Three heavy blows during Washington’s “Crypto Week”, is the US encryption hegemony secure?

By Paul Veradittakit, Partner at Pantera Capital

Compiled by: Saoirse, Foresight News

summary

• The GENIUS Act has been signed into law, establishing uniform standards for the issuance and reserves of stablecoins.
• The CLARITY Act passed by the House of Representatives clarifies the regulatory scope of the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) over digital assets, and specifies the transition path from SEC regulation to CFTC regulation.
• The Anti-CBDC Act included in the National Defense Authorization Act (NDAA) prohibits the Federal Reserve from issuing a centralized digital dollar without congressional approval and advocates decentralized solutions.

 Photo by Brandon Smialowski/AFP

Event Review

Last week, U.S. cryptocurrency policy made historic progress. During what Congress called "Crypto Week," lawmakers pushed through several landmark bills. On July 19, President Trump signed the GENIUS Act into law. The news immediately boosted market sentiment, pushing the total market value of cryptocurrencies above $4 trillion for the first time, and the issuance of stablecoins hit a new high of $261 billion. The bill sets uniform standards for stablecoins, prompting financial giants such as JPMorgan Chase, Bank of America, PayPal, and Stripe to announce pilot programs. The clarity of cryptocurrency regulation reduces industry uncertainty, allowing institutional investors to mobilize previously idle funds, large banks to enter the stablecoin market in compliance, and users to trade more privately. The bill firmly positions cryptocurrency as a core pillar of the next generation of the financial Internet, while pushing the United States to the position of "the global cryptocurrency capital."

After months of debate, the CLARITY Act passed the House of Representatives with bipartisan support and is now being rapidly submitted to the Senate for deliberation. The bill clarifies the division of supervision of digital assets between the SEC and the CFTC. In addition, the Anti-CBDC Act has also made significant progress and has been included in the National Defense Authorization Act, prohibiting the Federal Reserve from issuing centralized digital dollars without explicit approval from Congress.

It’s an exciting time in the cryptocurrency industry! Below, we’ll break down the GENIUS Act, the CLARITY Act, and the Anti-CBDC Act, and what these developments mean for the industry.

GENIUS Act

On May 19, the Senate passed the final debate procedure of the GENIUS Act with 66 votes in favor and 32 votes against. On July 17, the US Congress submitted the bill to President Trump's desk, and on July 19, the President signed it into law.

What is the GENIUS Act?

The GENIUS Act clarifies who is eligible to issue payment stablecoins and lists eligible instruments that can serve as stablecoin reserve assets. The Act has completely changed the market's perception of stablecoins, from a simple trading target to an institutional-level payment channel. Stablecoins allow banks and fintech companies to deploy them as a true "programmable dollar" with second-level settlement and 24-hour clearing. We believe that this will unlock value across the entire value chain from machine payments to cross-border trade, while ensuring that global dollar liquidity is always under the supervision of U.S. regulators, ultimately leading to deeper market liquidity, lower settlement friction, and a more solid position for the dollar in the global market.

• Compliant issuers include three categories: (1) federally regulated banks; (2) non-bank stablecoin issuers licensed by the U.S. Office of the Comptroller of the Currency (OCC); and (3) state-chartered issuers, but the total market value of their stablecoins in circulation must not exceed US$10 billion.
• The value of the reserve assets must be equal to or greater than the total face value of all issued stablecoins.
• Eligible reserve instruments include: U.S. dollars held in the form of cash, demand deposits, or insured deposit shares of insured depository institutions; short-term Treasury bills with maturities of 93 days or less; and overnight reverse repurchase agreements fully collateralized by Treasury bills.
• The issuer must publish details of reserve assets and circulation on a monthly basis and conduct independent audits every year to confirm the 1:1 asset endorsement ratio and asset compliance.

Although the bill prohibits interest-bearing stablecoins, many projects may provide returns through alternative means, such as launching loyalty programs, rebates and other mechanisms to simulate the effect of income without directly paying interest. This regulatory pressure is expected to accelerate the integration of the stablecoin industry. Users will tend to choose the most attractive non-income incentive platforms, and stablecoin providers with a complete loyalty or reward system may occupy a larger market share, driving the industry from a decentralized "income ecosystem" to a centralized pattern, and ultimately dominated by a few leading players who provide innovative and compliant reward mechanisms.

CLARITY Act

What is the CLARITY Act?

The GENIUS Act provides a clear framework for stablecoin regulation, but there is no legislation to ensure that the trading infrastructure of stablecoins is decentralized and “trustless”. The CLARITY Act was introduced to fill this gap, and it clearly divides the responsibilities of the SEC and CFTC in digital asset regulation.

The CLARITY Act provides precise legal definitions for “digital assets,” “digital commodities,” and “mature blockchain systems”:

• Digital assets: refers to the digital representation of value or rights recorded in a cryptographically secure distributed ledger.
• Digital commodities: refers to fungible digital assets that are not securities, issued or exist in mature blockchain systems, and can be transferred between individuals without relying on intermediaries.
• Mature blockchain system: refers to a functional, open and fully decentralized protocol where no individual or group can unilaterally control the protocol rules or asset issuance.

