GENIUS at Work in the US Financial System

This paper examines the profitability of Stablecoin Issuance as regulated by the GENIUS Act. We provide an analysis of the revenues and expenses that can be expected to be earned and incurred by any regulated Stablecoin Issuer, as well as the competitive dynamics at work in the industry. We argue that, since Issuers regularly pay a large portion of their reserve income to distributors, Issuer profitability is not a function of reserve yield but, rather, is determined by economies of scale and operational efficiencies. We also analyze the dynamics at work in the market for stablecoin distribution and conclude that US banks with brokerage subsidiaries are the firms most well-positioned to dominate both the issuance and distribution of stablecoins regulated under the GENIUS Act.