The GENIUS Act defines a payment stablecoin as a digital asset that trades on a public distributed ledger that is designed to facilitate payment. It must be redeemable for currency but is explicitly not a national currency, a bank deposit, or a security. A payment stablecoin issuer is required to hold a minimum dollar-for-dollar reserve in bank deposits, very short-term government securities or the equivalent thereof in mutual fund shares to back the issuer’s outstanding stablecoins to “create the reasonable expectation” that digital asset will maintain a stable currency redemption value. The Act specifically prohibits depository institutions from offering payment stablecoin bank deposits, but it also explicitly allows banks to digitize bank deposits and transfer them intrabank on a private distributed ledger.
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