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The GENIUS Act focuses on how stablecoins, as a new type of digital asset, can interact with existing financial infrastructure, which inherently involves clearing and settlement. Here’s how:
* Settlement: The act directly addresses the use of stablecoins for settlement, particularly “wholesale payments between banking organizations.” This means the act considers how banks can use stablecoins to finalize transactions with each other. It puts restrictions on stablecoins not issued by permitted issuers, specifying they cannot be used for this purpose. This is a key aspect of settlement, as it governs the transfer of value.
* Clearing (Indirectly): While the GENIUS Act doesn’t use the term “clearing” as extensively as “settlement,” it lays the groundwork for how stablecoins might be used in processes that involve clearing. Clearing generally involves the steps between the trade and the settlement, including confirmation, netting, and risk management. By establishing rules around stablecoin issuance, reserves, and who can use them for settlement, the GENIUS Act provides a framework that indirectly affects how stablecoin transactions could be cleared.
In essence, the GENIUS Act is concerned with:
* Defining which stablecoins can be used in settlement.
* Setting the rules for issuers, which impacts the reliability and safety of the stablecoins used in settlement.
The act aims to integrate stablecoins into the existing financial system by addressing their role in the settlement process, which is a core function of that system.

Video courtesy of CSOB

Video courtesy of CSOB