Under the CLARITY Act, the SEC is responsible for regulating tokens that have the attributes of "investment contracts". Such tokens are usually issued by projects that are under centralized control or in the early stages of development for financing. In contrast, the CFTC governs "digital commodities", which are fungible digital assets that are not securities and are based on mature blockchain systems. The Act allows digital assets to "migrate" from SEC supervision to CFTC supervision after they have achieved sufficient decentralization and widespread adoption.

Analysis of the CLARITY Act

The CLARITY Act clearly defines the meaning of “decentralization”:

• A mature blockchain system must be open and interoperable. It must use open source code and must not restrict anyone from participating in the functional activities of the blockchain.
• A mature blockchain system must have a governance mechanism. No individual or group may unilaterally modify the functions and operating rules of the blockchain, and the blockchain voting rights held by any individual or group may not exceed 20% of the total circulating voting rights.

For a project to transition from SEC regulation to CFTC regulation, it must be fully decentralized. SEC-regulated tokens are considered securities, and their restrictions and regulatory requirements are similar to those of listed companies; while the regulatory requirements for digital commodities under the jurisdiction of the CFTC are more relaxed, with no need to submit detailed reports, no restrictions on token access, and the market is open to all participants, and there is no "qualified investor" threshold.

Before the bill was introduced, crypto project teams always faced an ambiguous regulatory environment. No one could clearly define the standard of "decentralization", which caused the industry to be overloaded with legal pressure for a long time. Now, this situation has completely changed. The bill provides a clear legal definition of decentralization, and teams no longer need to chase ever-changing or difficult-to-achieve goals, but have clear and quantifiable benchmarks. This certainty brings much-needed relief to industry innovators and paves a predictable development path.

We believe that the bill will force project teams to find a balance between "moderate centralization to optimize performance" and "promoting decentralization to gain market access and regulatory dividends."

Anti-CBDC Act

What is Central Bank Digital Currency (CBDC)?

Central bank digital currency (CBDC) is a digital version of a country's legal tender, issued and regulated directly by the central bank. Compared with stablecoins, central bank digital currency is inherently more susceptible to government monitoring. Every transaction must pass through the country's centralized ledger and may be monitored by it, allowing authorities to accurately track, analyze, and even restrict citizens' financial activities.

There is an essential difference between central bank digital currency and stablecoin: stablecoin is issued by private institutions and backed by reserve assets such as legal tender or government bonds, so it lacks the central bank guarantee that central bank digital currency has. However, because stablecoins are traded on public ledgers such as Ethereum and Solana, their transactions are difficult to be reviewed by the government.

What is the Anti-CBDC Act?

The Anti-CBDC Act, formally known as the Anti-Central Bank Digital Currency Surveillance State Act, is a legislative measure designed to prevent the Federal Reserve or any U.S. government agency from creating and promoting a central bank digital currency without explicit authorization from Congress. The provision prohibits the government from searching and seizing Americans’ financial data, while plugging loopholes, prohibiting the indirect issuance of central bank digital currencies through third-party intermediaries, and requiring that any attempt to launch a U.S. digital dollar must first obtain explicit formal approval from the legislature.

Analysis of the Anti-CBDC Act

The Anti-CBDC Act directs financial innovation and activities to public decentralized blockchains rather than state-controlled ledgers. Combined with the GENIUS Act and the CLARITY Act, this legislative framework releases a clear policy preference: the U.S. government chooses to support stablecoins on decentralized ledgers rather than centralized digital currencies on permissioned government ledgers.

This approach reduces the possibility of state-led financial surveillance in the central bank's digital currency system and protects personal financial privacy. By supporting decentralized infrastructure, the legislation is highly consistent with the core spirit of blockchain, ensuring that users control their own economic life sovereignty without worrying about transactions being censored.

Conclusion

Last week was a historic moment for the cryptocurrency industry.

• The CLARITY Act sets clear standards for digital goods.
• The GENIUS Act sets out clear rules for the issuance and operation of stablecoins.
• Ultimately, the Anti-CBDC Act in the National Defense Authorization Act eliminates the risk of government surveillance, protects privacy, and encourages the development of decentralized networks.

As US cryptocurrency regulation becomes increasingly clear, the industry is experiencing a strong recovery centered on the US. We have seen a surge in demand for local talent: teams that previously moved overseas have returned to the US, and a large number of projects are actively recruiting US policy, developer relations, and partnership development experts.

The token issuance model is also transforming to "adapt to the US market": many projects no longer default to the offshore foundation model, but choose to issue tokens directly through Delaware entities; the token economic model is also being redesigned to better fit US market expectations. As shown in the case of OpenSea, airdrop activities are increasingly targeting US users; mainstream platforms such as Telegram have also launched Web3 wallets and applets for US users, highlighting the market's refocus on the United States.

The new era of regulatory certainty is fueling the digital asset industry, driving the boom of innovative stablecoin banks and payment companies. Both industry leaders and nimble new entrants are rapidly launching institutional-grade solutions such as custody, liquidity, compliance, and privacy protection, which are the core pillars of a mature crypto ecosystem. After 12 years of industry evolution, we have never been more optimistic. With rapid development momentum and a solid legal framework, the United States is rapidly consolidating its unshakable position as the "global cryptocurrency capital".