Payment stablecoins were designed to work as a means of payment. But when they are used at scale to store value and intermediate liquidity, they take on functions reminiscent of so-called shadow banking: arrangements that resemble deposits and credit but operate outside traditional banking regulation.
📌 What the GENIUS Act provides ● Sets capital, liquidity and risk management standards for authorized issuers. ● Requires asset segregation and auditable reporting, reducing insolvency risk. ● Prohibits the rehypothecation of collateral, ensuring that reserves are fully available for redemptions.
📌 Why it matters ● Without prudential requirements, stablecoins could play a role similar to demand deposits, but without the protection of the traditional banking system. ● Globally, there is a risk of liquidity concentrating in a few issuers, amplifying the effects of confidence crises (runs). ● Stablecoins are already being tested in practice for international settlement - such as Visa's pilot with USDC - showing that part of global liquidity already circulates outside bank intermediation.
📌 Regulatory agenda ● Set minimum capital and liquidity levels for issuers. ● Strengthen international coordination, since stablecoin use is global. ● Balance innovation and stability, avoiding both systemic fragility and excessive restrictions that would stifle new payment models.
𝐈𝐧 𝐬𝐡𝐨𝐫𝐭: by imposing prudential requirements, the GENIUS Act recognizes that stablecoins, although created as a means of payment, can generate risks typical of shadow banking. The regulatory challenge is to prevent this innovation from becoming a source of instability for the global financial system.
➡️ This is the last post in the series on the GENIUS Act and its implications for the international regulatory debate.
Authors: Roberto Panucci, Tiago Severo Gomes and Marcelo De Callis
