July 30, 2025 • 18 mins
President Trump signed the Genius Act, the US’s first major federal cryptocurrency legislation, earlier this month. The law focuses on one type of cryptocurrency: stablecoins. So, what exactly is a stablecoin?
On today’s Big Take podcast, Bloomberg’s Emily Mason joins host Sarah Holder to break down what stablecoins are, how they work and what their wider adoption could mean for the crypto industry, banks and consumers.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio News. Today a victory celebration
at the White House as Republican lawmakers and crypto industry
leaders gathered around the President for the signing of the
Genius Act. On July eighteenth, President Trump signed the Genius Act.
It's the country's first major federal cryptocurrency legislation. A landmark
(00:25):
bill establishing a regulatory framework for the roughly two hundred
and fifty billion dollar cryptocurrency market known as stable coin,
has become law. The law focuses on a type of
cryptocurrency called stable coin.
Speaker 2 (00:39):
It's a digital asset that's designed to maintain a stable price,
as the name suggests, and it's typically backed by reserves
that are held in short term assets like short term
US treasuries or cash.
Speaker 1 (00:49):
Emily Mason covers cryptocurrencies for Bloomberg.
Speaker 2 (00:52):
With the crypto industry, there's so much stuff that's really
out there in odd like there's NFTs, there's the board apes,
there's dogecoin, There's all these kind of crazy, really volatile cryptocurrencies.
And stable coin is the thing that really has kind
of real use cases in the real world for real
businesses and real financial institutions.
Speaker 1 (01:16):
Emily says the signing of the Genius Act into law
marks a major and long awaited milestone for the crypto industry.
Stable Coins already make up about two thirds of crypto transactions,
and this new legislation will make it much easier for
the digital assets to go mainstream.
Speaker 2 (01:35):
The challenge beforehand is that there were a bunch of
companies and financial institutions that were sort of stable coin curious,
but they couldn't really act on that curiosity because they
didn't know if it was allowed or if they were
going to get in trouble. I think now it's where
the building can really start happening and scaling.
Speaker 1 (01:52):
I'm Sarah Holder, and this is the big take from
Bloomberg News today. On the show, what are stable coins
exactly work, Why they were the focus of the US's
first crypto legislation, and what their wider adoption could mean
for the crypto industry, for banks, and for you and me.
(02:17):
If you chart the price of a cryptocurrency like bitcoin,
you get a very bumpy roller coaster. It makes for
a wild ride. But stable coins they're designed for minimal
motion sickness.
Speaker 2 (02:29):
They can even be pecked to commodities like gold, but
typically the most popular ones, they're packed to the US dollar.
Speaker 1 (02:36):
Okay, not to get all philosophical on you, but the
US dollar, like any other currency, it's kind of make
belief it has value because we all believe it does.
For a long time, the US dollar was actually backed
by gold, real tangible gold that helps set the value
of a dollar and keep it stable. We stopped doing
(02:56):
that in the nineteen seventies. But cryptocurrency are brand new,
relatively speaking, and they're not backed by a trustworthy government.
Their value has been notoriously volatile. Stable coins are supposed
to be the answer to all that volatility, because the
value of most stable coins isn't just determined by how
much people are willing to pay for them on any
(03:18):
given day, but by the value of the traditional currency
they're pegged too. For every stable coin, they're supposed to
be a dollar again, a US Treasury bond, or some
tangible asset locked away in a vault, kind of like
there used to be gold for the dollar. But this
of course begs the question, if you really want something stable,
(03:38):
why not just use a dollar.
Speaker 2 (03:43):
So the advantage in the demand for a stable coin
is you can use it for transactions. You can use
it as a payment vehicle because the price isn't volatile,
but you can still get the advantages of the blockchain.
Speaker 1 (03:54):
Quick reminder of what the blockchain is for those of
us who might need one. It's essentially a digital district
needed ledger.
Speaker 3 (04:01):
Keeps track of the transactions.
Speaker 2 (04:03):
I think the advantages of digital currencies that people are
really excited about are, for example, it's programmable, so you
can do things like if this happens, then send this payment,
and that can happen automatically with something called a smart contract,
which are you know, contracts that are automatically executed when
certain conditions are met. So that's something that people are
really excited about with digital currencies, and you can make
(04:24):
that work with stable coin.
Speaker 1 (04:26):
Stable Coin, like other cryptocurrencies, operates on the blockchain, so
you get all those advantages while avoiding the crazy price
fluctuations we were talking about earlier. Makes sense in theory,
but I asked Emily, in the real world, what are
companies and people actually using stable coins for.
