Pantera Partner: GENIUS Bill Interpretation and Why it is Favourable Information for M0 protocol

Stablecoins will become a means of transfer rather than a store of value.

Written by: Paul Veradittakit, Partner at Pantera Capital

Compiled by: AIMan@Golden Finance

The GENIUS Act is truly a genius move!

On May 19, the U.S. Senate voted to initiate the closure of the debate process to conclude consideration of the GENIUS Act. The procedural vote passed with 66 yes and 32 against, with more than 15 Democratic senators joining forces with Republican senators to meet the 60-vote threshold needed to overcome lengthy debates. This prevents senators from blocking the passage of the bill by prolonging the debate. As a result, the Senate can now officially begin debate on the GENIUS Act for up to 30 hours. AFTER THAT, THE SENATE MUST HAVE A FINAL VOTE ON THE GENIUS BILL. If the Senate approves the GENIUS Act, the bill will go to the House of Representatives for further consideration.

As I mentioned in my previous article, the market capitalization of stablecoins has reached $230 billion, and Pantera Capital has been at the forefront of this trend, having invested early in Circle, Ethena, M^0, Ondo, and Figure Markets. Now, let's analyze the "GENIUS Act" and its significance.

Genius Act Interpretation

The "GENIUS Act" is the abbreviation for the Establishing National Innovation for U.S. Stablecoins Act of 2025, which is the first comprehensive federal framework in the United States for regulating payment stablecoins. The bill was introduced by Republican Senator Bill Hagerty of Tennessee and is co-sponsored by bipartisan lawmakers with the aim of clarifying the definitions of stablecoins and issuers.

In this bill, paying with stablecoins is a type of digital asset intended for payments and settlements. Its issuer is obligated to redeem it for a fixed amount of currency value and maintain a stable value relative to that fixed amount. This definition encompasses two main characteristics of stablecoins: they must be pegged to a fixed amount and maintain stability relative to that fixed amount.

The part about the requirements for stablecoin issuers is the most interesting. Payment stablecoins that are approved for issuance must be subsidiaries of insured depository institutions, federally qualified non-bank payment stablecoin issuers, or state-qualified payment stablecoin issuers. Issuers with a market capitalization of less than $10 billion can also choose to be state-regulated. According to this definition, the privilege of issuing stablecoins is not limited to FDIC-insured banks. We believe that more institutional issuers and smaller state-level issuers will enter this field in the near future.

Issuers of stablecoins should maintain reserve support at a ratio of at least 1 to 1. The reserves include US dollars, demand deposits at insured depository institutions or insured stocks, Treasury bills with maturities of 93 days or less, money market funds, and central bank reserve deposits. This section is highly valuable as it precisely outlines which assets qualify to be included in the stablecoin reserves. It is worth noting that the yields on all bonds with maturities shorter than 93 days and money market funds are lower than those of other financial assets.

A consumer protection agreement has also been established, such as the monthly composition value of the reserves held by the issuer and the outstanding stablecoins issued by the issuer must be published on the issuer's website to promote transparency in the field and consumer trust.

There is clear bipartisan support in the US Congress for the US dollar to maintain its position as the world's dominant currency through stablecoins. The 66 senators who supported the bill argued that without a comprehensive legislative framework, the dollar would be threatened by foreign stablecoins. However, the main concern with the bill, or the cryptocurrency space, is that the Trump family is using crypto to evade regulation. Senator Elizabeth Warren, Democrat of Massachusetts, the main oppositionist, released a two-page report outlining how the bill "paved the way for Trump's cryptocurrency corruption; amplified Tether's massive national security vulnerability; allowing big tech companies to issue their own stablecoins; and failed to address several other fundamental flaws."

Several Democratic senators have proposed a bill targeting Trump's cryptocurrency investments to prevent the president from profiting from them. Senator Michael Bennet plans to introduce the "STABLE Act," which would prohibit elected officials or federal candidates from issuing or supporting digital assets.

JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, and other major U.S. banks have announced plans to create federated crypto stablecoins, and the industry sees the GENIUS Act as a positive step toward regulatory certainty.

Looking to the Future

Last year, we published a comprehensive paper on stablecoins. With recent developments in mind, let’s delve deeper into how we believe the "GENIUS Act" will change the stablecoin space.

Stablecoins will become a means of transfer rather than a store of value

As mentioned in the previous section, we believe that the low yield characteristics of stablecoin reserves will lead consumers to view stablecoins as a means of transfer rather than a store of value. In other words, although stablecoins enable faster transactions and lower costs, if I can obtain higher returns from stocks or cryptocurrencies, why would I hold stablecoins for a 4% yield? Therefore, consumers will frequently buy and sell stablecoins before and after transactions.

