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Rachel Wolfson
Reporter
Rachel Wolfson
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The GENIUS Act is the first major piece of crypto legislation to be passed by the United States Congress. The bill sets forth regulatory requirements for stablecoins and issuers in the US, finally allowing institutions and big banks to take advantage of these digital assets.
Yet the GENIUS Act extends beyond benefiting large financial corporations. Technology companies that facilitate tokenization are now finally able to operate under regulatory frameworks provided by the GENIUS Act.
Tokenization Companies Gain Regulatory Clarity
Dave Hendricks, CEO and founder of Vertalo, told Cryptonews that while the passage of the GENIUS Act provides large financial institutions with regulatory clearance to implement distributed ledger technology (DLT), the beneficiaries of the GENIUS Act are technology companies.
“Companies like Vertalo that enable institutions to issue and manage tokenized products and stablecoins are the real winners here,” Hendricks said. “Winning the stablecoin arms race will spur new investments in technology—and likely M&A—mostly to the benefit of builders, rather than to the banks, who may have to forego building in favor of buying.”
While much attention has been given to big banks taking advantage of stablecoins due to the GENIUS Act, Hendricks shared that Vertalo—a real-world asset (RWA) tokenization platform founded in 2017—finally has regulatory clearance to implement DLT without fear of arbitrary enforcement actions.
“Building distributed ledger technology platforms that comply with settled and emerging securities regulations as well as scale to enterprise volume is hard work and requires years of development,” Hendricks said. “If banks and other financial institutions are looking for speed to market, they will likely need to look outside.”
This appears to be the case. Walter Hessert, head of strategy for Paxos—the blockchain infrastructure provider behind PayPal’s PYUSD stablecoin—told Cryptonews that the GENIUS Act validates the company’s years of building compliant infrastructure alongside major enterprises like Stripe, Mastercard, and PayPal.
“We can immediately leverage our existing GENIUS-compliant stablecoins like USDG and PYUSD to serve institutional demand,” Hessert said.
He elaborated that there is more to the GENIUS Act than just stablecoins, noting that it creates the regulated digital dollar infrastructure that makes large-scale RWA tokenization possible.
Hessert pointed out that stablecoins serve as the essential on-chain settlement mechanism. With that piece now regulated, institutions can confidently tokenize RWAs at scale.
This is a game-changer, especially for technology companies like Paxos that have already launched compliant stablecoin products. “Both our Global Dollar (USDG) and PayPal USD (PYUSD) are compliant with the GENIUS Act’s requirements,” Hessert said.
RWA Platforms and Financial Institutions Working Together
A new opportunity has also come about, given the GENIUS Act’s impact on both technology companies and financial institutions.
For instance, Hessert explained that for banks, the new piece of legislation is just as transformative. “Banks get regulatory clarity to custody digital assets and issue their own stablecoins through subsidiaries, all while leveraging existing relationships with corporate clients.”
Yet Hessert noted that the real opportunity here is in partnerships. He explained that while banks have deep client relationships and regulatory expertise, tech companies have the blockchain infrastructure and compliance frameworks already built.
“Global Dollar Network exemplifies this, as we’re partnering with traditional financial institutions to combine their distribution and trust with our stablecoin issuance technology,” Hessert said. “Rather than a zero-sum game, GENIUS creates a collaborative ecosystem where banks and tech companies can focus on their respective strengths.”
Florian Nöll, WW director at IBM LinuxONE, further told Cryptonews that the GENIUS Act allows stablecoin issuers to officially go after the retail payment business.
“This is because of stablecoins’ high degree of transparency in settlement, that lowers risk and reduces fees to orders of magnitude compared to traditional rails. It ultimately opens the way for stablecoins to be a cash equivalent, but without using commercial bank money,” Nöll explained.
He added that while commercial banks may be expected to respond with their own digital currencies (not necessarily stablecoins), tokenization providers would have to be involved in the process.
“Their role is pivotal in bridging traditional banking with the digital economy, ensuring compliance, interoperability, and operational efficiency,” Nöll commented.
With this in mind, Nöll shared that IBM—including IBM Research—is building a tokenization framework for enterprise assets and bank money, addressing many existing technical and governance challenges. He added that IBM is offering differentiated capabilities for digital asset custody infrastructure for financial institutions looking to protect and manage the lifecycle of digital assets.
Challenges To Consider
While the GENIUS Act has created numerous opportunities for both technology companies and financial institutions, a number of challenges remain that may hold back progress.
Ryan Zega, head of structured finance at Aptos Labs, told Cryptonews that a primary challenge is bridging the gap between on-chain networks and off-chain financial systems.
Zega explained that for tokenized assets and programmable money to see broad adoption, integration with banks, custodians, and capital markets infrastructure needs to improve.
“There’s also a continuing need to educate policymakers, financial institutions, and the public on the practical benefits of this technology beyond headlines and speculation. That understanding will be key to long-term adoption,” Zega said.
Hessert added that while compliant technology companies like Paxos may not face major challenges, the GENIUS Act requirements will prompt changes in how international jurisdictions look to regulate stablecoins.
“Part of this will include incorporating the bill’s stablecoin reciprocity provision. This will allow stablecoins to become a global product and maximize their potential for both a modernized and inclusive global financial system,” Hessert said.
Hendricks further stated that while technology companies involved in tokenization may benefit the most from the GENIUS Act, he believes the legislation will not be helpful for the overall crypto industry.
“In fact, the GENIUS Act could be seen as a step backward towards centralization. The GENIUS Act was a brilliant first move of this latest Congress if the goal was to provide cover to large financial institutions to expand their overall offerings, not just payment stablecoins,” he said.
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