Speaker 2 (04:45):
Yeah, so if you're a big institution and you're managing
entities kind of around the world, and you need to
be moving money quickly between them. Then stable coin's attractive
for that reason because it's instant and it's twenty four
to seven versus other means of payments, especially cross border,
have to go through like a correspondent banking system, so
it kind of gets pinged between like bank ABCD until
(05:06):
it gets to its final destination. Each of those banks
charges a fee, and each of those banks can add
delay to the transaction actually settling and clearing. So stablecoin
cuts out all of those intermediaries and it lets you
kind of just send it directly from point A to
point B, so that can be cheaper, that can be
more efficient, it can be faster, and it can happen anytime.
So that's kind of the advantage of stable coin.
Speaker 1 (05:28):
It's like wiring money turbo speed.
Speaker 2 (05:31):
Yes, it's like wiring money, and that can have a
lot of business advantages. So like if I need to
pay a vendor abroad and I'm running a business in
the US and the vendor is not going to release
my goods to me, that I need to run my
business until the payment lands. If I can do that
instantly with stable coin, like that really helps me run
my business more efficiently.
Speaker 1 (05:48):
What about consumers, Why would someone like you or I
use a stable coin.
Speaker 2 (05:54):
Yeah, so in the US, consumer payments work pretty well.
Like I personally don't really need a stable cookin in
my day to day. But if you're living in a
country where the native currency is more volatile and it's
not a good store of value, then access to dollars
is really appealing, and I might not be able to
get a US bank account very easily. So holding stable
coin is really attractive for that reason. And like, one
(06:16):
trend that's emerging is US companies employing contractors abroad are
using stable coin to pay them, and a lot of
different payroll providers are coming out with solutions to enable that.
Speaker 1 (06:27):
The problem is stable coins aren't always perfectly stable. A
stable coin can break from the currency or asset it's
pegg two. Emily says. This is called a depegging event.
Speaker 2 (06:40):
That's when the stable coin isn't trading one for one
for like one USD.
Speaker 1 (06:45):
One of the most high profile depegging events happened a
few years ago and it involved one of the largest
stable coin issuers called Circle.
Speaker 2 (06:53):
So Circle very briefly depegged when Silicon Valley Bank failed
because they were holding a lot of their reserves there.
Speaker 1 (06:58):
Silicon Valley Bank was the favored regional bank of many
California tech firms. When it collapsed in twenty twenty three,
Circle suddenly lost access to a chunk of its reserves.
Spooped investors sold Circle stable coin, and its value fell.
Instead of being one to one with a dollar, the
issuer's stable coin briefly fell as low as eighty one
(07:19):
and a half cents before Circle reassured investors and the
price bounced back, but other stable coins haven't been able
to recover.
Speaker 2 (07:27):
Kar Luna was a really popular stable coin, and then
that kind of had like a spiral deepegging episode and
is now defunct.
Speaker 1 (07:37):
Tether, the world's largest issuer of stable coins, has also
faced questions about just how stable its stable coins are.
In twenty twenty one, it paid about sixty million dollars
to New York and the US Commodity Futures Trading Commission
to settle allegations of making untrue and misleading claims, including
the fact that all its coins were backed one to
(07:58):
one by US dollars at all times. Tether still doesn't
release audited statements about the reserves that back it's stable coins,
given these concerns about transparency and reliability. I asked Emily
how stable coin issuers are supposed to make sure their
currency lives up to its name.
Speaker 2 (08:16):
Yeah, I mean, it's keeping your reserves in a really
trusted and secure place. I think the risk is always.
I mean it's similar to bank runs, right, Like if
depositors lose confidence in their bank and they all rush
to take their money out and it's not immediately available,
that's when you have a bank failure. And stablecoin issuers
are similar, Like, if the people holding your coin lose
confidence that you're maintaining the reserves in a safe and
(08:39):
sound way and that they're actually there and that they
can actually redeem their money, then they're going to rush
to redeem. And I think that's one of the big
concerns is like, Okay, if you have an event like that,
if you have like the equivalent of a bank run
on a stable coin issuer, are you going to be
able to meet those demands and those redemption requests? And
I think some lawmakers were saying, like, Okay, if circle
takes off and all of these can consumers have USDC
(09:01):
and they're holding stable coin balances and something like that,
happens and circle fails, are we going to bail them out? Like,
we don't really want to sign up for that. So
that's kind of one of the concerns.