The "GENIUS Act" will reduce the number of fixed stablecoins while increasing the number of liquid stablecoins. Once regulations are clarified, we believe that stablecoins will gradually encroach on ACH payments and remittances, ultimately capturing a market worth $1.8 trillion.

Source: Artemis Analytics

M0 has unique advantages that can ride the wave of increasing issuers

SINCE THE GENIUS BILL OPENS THE DOOR FOR THREE DIFFERENT INSTITUTIONS TO ISSUE STABLECOINS, WE BELIEVE THAT THE NUMBER OF ISSUERS IN THIS SPACE WILL INCREASE SIGNIFICANTLY IN THE NEAR FUTURE.

As an early supporter of M0, we believe that M0 will lead a wave of new stablecoin issuers. M0 democratizes the generation and management of programmable digital cash tools. Through M0, any of the three eligible issuers in the GENIUS Act can easily and quickly issue stablecoins that comply with the Act.

Use M0 to mint compliant stablecoin

The M0 protocol lowers the entry barrier for stablecoin issuers. Let's analyze the key participants in the M0 model and how it works:

1. Minting Agency: A minting agency is an institution connected to the protocol to generate and manage the supply of $M (the cornerstone stablecoin on the M0 protocol). According to the GENIUS Act, a minting agency can be a subsidiary of an insured depository institution, a federally qualified non-bank payment stablecoin issuer, or a state-qualified payment stablecoin issuer.
2. Validator: An independent entity responsible for providing timely information about the off-chain collateral used to generate $M. Traditional validators are usually independent auditing firms, such as KPMG or Deloitte.
3. Beneficiaries: A group of entities qualified to receive interest from the protocol. This enables the M0 platform to customize yield distribution.
4. After understanding the definitions of minting and validators, let's take a look at how to mint a stablecoin that complies with M0:
5. Minters, validators, and earners need to obtain governance permission. Governance permission is crucial because malicious minters could mint $M without sufficient support, leading to the dilution of $M's value.

The issuer publishes its collateral proof to the validators. According to the "GENIUS Act," qualified collateral includes US dollars, demand deposits from insured depository institutions or insured stocks, Treasury bills with a term of 93 days or less, money market funds, and central bank reserve deposits.

Validators will evaluate the collateral and publish its value as the on-chain collateral of the minter.

The minting party can mint an amount of $M that is equal to the amount of on-chain collateral. Since the on-chain collateral is the upper limit of the value of $M that the minting party can mint, M0 ensures that the minted stablecoin has at least a 1:1 collateralization ratio, thereby ensuring that the minted stablecoin complies with the regulations.

If the coin issuer wants to withdraw a certain amount of collateral from the protocol, the issuer must first burn an equivalent amount of $M to maintain the 1:1 backing of the remaining minted $M.

Leverage M0 to expand your advantages

There are many advantages to minting stablecoins on M0, including but not limited to:

• Shared Liquidity: All stablecoins minted on M0 belong to a unified liquidity pool. If platform A mints "A coin" on M0, and platform B also mints "B coin", users can immediately exchange A coin for B coin at face value without price discovery. Both stablecoins can be used in DeFi applications, exchanges, or wallets that support M0.
• Decentralized issuance: M0 allows multiple independent institutions (known as "issuers") to issue stablecoins without relying on a single centralized company. This reduces single points of failure and enhances system resilience. Given that large banks like JPMorgan Chase and Citigroup have just announced plans to explore joint issuance of stablecoins, such built-in features are particularly important today.
• Complaint collateral support: Stablecoins on M0 must have 1:1 backing, in accordance with the GENIUS Act.
• Rapid Deployment: M0 provides SDKs and infrastructure, allowing builders to quickly launch new, feature-rich stablecoins without having to develop complex custody, compliance, or minting systems from scratch.
• Cross-chain support: M0 operates on multiple blockchains (such as Ethereum and Solana) and supports cross-chain transfers, allowing stablecoins to be used across various wallets, DeFi protocols, and payment networks.
• Monetization: Builders and platforms can earn a share of the returns generated by base collateral (such as U.S. Treasuries) by specifying the group of income recipients at the protocol level, thereby creating new sources of income beyond simple transaction fees.

Pantera Capital has long been a supporter of the stablecoin industry and has made anchor investments in stablecoins such as M0. We look forward to seeing more stablecoin innovations based on the regulatory certainty provided by the GENIUS Act.