful for buying things or saving money, because their value doesn't jump up and down like Bitcoin.
Now, in the United States, a new rulebook called the GENIUS Act is being put in place for some of these stablecoins. Think of it like a new set of rules for how certain digital banks should work.
What kind of stablecoins does the GENIUS Act care about?
- This new rulebook is mostly for stablecoins that are backed by real US dollars. Imagine a company that holds a real dollar in a bank for every digital dollar they create. The GENIUS Act wants to make sure these companies play by the rules:
They have to prove they really have enough dollars in the bank.
They need to follow rules to stop bad guys from using them for illegal stuff (like money laundering).
They'll be watched by the government, kind of like regular banks.
- The goal is to make these types of stablecoins very safe and trustworthy, so more people and big companies will use them for payments around the world. This could even make the US dollar even stronger globally.
What is a Payment Stablecoin?
The term "payment stablecoin" in the GENIUS Act does not exclusively refer to stablecoins used by banks in their payment systems.
While the Act aims to facilitate the use of stablecoins by traditional financial institutions, its definition of "payment stablecoin" is broader and focuses on the characteristics of the stablecoin itself, rather than who uses it.
Based on summaries in the GENIUS Act (specifically S. 919 and S. 1582, which are the Senate bills referred to by "GENIUS Act of 2025"), the wording used to define "payment stablecoin" is generally consistent across these proposals.
Here's the common definition found in the GENIUS Act, or very similar wording across its iterations:
"The term 'payment stablecoin' means a digital asset—
(A) that is or is designed to be used as a means of payment or settlement; and
(B) the issuer of which—
(i) is obligated to convert, redeem, or repurchase for a fixed amount of monetary value; and
(ii) represents it will maintain or creates the reasonable expectation that it will maintain a stable value relative to the value of a fixed amount of monetary value."
Let's break down what this means:
"Digital asset": This simply means it's a cryptocurrency or token.
"Used as a means of payment or settlement": This is the core function. It's intended to be used to buy things, send money, or settle financial obligations. This isn't restricted to banks; it includes general public use.
"Issuer... is obligated to convert, redeem, or repurchase for a fixed amount of monetary value": This is key. It means the entity that created the stablecoin must be able to give you back a fixed amount of a national currency (like $1 USD) for each stablecoin. This implies a direct, enforceable promise from the issuer.
"Represents it will maintain or creates the reasonable expectation that it will maintain a stable value relative to the value of a fixed amount of monetary value": This reinforces the "stable" aspect – the stablecoin is designed and advertised to hold its value against a real-world currency.
What this definition implies:
- Fiat-backed focus: The obligation to redeem for a "fixed amount of monetary value" (e.g., $1 USD) and the requirement for issuers to maintain 1:1 reserves in highly liquid, fiat-denominated assets (like US dollars, Treasury bills, bank deposits) clearly indicate that the GENIUS Act's primary target is fiat-backed stablecoins.
- Issuer responsibility: The definition places significant responsibility on the issuer of the stablecoin to maintain the peg and redeem the stablecoin.
- This is why the Act then outlines who can be a "permitted payment stablecoin issuer" (e.g., subsidiaries of banks, or approved non-bank entities subject to regulation).
Pay attention to this:
- ***Exclusion of algorithmic stablecoins: *** This definition inherently excludes purely algorithmic stablecoins like HBD, which rely on economic incentives and arbitrage within a crypto ecosystem rather than a direct, 1:1 fiat reserve by an identifiable issuer with a legal obligation to redeem.
- HBD's peg is maintained through its relationship with HIVE, not through a direct promise from an "issuer" to hand over fiat dollars from a reserve.
- So, while the GENIUS Act absolutely aims to integrate these regulated stablecoins into broader payment systems, including potentially those used by banks, the definition of "payment stablecoin" itself is a technical one based on its backing and the issuer's obligations, not solely on who the end-user is or which payment system it operates within.
The Hive blockchain stablecoin: HBD which means Hive Backed Dollars.
- HBD is also a stablecoin, but HBD is different from the ones the GENIUS Act is focusing on.
- HBD is worth not one dollar, but one dollar worth of Hive.
- So it's the same, but different.
- The Genius Act focuses on regulating all stablecoins backed by Traditional Assets, and states only those stablecoins can be used in Payment Systems.
- Hive isn't backed 1:1 by Traditional Assets, which means US Dollars or US Treasuries.
- The Genius Act calls stablecoins like Hive an Endogenously Collateralized Stablecoin, and it is not banned from the USA, but it is banned from being a Payment System Stablecoin.
Here's a simpler way to think about it:
HBD doesn't have actual US dollars sitting in a bank account to back it up. Instead, it's backed by the Hive blockchain's own digital money, called HIVE.
- If you have HBD, you can tell the Hive blockchain to give you a dollar's worth of HIVE in exchange. This ability to swap HBD for HIVE helps HBD stay close to $1.
- The Hive blockchain also has smart computer programs and rules that help keep HBD stable, looking at the price of HIVE and how much HBD is out there.
- People who help run the Hive blockchain (called "witnesses") also play a role in making sure HBD stays on track.
So, what does the GENIUS Act mean for HBD?
It probably won't directly affect HBD: Since HBD isn't backed by real dollars in a bank account, it doesn't fit the main type of stablecoin the GENIUS Act wants to regulate. So, HBD won't have to follow all those strict new rules about holding real money in reserves or being watched by US government agencies.
More eyeballs on other stablecoins: Even though HBD isn't directly covered, the GENIUS Act shows that governments are paying more attention to all stablecoins. This might make people look harder at how HBD works and if it's truly stable.
HBD might live in a different "neighborhood": The new law might mean that big, well-known digital money exchanges that follow US rules won't list HBD. That's because HBD is different from the "approved" stablecoins.
What this means: HBD will likely keep being used mostly on decentralized exchanges. Think of these as open, online marketplaces that don't have a central company running them, so they don't have to follow the same rules as traditional banks or big exchanges.
Good news for Hive: This is where things like LeoDex (a tool on Hive) become super important. LeoDex helps people swap different kinds of digital money, including HBD, across different blockchains. This helps HBD connect to the wider world of digital money, even if it's not on the "main" regulated exchanges.
HBD needs its own special strengths: With many new, regulated dollar-backed stablecoins coming out, HBD will have to show why it's still a good choice.
- HBD's strengths: Its main strengths are that it's very decentralized (no single company controls it), it's censorship-resistant (no one can easily stop it from working), and it's built right into the Hive social media and content-sharing world. The interest you can earn on HBD Savings is also a unique feature.
Last words regarding the Genius Act and Hive's stablecoin HBD.
- In short, the GENIUS Act is a big deal for some stablecoins, making them more like digital versions of regular money in banks. But HBD is a different kind of stablecoin. It won't be directly under these new rules, but it will need to keep showing its unique value and how it can connect to the bigger digital money world through decentralized tools.
The End
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