Speaker 1 (09:10):
And lawmakers have other concerns about stable coins. Report from
the Financial Action Task Force released in June show that
most criminal activity happening on cryptocurrency ledgers now involves stable coins.
Besides the obvious appeal of anonymity that all cryptocurrency offers,
Emily says, financial criminals like stability too. Well.
Speaker 2 (09:31):
The advantages of stable coins for the traditional market are
the same for criminal actors, right, Like the price is stable,
So if I'm making payments, I want the currency that
I used to be worth the same amount today that
it was yesterday when I made the payment, So the
advantages are kind of the same there.
Speaker 1 (09:47):
That's so interesting. So like above above board, financial actors
like stable coin for the same reason that potentially mortifarious
actors would like it.
Speaker 3 (09:54):
Yeah, one hundred percent.
Speaker 2 (09:55):
And then on the transparency piece with the blockchain, like
it's kind of one of those things where it's like, Okay,
you can see all the transactions and you can see
the digital wallets that were that were transacting but the
wallets have these really long names. It's like a bunch
of letters and numbers, and you're kind of like, okay,
well who is that? And then you can see all
(10:16):
the transactions, but you don't necessarily know who's making the transactions.
And that's why the off ramping is such a big
kind of conversation for criminals. It's sort of like, Okay,
if I've got all of this illicit money in my
cryptocurrency wallet, how am I going to get it out?
But not tie it to myself? Because as soon as
I try to transfer it to a bank account, the
bank knows who I am, and so that's kind of
(10:38):
like a challenge for them.
Speaker 1 (10:41):
Coming up, we dig into the Genius Act and how
regulating stable coins could push more companies to start making
them and using them. With the passage of the Genius Act,
(11:02):
the US is now officially regulating the cryptocurrency market, well
one corner of it, anyway. Bloomberg's Emily Mason says, out
of all the digital assets out there, stable coins were
a logical place to start.
Speaker 2 (11:16):
I think just like they have a really concrete use
case that it's kind of clear to see than maybe
some of the other cryptocurrencies that are used primarily for
trading activities, and they're more of like it's more of
an investment vehicle than it is for actually making payments.
And the Genius Act is very specific. It's for payment
stable coin issuers. This is for making payments and like
(11:36):
making payments easier and just better for businesses and financial
institutions and potentially consumers if that makes sense, though it's
not super clear why it would in the US.
Speaker 1 (11:45):
Can you break down what exactly the regulation does?
Speaker 2 (11:48):
Yeah, So it kind of creates guidelines around like what
the reserves need to look like, it needs to be
backed one to one by short term assets. It establishes
the OCC as a regulator of stable coin issuers, though
the issuers can still be regular by either state or
federal regulators.
Speaker 1 (12:02):
The OCC is the Office of the Controller of the Currency.
Speaker 3 (12:06):
Yeah, and it's like a federal regulator.
Speaker 1 (12:08):
Another thing the Genius Act does is it requires issuers
to abide by anti money laundering and anti terrorism rules.
Speaker 2 (12:15):
Honestly, it's pretty short, Like that's what's kind of crazy.
It's like, if you read it, it's like a pretty
short thing. Those are kind of the main things that
we've been calling.
Speaker 1 (12:21):
Out though, Yeah, well, why is it important that this
regulation ensures or tries to ensure that these coins are
backed by actual assets. The dollar, for example, was once
backed by gold, but it hasn't been for decades.
Speaker 3 (12:34):
Yeah.
Speaker 2 (12:35):
The banks are regulated super closely by different there's a
lot of different regulators, the OCC being one of them,
the FDIC being another one, and then bank deposits are
also ensured up to two hundred and fifty thousand dollars
by the FDIC. So even though it's not backed one
to one by gold, it's kind of got this really
sturdy infrastructure around it to keep consumers and businesses safe
(12:56):
and to keep people confident that they can transact in
the dollar and they're not going to have a problem.
Speaker 3 (13:01):
And stablecoin it's the same thing.
Speaker 2 (13:03):
You know, you need to build this regulatory scaffolding around
it so that people can use it and feel safe
and don't get in trouble.
Speaker 1 (13:10):
Who was pushing for this regulation? Who are the legislation's
main backers?
Speaker 2 (13:15):
I mean the crypto industry of course, And they put
a lot of money into Trump's campaign, into his inauguration fund.
