What the Future Holds for Stablecoins After Senate Passes Genius Act

Summary

WSJ Tech News Briefing: What the Future Holds for Stablecoins After Senate Passes Genius Act

Release Date: June 18, 2025 | Host: The Wall Street Journal

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1. Escalating Cyber Threats Amid the Iran-Israel Conflict

In this episode, Victoria Craig opens the discussion by highlighting the potential spillover of the Iran-Israel conflict into cyberspace. As physical battlegrounds dim, the digital realm presents a new frontier for conflict.

James Rundle, WSJ's Cybersecurity and National Cyber Policy reporter, delves into the likelihood and implications of Iran leveraging cyber capabilities against not only Israel but also its allies, including the United States. He emphasizes the persistence and capability of Iranian cyber operations:

"It's not just likely. It's happened before. Iran has been known to target critical infrastructure in the US and past cyber attacks. We saw that in 2023 when Iranian hacktivists attacked a water plant in Pennsylvania, defacing screens with anti-Israel propaganda." [01:15]

Rundle explains that while there has been an uptick in disinformation campaigns—such as text messages warning Israeli residents of missile strikes—destructive cyberattacks like malware and ransomware have yet to see a significant rise:

"A lot of cyber activity has increased in terms of disinformation... they haven't noticed a lot in terms of destructive attacks such as malware, ransomware wipers, that sort of thing. Not yet anyway." [01:49]

The discussion shifts to the preparedness of U.S. infrastructure. Rundle points out that despite improvements, many critical infrastructures remain vulnerable due to their private sector management:

"The problem is really on two fronts... companies are being urged to make sure they're following the basics, so make sure that their software is up to date and patched against the latest threats." [02:27]

He further emphasizes the potential catastrophic impact if Iran were to successfully breach major U.S. infrastructure:

"If they do manage to get into the systems of something crucial, such as a power plant, it could quite rapidly disrupt everyday life in America." [03:06]

Rundle concludes this segment by acknowledging improvements in governmental focus on cybersecurity but remains cautious about the overall readiness:

"In a lot of places in America, it's a huge issue." [04:22]

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2. The Genius Act: Shaping the Future of Stablecoins

Transitioning from cybersecurity, the briefing moves to the realm of digital finance with the passage of the Genius Act in the Senate, which is poised to head to the House for a vote. Teles Demos, WSJ's Heard on the Street columnist, provides an in-depth analysis of the legislation and its implications for the stablecoin industry.

Demos explains that the Genius Act establishes a comprehensive regulatory framework for stablecoins, aiming to clarify their definition, regulatory oversight, and issuance requirements:

"The Genius act is designed to give a kind of regulatory framework for stablecoins... what officially is a stablecoin which sort of federal regulators will address it, and what are the requirements that you have to follow to be able to issue it under these guidelines." [06:08]

Key provisions include mandatory audited reserves backing the stablecoins and specific guidelines on the types of instruments that can hold these reserves. This regulatory clarity is intended to foster trust and legitimacy, encouraging broader adoption among businesses and consumers.

Demos highlights the interest from major retailers like Amazon and Walmart, who are contemplating launching their own stablecoins. He discusses the potential disruption to the traditional banking system, drawing parallels to money market funds:

"Stablecoins essentially are a place to park money that isn't a bank account... they make banks compete with them as a place to put your cash." [07:17]

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3. Implications for the Banking System and Payment Ecosystems

The conversation then explores how stablecoins could transform the banking landscape and payment systems. Demos posits that stablecoins could offer an alternative to traditional bank accounts, similar to how money market funds operate, potentially altering how deposits are managed and viewed:

"Stablecoins represent a very different kind of deposit. My small sub $250,000 checking account is fully insured by the FDIC... but larger accounts held by stablecoin issuers are not insured." [09:51]

Referencing the collapse of Silicon Valley Bank (SVB) in 2023, Demos illustrates the risks associated with uninsured corporate deposits, drawing concerns about the stability and security of funds managed through stablecoins:

"The SVB example illustrates how messy these kinds of things can get. If stablecoins reach a massive scale, it would represent a pretty meaningful change in how deposits live in banks." [10:11]

Regarding payments, stablecoins could bypass traditional credit card networks, offering merchants lower transaction costs and a new method for consumers to transfer money directly:

"Stablecoins present to the people who back them the opportunity to move money in a way that doesn't need a credit card. Because I can transfer a stablecoin to you just by moving it on the ledger." [07:40]

However, Demos remains cautiously optimistic, noting that while stablecoins offer innovative advantages, widespread disruption to the current payment ecosystem remains uncertain:

"Whether stablecoins are truly going to disrupt payments in that sense remains to be seen." [08:30]

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Conclusion

The episode of WSJ Tech News Briefing effectively navigates two pressing technology issues: the rising threat of cyber warfare in the context of geopolitical conflicts and the regulatory evolution of the stablecoin industry. Through expert insights from James Rundle and Teles Demos, listeners gain a comprehensive understanding of the challenges and opportunities that lie ahead. As cyber threats continue to evolve and financial technologies like stablecoins gain regulatory clarity, the interplay between technology, policy, and the global economy remains a critical area to watch.

