Investors have piled into crypto stocks in recent sessions after the US Senate passed the GENIUS Act with a decisive 68-30 vote, marking a significant milestone in stablecoin legislation.
What the bill essentially does is establish a federal framework for private firms to issue stablecoins under strict regulations, including full reserve backing and monthly audits.
While the GENIUS Act still needs approval from the House before it becomes a law, the legislation is already hurting traditional payment stocks like Visa Inc and Mastercard Inc.
Why? Because this bill, if it becomes a law, could make it more appealing for global merchants to switch from conventional card payments to stablecoins for transactions.
Why is GENIUS Act a threat for Visa and Mastercard?
Senate’s approval of the GENIUS Act poses a meaningful threat to card companies like Visa and Mastercard as it could establish stablecoins as compliant, mainstream instruments for payments.
If stablecoins are backed by liquid assets and audited regularly, as proposed in the aforementioned bill, businesses may begin to prefer them for transactions to avoid interchange fees and processing delays.
In fact, retail behemoths like Amazon and Walmart Inc are already warming up to launch their own stablecoins – potentially bypassing Visa and Mastercard fees entirely – and losing business from giants like these could deal a significant financial blow to both.
The GENIUS Act prohibits yield on consumer stablecoins, but vests regulatory control within the Treasury, offering clearer oversight.
That threatens the stranglehold Visa and Mastercard hold over everyday transactions and settlement processes.
While some would argue that consumers still value credit card rewards and protections, emergence of compliant, low-fee stablecoins backed by regulatory clarity could gradually reduce dominance of incumbent networks.
Are stablecoins already being used actively for transactions?
What’s also worth mentioning is that stablecoins are already being used for transactions, and that too, at scale.
In 2024, stablecoins saw transaction volumes surpass $27 trillion, outpacing the combined volume on Visa and Mastercard – a landmark indicator of their growing usage.
In Q1 this year, stablecoins continued to dominate those two payment networks, with over $1.4 trillion in transaction volume seen in a single month (May).
More importantly, stablecoin usage is expanding well beyond crypto trading. More than 20% of stablecoin transaction volumes are now tied to payments, not trading.
According to American Banker, just under half of the surveyed corporate treasurers say they are using stablecoins for operational payments, while another 23% are piloting them.
Reportedly, weekly stablecoin transfers now average more than $500 billion, surpassing Visa by over 60%.
These facts and figures confirm stablecoins are no longer niche – they’re actively being used for high-value transfers, remittances, and commerce – all of which could become a significantly more pronounced challenges for the likes of Visa and Mastercard if the GENIUS Act becomes a law.
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