They had lots of like flashy parties because they put
money in for that, so crypto companies. The Trump family
is kind of like involved in the cryptocurrency industry, so
they've they've been supporters of it. He and his sons
founded World Liberty Financial. He stepped down once he became president,
but World Liberty Financial issues its own stable coin called
(13:38):
USD one, So they are like heavily involved in this industry,
in this space.
Speaker 1 (13:42):
According to the Bloomberg Billionaire's Index, crypto ventures added at
least six hundred and twenty million dollars to Donald Trump's
fortune as of early July. That's one reason critics of
the Genius Act, including Massachusetts Senator Elizabeth Warren, opposed the law.
She was also concerned about technology companies issuing their own
stable coins.
Speaker 2 (14:02):
So someone like a Meta or Elon Musk with X
like he could issue a stable coin and kind of
turn these platforms into almost de facto bank accounts. And
her concern was if people are storing significant amount of
money as stable coin balances, like can we really trust
these companies to keep that money safe and secure, and
like are people kind of going to land in trouble?
Speaker 1 (14:23):
Wall Street and traditional financial institutions have their own worries.
Speaker 2 (14:28):
There's a lot of concern from the banking industry that
if you can hold money as a stable coin balance
and you're earning four percent, then you're going to take
your money out of the banking system, and then that's
going to weaken the banking industry pretty significantly. You know,
if businesses can hold stable coin balances and that's a
better way for them to transact, that's a better way
for them to conduct business payments, then they're going to leave.
(14:50):
That's something that they want to be ahead of. They
want to be sure that they're offering a comparable product.
Speaker 1 (14:54):
Secretary Busson has also talked about the fact that this
could that the increased use of or backed stable coins
could increase demand for US treasuries and the US dollar.
Speaker 2 (15:04):
Yeah, so, I mean he's excited about this because it
means that more people are buying treasuries to back the
stable coins. And I think the other thing that people
are excited about is sort of that this is something
that can help keep the dollar really relevant and strong
currency around the world, because you'll have people in all
of these other countries that want dollar access using stable
coin as a means for transacting.
Speaker 1 (15:26):
Big picture, what does this all mean for consumers.
Speaker 2 (15:29):
I think it's like it so remains to be seen,
especially in the US, just because our payment systems today
like work pretty well, so whether people are actually using
stable coin to check out is kind of remains to
be seen. Merchants would maybe really like that to happen
because accepting credit cards is expensive. There's a couple of
(15:49):
caveats to that though. For example, if you pay with
stable coin, it's not a credit product, you have to
have the money immediately available. I love paying with my
credit card because you know, I haven't been paid yet
and it's a credit and iron points. Stable Cooin hasn't
really replicated any of that yet, and there's a lot
more stable coin linked cards coming to market, So Visa
announced a partnership with Striped to kind of enable that
(16:11):
so you can actually then start spending your stable coin
balance as you would with any other card.
Speaker 1 (16:18):
What are the biggest open questions that you still have
about what this regulation might mean for the stable coin
industry and about the use of stable coins moving forward.
Speaker 3 (16:29):
I'm still super interested in the adoption question.
Speaker 2 (16:31):
And then the other piece is this interoperability piece, Like
if we have all of these different coins that are
being issued. What is the mechanism for making them all
work together? Right now, I have a dollar, You have
a dollar, someone else over there has a dollar, and
we can all transact pretty easily.
Speaker 3 (16:46):
What does that look like for stable coin?
Speaker 2 (16:47):
It could also be on other blockchains, so you have
to figure out ways to make those transactions all work.
The big advantages of the card networks is I can
walk into any store and I'm really confident that my
card is going to be accepted because everyone takes Visa
and MasterCard. If I'm walking in with a stable coin balance,
it's probably today impossible that I'll be able to Yeah.
Speaker 1 (17:07):
I was gonna say, like, can you do that anywhere?
Speaker 3 (17:10):
No, I don't think you can do that anywhere.
Speaker 2 (17:11):
But like, that's why Visa has stable cooin linked cards
so that I can spend my stable coin balance with
a Visa card, and Visa becomes kind of an and
MasterCard becomes the acceptance brand for stable coin, and so
they're kind of still trying to figure out what does
that look like, Like how do you build that network
of acceptance.
Speaker 1 (17:36):
This is the big take from Bloomberg News. I'm Sarah
Holder to get more from the big Take and unlimited
access to all of bloomberg dot com. Subscribe today at
bloomberg dot com slash podcast offer. If you like this episode,
make sure to follow and review The Big Take wherever
you listen to podcasts. It helps people find the show.