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Produced by Julie Chang with supervising producer Melanie Roy. For more insights and updates, tune in to the Wall Street Journal's Tech News Briefing.

Transcript

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[Victoria Craig]

It's Wednesday, June 18th. I'm Victoria Craig for the Wall Street Journal. As Iran loses ground on the physical battlefield in its raging conflict with Israel, could it look to cyberspace to inflict more damage? Then the Genius act gets the Senate's blessing to head to the House for a vote. We talked to our Hurt on the street columnist about what the legislation means for the stablecoin industry and what consumers should know. But first, the conflict between Iran and Israel could spill over into places conventional weapons never would. That's a concern. Cybersecurity experts have expressed warning that companies could be caught in a digital crossfire as the battle escalates. James Rundle covers cybersecurity and national cyber policy for the Wall Street Journal. James, you write that cyberspace could provide an avenue for Iran to cause problems not just for Israel, but its allies, too. How likely is that?

[James Rundle]

It's not just likely. It's happened before. Iran has been known to target critical infrastructure in the US and past cyber attacks. We saw that in 2023 when Iranian hacktivists attacked a water plant in Pennsylvania, defacing screens with anti Israel propaganda. But Iran has been a perennial cyber threat for a number of years now. It's one of the big four adversaries of the US and the west in cyberspace, along with Russia, China and North Korea. So it's very capable. It has done it before.

[Teles Demos]

So is there any evidence of an increase in attempted or successful attacks on the US or any of other of Israel's allies so far?

[James Rundle]

It's a little early to tell. Some sources say they have seen increases. Most people I've spoken to have said that Iran is fairly preoccupied, as you might expect, with the physical war right now. A lot of it's cyber activity has increased in terms of disinformation. So it's sending text messages to Israeli residents warning of missiles falling in their area, that sort of thing. But a lot of people I speak to say that they haven't noticed a lot in terms of destructive attacks such as malware, ransomware wipers, that sort of thing. Not yet anyway.

[Teles Demos]

And here in the US you write that analysis centers for the US FDA and tech sectors have warned their members to take extra precautions. Why is that? How are they preparing?

[James Rundle]

Well, the problem is really on two fronts. Number one is the deliberate attacks that could come from Iran trying to pick out what we call low hanging fruit in cybersecurity, which is companies that don't have great defenses and can be easily breached. The other is that by its nature, cyber attacks can have quite a large blast radius, so they can spread far beyond the intended target, whether that's in the Middle East, Asia or the West. So companies are being urged to make sure they're following the basics, so make sure that they're software is up to date and it's patched against the latest threats, just to make sure that they're not either targets of opportunity or they don't get caught in the shockwave, so to speak.

[Teles Demos]

If Iran decides to target critical US infrastructure, how could that play out?

[James Rundle]

It depends on the motivation. A lot of the time Iran has groups linked to it that want to make a political message, so hacktivists we call them. And that's happened before in 2023 where you saw anti Israel propaganda being displayed on hardware within water plants. The worry and the concern of course, is that if they do manage to get into the systems of something crucial, such as a power plant, such as a energy facility of some kind, that it could quite rapidly disrupt everyday life in America. Whether that's to discourage us from joining the conflict with Israel or to make a wider point as well.

[Teles Demos]

So when we talk about whether the US or how the US is prepared to handle it, are we equipped to handle all of these threats or is the government or companies doing more now to prepare themselves for as the threat level sort of rises?

[James Rundle]

It's definitely got better. In the last few years there's been a very strong governmental focus from the Cybersecurity and Infrastructure Security Agency, from even the National Security Agency and the FBI on hammering home this point that companies need to start taking responsibility for their own defence. Because the problem in America is that the federal government can only do so much. The vast majority of critical infrastructure. So our waste water plants, our power plants is all in private sector hands. So getting that kind of collective immunity, so to speak, from cyber attacks is very important.

[Victoria Craig]

And do we have a critical level.

[Teles Demos]

Of that at this point?

[James Rundle]

I would not think so. That's not what I hear from officials or from experts saying the larger, more well resourced companies, yes, they have pretty sophisticated defenses in place, but in a lot of places in America it's a huge issue.

[Victoria Craig]

That was James Rundle, WSJ's Cybersecurity and National Cyber Policy reporter. Coming up, how could more regulation of the stablecoin industry affect consumers and the banking system? We'll explore that with our columnist after the break.

