Mortar Strategies: GENIUS Act Analysis

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Policy Overview
This legislation seeks to provide a clear regulatory framework for digital assets by allocating oversight duties to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The SEC would regulate “restricted digital assets,” while the CFTC would oversee “digital commodities.” FIT21 includes provisions for consumer protections, market transparency, stablecoin regulation, and a certification process for determining whether a blockchain is sufficiently decentralized or functional.

Key Implications

• Business Clarity: By clarifying which agencies regulate specific digital assets, FIT21 aims to reduce legal uncertainties that hamper growth and innovation.
• Consumer Protections: Enhanced disclosure requirements and asset safekeeping standards strengthen safeguards for retail investors.
• Market Confidence: A predictable legal environment may attract greater investment in U.S.-based blockchain and crypto ventures, mitigating concerns that companies may relocate overseas.
   

Legislative Outlook
Although the bill passed the House with bipartisan support, its progress in the Senate is less certain due to differing views on crypto regulation. Should it become law, FIT21 could solidify the U.S. as a global leader in blockchain and digital asset development while addressing the risks associated with emerging technologies.

Actionable Steps for Stakeholders

• Strategic Preparation: Companies should evaluate the classification of their digital assets to ensure compliance with the proposed oversight structure.
• Regulatory Engagement: Ongoing dialogue with lawmakers and regulators can help shape the final framework and ensure industry concerns are heard.
• Operational Readiness: Entities dealing in digital assets should consider updating disclosures, operational protocols, and consumer protection measures to align with potential new requirements.

Policy Overview
This bipartisan bill provides a “safe harbor” for non-custodial blockchain developers and service providers (such as miners and wallet providers) by exempting them from being classified as money transmitters or financial institutions under state or federal laws—unless they directly control consumer funds. It also codifies existing Financial Crimes Enforcement Network (FinCEN) guidelines.

Key Implications

• Developer Protection: By clarifying that non-custodial services are not subject to financial institution regulations, the bill fosters technical innovation and reduces compliance-related obstacles.
• Industry Growth: The safe harbor could encourage more blockchain projects to remain in or relocate to the United States, where regulatory clarity is improving.
• State-Level Impact: If enacted, the bill would limit the application of certain state licensing regimes—such as New York’s BitLicense—to entities that actually handle consumer funds.
   

Legislative Outlook
Although it enjoys bipartisan support, this bill has made limited progress since being placed on the Union Calendar in May 2024. Its ultimate fate will depend on the broader congressional appetite for addressing blockchain regulatory clarity. If passed, it stands to significantly reduce compliance costs and spur further innovation in non-custodial blockchain services.

Actionable Steps for Stakeholders

• Risk Assessment: Assess whether your organization’s activities fall under the non-custodial category and how a safe harbor might reduce potential regulatory exposure. 
• Advocacy and Outreach: Engage with policymakers to emphasize the importance of clear, innovation-friendly guidelines that maintain essential consumer protections. 
• Business Alignment: Plan operational structures, legal strategies, and product roadmaps in anticipation of possible passage, ensuring you can quickly capitalize on reduced compliance burdens.