Thanks for listening. We'll be back tomorrow
Bloomberg Audio Studios, podcasts, radio News. Today a victory celebration
at the White House as Republican lawmakers and crypto industry
leaders gathered around the President for the signing of the
Genius Act. On July eighteenth, President Trump signed the Genius Act.
It's the country's first major federal cryptocurrency legislation. A landmark
(00:25):
bill establishing a regulatory framework for the roughly two hundred
and fifty billion dollar cryptocurrency market known as stable coin,
has become law. The law focuses on a type of
cryptocurrency called stable coin.
Speaker 2 (00:39):
It's a digital asset that's designed to maintain a stable price,
as the name suggests, and it's typically backed by reserves
that are held in short term assets like short term
US treasuries or cash.
Speaker 1 (00:49):
Emily Mason covers cryptocurrencies for Bloomberg.
Speaker 2 (00:52):
With the crypto industry, there's so much stuff that's really
out there in odd like there's NFTs, there's the board apes,
there's dogecoin, There's all these kind of crazy, really volatile cryptocurrencies.
And stable coin is the thing that really has kind
of real use cases in the real world for real
businesses and real financial institutions.
Speaker 1 (01:16):
Emily says the signing of the Genius Act into law
marks a major and long awaited milestone for the crypto industry.
Stable Coins already make up about two thirds of crypto transactions,
and this new legislation will make it much easier for
the digital assets to go mainstream.
Speaker 2 (01:35):
The challenge beforehand is that there were a bunch of
companies and financial institutions that were sort of stable coin curious,
but they couldn't really act on that curiosity because they
didn't know if it was allowed or if they were
going to get in trouble. I think now it's where
the building can really start happening and scaling.
Speaker 1 (01:52):
I'm Sarah Holder, and this is the big take from
Bloomberg News today. On the show, what are stable coins
exactly work, Why they were the focus of the US's
first crypto legislation, and what their wider adoption could mean
for the crypto industry, for banks, and for you and me.
(02:17):
If you chart the price of a cryptocurrency like bitcoin,
you get a very bumpy roller coaster. It makes for
a wild ride. But stable coins they're designed for minimal
motion sickness.
Speaker 2 (02:29):
They can even be pecked to commodities like gold, but
typically the most popular ones, they're packed to the US dollar.
Speaker 1 (02:36):
Okay, not to get all philosophical on you, but the
US dollar, like any other currency, it's kind of make
belief it has value because we all believe it does.
For a long time, the US dollar was actually backed
by gold, real tangible gold that helps set the value
of a dollar and keep it stable. We stopped doing
(02:56):
that in the nineteen seventies. But cryptocurrency are brand new,
relatively speaking, and they're not backed by a trustworthy government.
Their value has been notoriously volatile. Stable coins are supposed
to be the answer to all that volatility, because the
value of most stable coins isn't just determined by how
much people are willing to pay for them on any
(03:18):
given day, but by the value of the traditional currency
they're pegged too. For every stable coin, they're supposed to
be a dollar again, a US Treasury bond, or some
tangible asset locked away in a vault, kind of like
there used to be gold for the dollar. But this
of course begs the question, if you really want something stable,
(03:38):
why not just use a dollar.
Speaker 2 (03:43):
So the advantage in the demand for a stable coin
is you can use it for transactions. You can use
it as a payment vehicle because the price isn't volatile,
but you can still get the advantages of the blockchain.
Speaker 1 (03:54):
Quick reminder of what the blockchain is for those of
us who might need one. It's essentially a digital district
needed ledger.
Speaker 3 (04:01):
Keeps track of the transactions.
Speaker 2 (04:03):
I think the advantages of digital currencies that people are
really excited about are, for example, it's programmable, so you
can do things like if this happens, then send this payment,
and that can happen automatically with something called a smart contract,
which are you know, contracts that are automatically executed when
certain conditions are met. So that's something that people are
really excited about with digital currencies, and you can make
(04:24):
that work with stable coin.
Speaker 1 (04:26):
Stable Coin, like other cryptocurrencies, operates on the blockchain, so
you get all those advantages while avoiding the crazy price
fluctuations we were talking about earlier. Makes sense in theory,
but I asked Emily, in the real world, what are
companies and people actually using stable coins for.
