Stablecoin legislation gains momentum as Genius Act progresses

Hi everyone, I'm Elise Soucy Watts, and it's my pleasure to welcome Jason Alegrante, Chief legal officer at Fireblox to FinTech TV.

Thanks.

So Jason, we recently saw a major development in stablecoin legislation in the US.

What does the Progress on Genius Act mean for industry and why is this legislative clarity so important?

Yeah, I mean, let's, let's talk a little bit about what happened last night, which in my mind was absolutely historic.

Not only is the Genius Act and the ability for financial institutions to participate with clarity in the stablecoin market, great for digital assets overall, it truly was a remarkable event in its own right.

This, and I don't want to count chickens while we have eggs, right, but assuming that this passes the Senate and eventually passes the House, this will be the first piece of digital asset focused legislation in the United States.

And not only that, we had 66 votes.

It sets the stage for the next big step, which is market infrastructure legislation.

So I think things are looking really good, not only for stablecoins, but also for what comes next, which is market infrastructure legislation.

And I just want to say it's, it's, it's remarkable having gotten 66 votes.

It means we had a number of Democrats who voted for innovation, who voted for Vision of America, which is a leader in digital assets.

Again, truly a remarkable turn of events and something really, really great for digital assets, really exciting, so truly both a historic and a really bipartisan moment for digital assets.

Legislation.

Now as fireblocks you work with both the digital native side as well as traditional finance players.

What have you seen in terms of the shift in institutional adoption for the digital asset market?

Yeah, it's great.

We're, we're, we're focused on institutions only, so the shift we're seeing, which is an uptick in interest, is really great for our business, of course, but we think it's great for digital assets overall.

And we can kind of tell that story both on the digital native side as well as on the institutional side, right?

So we used to have a lot of customers come to Fireblox.

These were either hedge fund type businesses, asset managers.

We're seeing a huge uptick in interest.

I think that has a lot to do with Bitcoin, not only the asset price and performance, which has historically been great over time.

But we did have the introduction of ETFs over the last year.

This has had a really big impact on the availability of Bitcoin exposures, right?

We now have pension funds.

We have university endowments.

We have mom and pop retail investors, and of course we have the institutional asset managers providing it through exposure to ETFs.

So we're seeing about 1% allocations right now.

I expect that to go up over time, but the big story here really is the broadened exposure to the asset class.

Folks are owning Bitcoin for the first time in their lives, and at least year to date it's performing very well for them.

So that's great.

On the institutional side, stablecoins again, it's really, really, really a major story.

It is, I would argue, the first successful tokenization use case at scale.

You don't have to take my word for it, just looking at the numbers on the Firebox platform.

So in the last year, 2024, our customers used the Firebox platform to secure 3.5 trillion notional intransactions.

Of that 3.5, a full 1.6 had a stablecoin leg.

Here numbers, numbers speak for ourselves.

Institutions want to use this asset class.

It has huge cross-border applications.

It achieves real efficiencies over existing solutions, um, and again, it's just another reason why stablecoin passed into the United States is such a big deal.

And I think it's safe to say based on those numbers that you know this asset class is scaling both for institutions and for digital natives, but when you mentioned the ETFs, the US was a real leader there.

But I want to go beyond the US as well, because I know obviously you've got to operate globally.

What are some of the key global trends in the market that you're seeing right now and how are they also tied?

Activity we're seeing here in the United States.

Sure, I mean we had a realization earlier this year and it's basically that our customers are either coming to us already regulated or or they are in the process of becoming regulated and this is indicative indicative of the global trend which is towards regulation.

The United States is finally getting on board, but we already have seen this in the European Union.

We have what I call VAP or CAPs style regulation, which is what MICA is.

We have that now being adopted all over the world.

So listen, regulation can be good or bad for individual market participants.

It can also have very predictable effects, right?

And one of those is that it is now getting to be much more expensive to operate a digital asset business as you make that transition from unregulated to regulated.

We're going to see a number of impacts as a result.

We're going to see fewer new entrants into the market.

We're going to see consolidation at the middle and the top end.

And what we're going to be left with is a very different cost structure for those market participants who are able to stay.

Now at Firebox, right, we see massive opportunity there.

A lot of that cost structure increase is going to be on the compliance side of the house.

So Firebox wants to be a platform where you can come to Firebox and you can find the compliance service provider of your choosing and you can connect to it using the Firebox platform.

We also want to do more.

We want to do more on our own.

So Dora, which is a form of third party risk management that came into effect earlier this year in Europe, this is something where we've done a lot of work on our products internally and on the licensing side, I said a lot of folks are now becoming licensed for the first time.

We want them to come to Firebox, choose Firebox, and be confident that when they go to the regulator or their licensing authority and they say, Hey, what have you done for the tech stack?

Who's your third party provider?

What does that look like?

And they say Firebox, there's a recognition to the brand.

There's a trust to the brand, and we can really A partner to your customers as they go through this journey.

And so really actually the kind of key global trend there is regulation and for the whole of the industry to become more regulated and more compliant and it sounds like you guys are at the forefront of helping provide that resiliency 100%.

And again, not only that, we, we would argue we're in the middle of a virtuous cycle, right?

So we said we're going to see consolidation, we're going to see more sophisticated market participants.

This is going to be great for the end user, right?

And it's also going to create again a need for a really secure infrastructure.

And then again we'll see more regulation.

We'll see existing incumbents who are already regulated, the financial institutions who now have a stablecoin use case that's a proven use case, they're going to enter into the marketplace.

So we're going to see a real maturation of the market over the next year or two.

It's already underway, but we're going to see that that trend through to its conclusion.

Well, a really exciting time to be in this space for sure.

So thank you so much for sharing your insight.

Thank you.