Why in NEWS
US President Donald Trump signed the GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins), setting up the first official legal framework for stablecoins in the US.
Key Concepts Explained
| Term | Explanation |
|---|---|
| GENIUS Act | US law that regulates payment stablecoins, encouraging innovation and safety. |
| Stablecoin | A cryptocurrency pegged to a stable asset like USD or gold for price stability. |
| CBDC | Central Bank Digital Currency; India’s Digital Rupee is a form of CBDC. |
| Virtual Digital Asset (VDA) | Term used in India for crypto assets including stablecoins under taxation laws. |
News Details (Simple Summary)
- The GENIUS Act marks a pro-crypto shift by the US government, aiming to make the US a global leader in digital payments.
- It excludes central bank currencies, tokenized bank deposits, and securities from the definition of stablecoins.
- The law protects consumers, regulates issuers, and promotes financial innovation.
How Stablecoins Work:
- Pegged to assets like the US Dollar to avoid volatility.
- Useful for daily transactions, cross-border transfers, and financial services.
- Maintained via collateral (e.g., USD reserves) or algorithmic supply control.
India’s Stand
| India’s Position | Details |
|---|---|
| No legal recognition | All crypto assets, including stablecoins, are taxed as VDAs. |
| Regulatory move | VDAs brought under PMLA in 2023 to control misuse. |
| India’s alternative | CBDC (Digital Rupee) is being promoted, with ₹1,016 crore in circulation (March 2025). |
| Features of CBDC | Enables programmable payments, tracks location, expiry, or purpose. |
Visual Aid
Comparison: Stablecoins vs CBDC
| Feature | Stablecoins | CBDC (Digital Rupee) |
|---|---|---|
| Issuer | Private Entities | Reserve Bank of India |
| Backing | USD, gold, or algorithmic | Sovereign currency |
| Legal Status (India) | Not Recognised (VDA) | Official legal tender |
| Use Cases | Crypto payments, DeFi, transfers | DBT schemes, formal digital payments |
In a Nutshell
Memory Code
“GENIUS Regulates, India Digitises”
(GENIUS = US Stablecoin law; India = Digital Rupee focus)
Prelims Questions
- Which of the following is true about stablecoins under the GENIUS Act?
A) They include CBDCs
B) They are pegged to volatile cryptocurrencies
C) They are excluded from securities definition
D) They are issued by central banks - Which Indian law brought cryptocurrencies under anti-money laundering regulation?
A) Income Tax Act, 1961
B) Prevention of Money Laundering Act, 2002
C) Banking Regulation Act, 1949
D) SEBI Act, 1992 - Which of the following is NOT a feature of India’s CBDC (Digital Rupee)?
A) Programmable payments
B) Backed by gold reserves
C) Expiry and location tracking
D) Issued by RBI
Prelims Answers & Explanations
| Q No. | Answer | Explanation |
|---|---|---|
| 1 | C | GENIUS Act excludes CBDCs and securities; stablecoins are not central bank money. |
| 2 | B | PMLA, 2002 was amended in 2023 to include Virtual Digital Assets. |
| 3 | B | CBDC is not backed by gold; it is fiat currency issued digitally by RBI. |