Speaker 2 (04:45):
Yeah, so if you're a big institution and you're managing
entities kind of around the world, and you need to
be moving money quickly between them. Then stable coin's attractive
for that reason because it's instant and it's twenty four
to seven versus other means of payments, especially cross border,
have to go through like a correspondent banking system, so
it kind of gets pinged between like bank ABCD until
(05:06):
it gets to its final destination. Each of those banks
charges a fee, and each of those banks can add
delay to the transaction actually settling and clearing. So stablecoin
cuts out all of those intermediaries and it lets you
kind of just send it directly from point A to
point B, so that can be cheaper, that can be
more efficient, it can be faster, and it can happen anytime.
So that's kind of the advantage of stable coin.
Speaker 1 (05:28):
It's like wiring money turbo speed.
Speaker 2 (05:31):
Yes, it's like wiring money, and that can have a
lot of business advantages. So like if I need to
pay a vendor abroad and I'm running a business in
the US and the vendor is not going to release
my goods to me, that I need to run my
business until the payment lands. If I can do that
instantly with stable coin, like that really helps me run
my business more efficiently.
Speaker 1 (05:48):
What about consumers, Why would someone like you or I
use a stable coin.
Speaker 2 (05:54):
Yeah, so in the US, consumer payments work pretty well.
Like I personally don't really need a stable cookin in
my day to day. But if you're living in a
country where the native currency is more volatile and it's
not a good store of value, then access to dollars
is really appealing, and I might not be able to
get a US bank account very easily. So holding stable
coin is really attractive for that reason. And like, one
(06:16):
trend that's emerging is US companies employing contractors abroad are
using stable coin to pay them, and a lot of
different payroll providers are coming out with solutions to enable that.
Speaker 1 (06:27):
The problem is stable coins aren't always perfectly stable. A
stable coin can break from the currency or asset it's
pegg two. Emily says. This is called a depegging event.
Speaker 2 (06:40):
That's when the stable coin isn't trading one for one
for like one USD.
Speaker 1 (06:45):
One of the most high profile depegging events happened a
few years ago and it involved one of the largest
stable coin issuers called Circle.
Speaker 2 (06:53):
So Circle very briefly depegged when Silicon Valley Bank failed
because they were holding a lot of their reserves there.
Speaker 1 (06:58):
Silicon Valley Bank was the favored regional bank of many
California tech firms. When it collapsed in twenty twenty three,
Circle suddenly lost access to a chunk of its reserves.
Spooped investors sold Circle stable coin, and its value fell.
Instead of being one to one with a dollar, the
issuer's stable coin briefly fell as low as eighty one
(07:19):
and a half cents before Circle reassured investors and the
price bounced back, but other stable coins haven't been able
to recover.
Speaker 2 (07:27):
Kar Luna was a really popular stable coin, and then
that kind of had like a spiral deepegging episode and
is now defunct.
Speaker 1 (07:37):
Tether, the world's largest issuer of stable coins, has also
faced questions about just how stable its stable coins are.
In twenty twenty one, it paid about sixty million dollars
to New York and the US Commodity Futures Trading Commission
to settle allegations of making untrue and misleading claims, including
the fact that all its coins were backed one to
(07:58):
one by US dollars at all times. Tether still doesn't
release audited statements about the reserves that back it's stable coins,
given these concerns about transparency and reliability. I asked Emily
how stable coin issuers are supposed to make sure their
currency lives up to its name.
Speaker 2 (08:16):
Yeah, I mean, it's keeping your reserves in a really
trusted and secure place. I think the risk is always.
I mean it's similar to bank runs, right, Like if
depositors lose confidence in their bank and they all rush
to take their money out and it's not immediately available,
that's when you have a bank failure. And stablecoin issuers
are similar, Like, if the people holding your coin lose
confidence that you're maintaining the reserves in a safe and
(08:39):
sound way and that they're actually there and that they
can actually redeem their money, then they're going to rush
to redeem. And I think that's one of the big
concerns is like, Okay, if you have an event like that,
if you have like the equivalent of a bank run
on a stable coin issuer, are you going to be
able to meet those demands and those redemption requests? And
I think some lawmakers were saying, like, Okay, if circle
takes off and all of these can consumers have USDC
(09:01):
and they're holding stable coin balances and something like that,
happens and circle fails, are we going to bail them out? Like,
we don't really want to sign up for that. So
that's kind of one of the concerns.
Speaker 1 (09:10):
And lawmakers have other concerns about stable coins. Report from
the Financial Action Task Force released in June show that
most criminal activity happening on cryptocurrency ledgers now involves stable coins.