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[Victoria Craig]

Dollar coin and tether are two examples of well known stablecoins. Both are designed to maintain, as their name suggests, a stable price. Thanks to their 1 to 1 exchange rate with the US dollar's value. These cryptocurrencies have not gone mainstream enough to be used as common payments for everyday purchases. But Congress is thinking about what happens to the banking system as we know it if and when they do. Teles Demos is a columnist for WSJ's Hurt on the Street. He's been writing about legislation which passed the Senate yesterday called the Genius Act. Tell us, what is this bill and, and what would it do if it is eventually signed into law?

[Teles Demos]

So the Genius act is a piece of legislation that is basically designed to give a kind of regulatory framework for stablecoins. Stablecoins exist today. They are regulated in a number of respects by states and other applicable laws. But what this is designed to do is to sort of really clear a pathway for, okay, what officially is a stablecoin which sort of federal regulators will sort of address it, and what are the requirements that you have to follow to be able to issue it under these guidelines? Right. And the main things are you have to have reserves backing the stablecoin that are audited. Those reserves have to be held in certain instruments. And then you're sort of blessed to issue a stablecoin in the United States. The intention is to then really give everyone license payments, companies, banks, et cetera, give everyone license to say, okay, we can actually do business with stablecoins. Because in the past there was just question marks around, oh, okay, well, yeah, we understand that they work in this way, but we kind of need this regulator, that regulator to sort of bless them. And this sort of lays the landscape is the hope for that.

Some of America's biggest retailers have been watching how this legislation is progressing through Congress. The Journal last week reported that retailers like Amazon and Walmart are considering launching their own stablecoins. But I think the biggest question is, how could that sort of thing disrupt the banking system as we know it? Because it'll change the way that people pay, right?

It's relevant to banking in a couple of ways. Number one is what a stablecoin essentially is, is a place to park money that isn't a bank account. And we've seen things like that emerge in the past. For example, money market funds are essentially like a stablecoin, right? It's a place you put in a dollar, you hope to get a dollar out. That dollar sits, not necessarily just in cash, but in like a Treasury bill or something like that. Things like that have had big impacts on the banking system over the years by essentially making banks compete with them as a place to put your cash. And so the concern has been, well, what will it mean if we create a whole new category of things that can do this? And so people have questions about what it will mean for the banking system to have this new place, this like, new location for money. That's one part of it. The other part is, like you referenced in payments, one of bank's big businesses today are payments. Mostly that means for consumers. You buy things with your debit or credit card. The bank facilitates that. The bank issues a card and they earn a fee, basically paid by the merchant when you use that card. And stablecoins present to the people who back them the opportunity to move money in a way that doesn't need a credit card. Because I can transfer a stablecoin to you just by moving it on the ledger. I don't need a network like Visa or MasterCard. Stablecoins using a blockchain represent another network to move money around. And so merchants who are on an eternal quest to get around credit cards because it costs them. It costs them. When you use your credit card or debit card at a merchant, they essentially pay for that. And so for many years, basically anytime a new payment technology emerges, merchants pop up to say, hey, maybe we could use that. They've had middling success doing that over the years. I mean, the fact is that most people like to use their debit cards, most people like to use their credit cards. Some people are richly rewarded for using their credit cards. And so whether stablecoins are truly going to disrupt kind of payments in that sense remains to be seen.

And you mentioned Silicon Valley bank and its downfall in 2023. The impact of uninsured corporate deposits, you write in your piece is a source of concern for widespread use of stablecoins. The SVB example sort of illustrates how messy these kinds of things can get. Is the industry ready for a disruption like that?

If stablecoins really reached a massive scale, it would represent a pretty meaningful change in like how deposits live in banks in the United States. That's because a lot of smaller kind of individual checking, savings, kind of day to day business accounts. If those things all get pooled into this big pot of money that backs a stablecoin, that is a very, very different kind of deposit. My small sub $250,000 checking account is fully insured by the FDIC. Accounts that are larger than that, like the account that a stablecoin issuer might have at a big bank, are not insured. And so lots of small insured deposits transform into big uninsured deposits. And uninsured deposits are a riskier source of funding for the bank because the holder of that deposit, because they're not protected by the fdic. Well, they ended up being protected in the case of svb. So, you know, it's debatable perhaps, but they are much more sensitive to like the Is this a quality bank? Do I want to keep my money here? Is another bank offering me a better deal for this money? Maybe I should take it there. Like it's a very different kind of deposit. And so it really changes just the way that money will flow around in the US economy.

[Victoria Craig]

That was WSJ Heard on the street columnist Telus Demos. And that's it for Tech News Briefing. Today's show is produced by Julie Chang with supervising producer Melanie Roy. I'm Victoria Craig for the Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.