Major retail giants Amazon and Walmart reportedly contemplating launching their own digital currencies, known as stablecoins.

Major retail giants Amazon and Walmart reportedly contemplating launching their own digital currencies, known as stablecoins.

The GENIUS Act, recently enacted in the U.S., introduces several key provisions affecting the issuance of stablecoins, particularly for large listed non-financial companies. Here are the main aspects relevant to these entities:

Key Provisions for Non-Financial Companies

1. Prohibition for Non-Financial Companies as Issuers:
2. The Act prohibits non-financial services public companies and their foreign equivalents from serving as payment stablecoin issuers unless they receive unanimous approval from the Stablecoin Certification Review Committee (SCRC).
3. Restrictions on Tying Arrangements:
4. The GENIUS Act also prohibits "tying" arrangements, where customers are forced to purchase other products as a condition of obtaining stablecoins. This applies across the board, including non-financial firms.
5. Regulatory Framework:
6. The Act establishes a dual state-federal regulatory structure, ensuring both national and localized oversight. However, non-financial companies are not typically allowed to participate in this framework as issuers.
7. Bank-Like Requirements for Issuers:
8. For entities allowed to issue stablecoins, the Act imposes a bank-like prudential regime, including strict reserve-backing requirements and regular public disclosures. Non-financial companies would need to comply with these regulations if approved to issue stablecoins.
9. Reserve Composition and Custody:
10. Stablecoins must be fully backed by high-quality, liquid assets such as U.S. currency, Treasury securities, and balances at Federal Reserve Banks. These assets must be segregated from the issuer's own assets and held with regulated financial institutions.

Implications for Large Listed Non-Financial Companies

• Limited Participation: The primary implication for large listed non-financial companies is that they are generally barred from issuing payment stablecoins unless they meet specific approval criteria.
• Compliance Challenges: If approved, these companies would face significant regulatory and compliance burdens, including maintaining fully backed reserves and adhering to strict disclosure and risk management standards.
• The relevant GENIUS Act clause now applies to large listed firms not based in the United States.
• This GENIUS Act amendment, if passed, would potentially impact Amazon but possibly not Walmart because it's a store not a marketplace.
• The GENIUS Act prohibits tying, which involves using market power in one sphere to force a partner or customer to use a second offering, such as a stablecoin.
• The Wall Street Journal reports that Amazon and Walmart are considering issuing their own stablecoins or using an existing one. A consortium of merchants led by a stablecoin issuer is one of the options being considered.

The timing of the news about Amazon, Walmart, and Expedia considering digital currencies is awkward for the ongoing GENIUS Act stablecoin legislation. Republican Senator Josh Hawley has proposed a GENIUS Act amendment that could block social media platforms, search engines, communication platforms, and e-commerce marketplaces with more than 25 million users from launching a stablecoin. There could be some haggling over the weekend before the final GENIUS Act vote next week. On many blockchains, fees for transactions can be negligible compared to credit card fees, which are around 2.9%. The receipt of stablecoin funds can be almost instant, unlike card payments which have delays. The Committee needs to produce rules clarifying the application of this clause within a year of the passage of the legislation. The Global Dollar stablecoin initiated by Paxos has a similar consortium structure for financial services companies.

1. The GENIUS Act, recently enacted in the U.S., has introduced provisions that could potentially limit the ability of large listed non-financial companies, such as Amazon and Walmart, to issue their own stablecoins, under the proposed amendment from Senator Josh Hawley.
2. If approved, these companies would face significant regulatory and compliance burdens, as they would need to comply with bank-like prudential regime, including strict reserve-backing requirements and regular public disclosures, if they wish to issue stablecoins.
3. The provisions of the GENIUS Act establish a dual state-federal regulatory structure, ensuring both national and localized oversight, but non-financial companies are not typically allowed to participate in this framework as issuers.
4. In the technology landscape, the implications of the GENIUS Act's stablecoin regulations could have far-reaching consequences, as fees for transactions on blockchains are often lower than credit card fees, making digital currencies an attractive option for payment systems, especially in the retail sector.

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