Besides the obvious appeal of anonymity that all cryptocurrency offers,
Emily says, financial criminals like stability too. Well.
Speaker 2 (09:31):
The advantages of stable coins for the traditional market are
the same for criminal actors, right, Like the price is stable,
So if I'm making payments, I want the currency that
I used to be worth the same amount today that
it was yesterday when I made the payment, So the
advantages are kind of the same there.
Speaker 1 (09:47):
That's so interesting. So like above above board, financial actors
like stable coin for the same reason that potentially mortifarious
actors would like it.
Speaker 3 (09:54):
Yeah, one hundred percent.
Speaker 2 (09:55):
And then on the transparency piece with the blockchain, like
it's kind of one of those things where it's like, Okay,
you can see all the transactions and you can see
the digital wallets that were that were transacting but the
wallets have these really long names. It's like a bunch
of letters and numbers, and you're kind of like, okay,
well who is that? And then you can see all
(10:16):
the transactions, but you don't necessarily know who's making the transactions.
And that's why the off ramping is such a big
kind of conversation for criminals. It's sort of like, Okay,
if I've got all of this illicit money in my
cryptocurrency wallet, how am I going to get it out?
But not tie it to myself? Because as soon as
I try to transfer it to a bank account, the
bank knows who I am, and so that's kind of
(10:38):
like a challenge for them.
Speaker 1 (10:41):
Coming up, we dig into the Genius Act and how
regulating stable coins could push more companies to start making
them and using them. With the passage of the Genius Act,
(11:02):
the US is now officially regulating the cryptocurrency market, well
one corner of it, anyway. Bloomberg's Emily Mason says, out
of all the digital assets out there, stable coins were
a logical place to start.
Speaker 2 (11:16):
I think just like they have a really concrete use
case that it's kind of clear to see than maybe
some of the other cryptocurrencies that are used primarily for
trading activities, and they're more of like it's more of
an investment vehicle than it is for actually making payments.
And the Genius Act is very specific. It's for payment
stable coin issuers. This is for making payments and like
(11:36):
making payments easier and just better for businesses and financial
institutions and potentially consumers if that makes sense, though it's
not super clear why it would in the US.
Speaker 1 (11:45):
Can you break down what exactly the regulation does?
Speaker 2 (11:48):
Yeah, So it kind of creates guidelines around like what
the reserves need to look like, it needs to be
backed one to one by short term assets. It establishes
the OCC as a regulator of stable coin issuers, though
the issuers can still be regular by either state or
federal regulators.
Speaker 1 (12:02):
The OCC is the Office of the Controller of the Currency.
Speaker 3 (12:06):
Yeah, and it's like a federal regulator.
Speaker 1 (12:08):
Another thing the Genius Act does is it requires issuers
to abide by anti money laundering and anti terrorism rules.
Speaker 2 (12:15):
Honestly, it's pretty short, Like that's what's kind of crazy.
It's like, if you read it, it's like a pretty
short thing. Those are kind of the main things that
we've been calling.
Speaker 1 (12:21):
Out though, Yeah, well, why is it important that this
regulation ensures or tries to ensure that these coins are
backed by actual assets. The dollar, for example, was once
backed by gold, but it hasn't been for decades.
Speaker 3 (12:34):
Yeah.
Speaker 2 (12:35):
The banks are regulated super closely by different there's a
lot of different regulators, the OCC being one of them,
the FDIC being another one, and then bank deposits are
also ensured up to two hundred and fifty thousand dollars
by the FDIC. So even though it's not backed one
to one by gold, it's kind of got this really
sturdy infrastructure around it to keep consumers and businesses safe
(12:56):
and to keep people confident that they can transact in
the dollar and they're not going to have a problem.
Speaker 3 (13:01):
And stablecoin it's the same thing.
Speaker 2 (13:03):
You know, you need to build this regulatory scaffolding around
it so that people can use it and feel safe
and don't get in trouble.
Speaker 1 (13:10):
Who was pushing for this regulation? Who are the legislation's
main backers?
Speaker 2 (13:15):
I mean the crypto industry of course, And they put
a lot of money into Trump's campaign, into his inauguration fund.
They had lots of like flashy parties because they put
money in for that, so crypto companies. The Trump family
is kind of like involved in the cryptocurrency industry, so
they've they've been supporters of it. He and his sons
founded World Liberty Financial. He stepped down once he became president,
but World Liberty Financial issues its own stable coin called
(13:38):
USD one, So they are like heavily involved in this industry,
in this space.
