Genius Act Grants Stablecoin Holders Bankruptcy Priority, May Exacerbate Risks in the Banking System

The "Genius Act" passed by the U.S. Senate grants stablecoin holders priority claim to their underlying assets in the event of issuer bankruptcy, drawing attention from the banking and legal sectors. Georgetown University law professor Adam Levitin pointed out that this mechanism could lead to "subsidizing stablecoin issuance at the expense of bank deposits," harming the interests of traditional bank customers, especially in the event of issuer or custodian bank bankruptcy.
The bill also stipulates that stablecoins must be backed by highly liquid assets, such as U.S. Treasury bonds, and that issuers must disclose reserve information monthly and have the ability to freeze tokens. If passed, banks and other entities will be able to legally issue compliant stablecoins.
Industry insiders believe that although the bill is intended to boost user confidence and strengthen the integration of stablecoins with traditional finance, the "bankruptcy priority" arrangement may disrupt the original risk structure of the financial system and become an important turning point in the development and regulatory coordination of stablecoins. (DL News) [Odaily Planet Daily]