I have not been a supporter of Stablecoin due to lack of safety and regulatory provisions in the same vein as regulated Banks. The Genius (really ??) Act changes that and provides for regulatory provisions similar ~ to that which governs other financial entities, including maintenance of capital requirements and money laundering protection. The AML provisions are weak and will not capture small medium bad actors.

Time will tell and I really hope that under Carney we will see some movement in Canadian finance. since we end to miss innovation completely in Canadian Banking and Finance. Similarly I hope OSFI are taking note.

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Source Perplexity.ai

Circle, Coinbase surge after Senate passes stablecoin GENIUS Act

Shares of Circle Internet Group and Coinbase surged significantly after the U.S. Senate passed the GENIUS Act, a landmark bill establishing the first federal framework for stablecoin regulation, with Circle stock rallying nearly 20% and Coinbase climbing 11% as investors responded positively to potential mainstream adoption of dollar-pegged cryptocurrencies.

cnbc.com

GENIUS Act Key Provisions

The GENIUS Act establishes comprehensive regulations for stablecoin issuers with several critical provisions:

• Requires issuers to maintain 100% reserves backed by cash or high-quality liquid assets like U.S. Treasury securities to ensure 1:1 backing
• Limits stablecoin issuance to authorized entities including insured banks, credit unions, and federally-qualified or state-qualified issuers
• Mandates monthly audits and transparent redemption processes for consumer protection
• Prohibits yield-bearing payment stablecoins to prevent evasion of the legislation’s intent
• Establishes that stablecoins meeting the criteria are explicitly defined as non-securities, preventing SEC jurisdiction
• Requires compliance with anti-money laundering laws and anti-terrorism sanctions
• Grants stablecoin holders priority for repayment in the event of issuer bankruptcy

This regulatory framework aims to integrate stablecoins into the U.S. financial infrastructure while providing the clarity that financial institutions need to confidently adopt these digital assets for payments and settlements.

Circle’s 400% Stock Surge

Circle Internet Group (CRCL) shares have experienced a meteoric rise since their June 5 IPO, surging approximately 400% from the initial $31 per share price to reach as high as $176 following the Senate’s passage of the GENIUS Act. The stablecoin issuer’s stock debuted with a spectacular 168% first-day gain, opening at $69 and closing at $83.23, marking the biggest Day 1 pop since Arm’s 2021 IPO.

The remarkable performance has been fueled by several factors:

• Growing mainstream acceptance of stablecoins as financial infrastructure
• BlackRock’s interest in acquiring nearly 10% of Circle’s shares
• Strong financial results with 59% revenue growth and 75% net income growth in Q1
• Regulatory tailwinds from the Trump administration’s crypto-friendly framework
• USDC’s position as the second-largest stablecoin with billions in circulation
• Increased trading volumes as investor confidence surged after the Senate vote

Stablecoin Reserve Requirements

The GENIUS Act establishes strict reserve requirements as the cornerstone of stablecoin regulation, requiring issuers to maintain a 1:1 backing ratio between stablecoins and reserve assets. These reserves must consist exclusively of highly liquid assets including:

• U.S. dollars and coins
• Government money market funds
• U.S. Treasury securities
• Other cash-like instruments with minimal risk

Issuers must publish monthly reserve disclosures and comply with anti-money laundering regulations, with larger issuers (exceeding $50 billion in market capitalization) required to provide annual audited financial statements. The legislation also creates a bankruptcy protection mechanism, ensuring stablecoin holders receive priority claims on reserve assets if an issuer fails, providing crucial consumer safeguards while maintaining the dollar’s supremacy as the world’s reserve currency.

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Further information

Circle stock price surged to a new record high after the US Senate passed the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS) and the ongoing stablecoin demand. CRCL shares closed at $200, up by over 300% from its listing price.

Cashing in on stablecoin growth

Circle stock price has surged after going public as investors focused on the GENIUS Act, which passed in the Senate this week. There are rising odds that the bill will pass in the House of Representatives since some Senate Democrats supported it.

The GENIUS Act is a bullish catalyst for Circle stock for two main reasons. First, it brings in the regulatory clarity that the stablecoin market needs without adding any undue costs. For example, the bill mandates issuers to hold liquid government bonds and do regular reporting, which Circle does already. 

Second, the GENIUS Act may make USDC gain market share if Tether refuses to comply as it did with MiCA. Such a move will force companies like Coinbase to convert user holdings from USDT to USDC as some European exchanges have done. 

Circle Payments Network is a key catalyst

The other bullish catalyst for the Circle stock price is the Circle Payments Network (CPN), a business that seeks to disrupt the financial services industry. 

CPN partners with banks and payment service companies to offer them a cheaper and faster approach to send money internationally.

Presently, these companies use SWIFT technology, a process that is expensive and slow. That’s because it uses correspondent banks and other processes. As a result, it is normal for a transaction to take a few hours or days to complete. 

The Circle Payment Network avoids this lengthy process by using USDC. In it, a company executes a payment using the stablecoin, which is then completed within a few seconds. USDC transactions cost cents, making them ideal for all parties.

The CPN business model also has a chance to disrupt traditional companies like Visa and Mastercard that make billions of dollars a year in payment transaction costs. 

Indeed, it has been reported that companies like Walmart and Amazon are considering leveraging stablecoins to cut these costs. One way for them to do that would be to partner with Circle, which already runs a popular stablecoin.

Risks for buying Circle stock

There are risks for buying Circle stock at this level. First, there are signs that USDC holdings are not growing. CoinGecko data shows that the stablecoin has a market cap of $61.45 billion, lower than the April high of $62 billion. 

Circle needs its USD supply to continue growing for it to supercharge its growth. Higher stablecoin growth means that it will generate higher investment income. 

The other risk is that the company is now highly valued since its market cap stands at over $33 billion, 54% of its total stablecoin assets. 

Further, the Federal Reserve has signaled that it will execute two interest rate cuts this year and more in 2024 and 2025. Lower rates will impact its revenue and profitability growth. 

Circle stock price will also face risks of a pullback when investors start to take profits. Cathie Wood’s Ark Invest has already dumped shares worth millions of dollars, and more investors will follow. 

The other top risk is that the company’s lockup expiry will happen in the next few months. Historically, recently IPOed companies crash or experience volatility ahead of expiry, letting insiders dump their shares. 

Finally, the ongoing momentum will likely ease now that the Circle stock price has become highly overbought.