Speaker 1 (13:42):
According to the Bloomberg Billionaire's Index, crypto ventures added at
least six hundred and twenty million dollars to Donald Trump's
fortune as of early July. That's one reason critics of
the Genius Act, including Massachusetts Senator Elizabeth Warren, opposed the law.
She was also concerned about technology companies issuing their own
stable coins.
Speaker 2 (14:02):
So someone like a Meta or Elon Musk with X
like he could issue a stable coin and kind of
turn these platforms into almost de facto bank accounts. And
her concern was if people are storing significant amount of
money as stable coin balances, like can we really trust
these companies to keep that money safe and secure, and
like are people kind of going to land in trouble?
Speaker 1 (14:23):
Wall Street and traditional financial institutions have their own worries.
Speaker 2 (14:28):
There's a lot of concern from the banking industry that
if you can hold money as a stable coin balance
and you're earning four percent, then you're going to take
your money out of the banking system, and then that's
going to weaken the banking industry pretty significantly. You know,
if businesses can hold stable coin balances and that's a
better way for them to transact, that's a better way
for them to conduct business payments, then they're going to leave.
(14:50):
That's something that they want to be ahead of. They
want to be sure that they're offering a comparable product.
Speaker 1 (14:54):
Secretary Busson has also talked about the fact that this
could that the increased use of or backed stable coins
could increase demand for US treasuries and the US dollar.
Speaker 2 (15:04):
Yeah, so, I mean he's excited about this because it
means that more people are buying treasuries to back the
stable coins. And I think the other thing that people
are excited about is sort of that this is something
that can help keep the dollar really relevant and strong
currency around the world, because you'll have people in all
of these other countries that want dollar access using stable
coin as a means for transacting.
Speaker 1 (15:26):
Big picture, what does this all mean for consumers.
Speaker 2 (15:29):
I think it's like it so remains to be seen,
especially in the US, just because our payment systems today
like work pretty well, so whether people are actually using
stable coin to check out is kind of remains to
be seen. Merchants would maybe really like that to happen
because accepting credit cards is expensive. There's a couple of
(15:49):
caveats to that though. For example, if you pay with
stable coin, it's not a credit product, you have to
have the money immediately available. I love paying with my
credit card because you know, I haven't been paid yet
and it's a credit and iron points. Stable Cooin hasn't
really replicated any of that yet, and there's a lot
more stable coin linked cards coming to market, So Visa
announced a partnership with Striped to kind of enable that
(16:11):
so you can actually then start spending your stable coin
balance as you would with any other card.
Speaker 1 (16:18):
What are the biggest open questions that you still have
about what this regulation might mean for the stable coin
industry and about the use of stable coins moving forward.
Speaker 3 (16:29):
I'm still super interested in the adoption question.
Speaker 2 (16:31):
And then the other piece is this interoperability piece, Like
if we have all of these different coins that are
being issued. What is the mechanism for making them all
work together? Right now, I have a dollar, You have
a dollar, someone else over there has a dollar, and
we can all transact pretty easily.
Speaker 3 (16:46):
What does that look like for stable coin?
Speaker 2 (16:47):
It could also be on other blockchains, so you have
to figure out ways to make those transactions all work.
The big advantages of the card networks is I can
walk into any store and I'm really confident that my
card is going to be accepted because everyone takes Visa
and MasterCard. If I'm walking in with a stable coin balance,
it's probably today impossible that I'll be able to Yeah.
Speaker 1 (17:07):
I was gonna say, like, can you do that anywhere?
Speaker 3 (17:10):
No, I don't think you can do that anywhere.
Speaker 2 (17:11):
But like, that's why Visa has stable cooin linked cards
so that I can spend my stable coin balance with
a Visa card, and Visa becomes kind of an and
MasterCard becomes the acceptance brand for stable coin, and so
they're kind of still trying to figure out what does
that look like, Like how do you build that network
of acceptance.
Speaker 1 (17:36):
This is the big take from Bloomberg News. I'm Sarah
Holder to get more from the big Take and unlimited
access to all of bloomberg dot com. Subscribe today at
bloomberg dot com slash podcast offer. If you like this episode,
make sure to follow and review The Big Take wherever
you listen to podcasts. It helps people find the show.
Thanks for listening. We'll be back tomorrow
Hosts And Creators
Sarah Holder
Saleha Mohsin
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