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GENIUS Act, CLARITY Act, and stablecoin takeaways for Malaysia

Recent developments in US law – including the GENIUS Act and CLARITY Act – show the way forward for Malaysian stablecoin issuers.

Bankers discuss cryptocurrencies
Bankers discuss cryptocurrencies

1. GENIUS Act

  • Signed by Trump on July 18, 2025.

  • Stands for Guiding and Establishing National Innovation for U.S. Stablecoins. First federal law targeting payment stablecoins.

  • Defines payment stablecoins as digital assets redeemable 1:1 for fiat or low-risk reserves. Not securities or commodities.

  • Only licensed “Permitted Payment Stablecoin Issuers” (PPSIs) can issue in the U.S. Full compliance: capital, liquidity, AML/KYC, audits, sanctions, risk management.

  • Foreign issuers can enter U.S. market if their home regime is deemed comparable and they register, hold U.S. reserves, and consent to jurisdiction.

  • SEC explicitly not primary overseer of stablecoins; powers limited to anti-fraud over PPSI-related trades.

2. CLARITY Act (Digital Asset Market Clarity Act of 2025)

  • Passed House alongside GENIUS Act. Defines non-stablecoin crypto assets. Clarifies SEC vs CFTC oversight.

  • Complements GENIUS by carving jurisdictional boundaries. SEC focuses on securities, CFTC on commodities.

  • Warned by critics: shifts could lower investor protections.

3. SEC’s Stance on Stablecoins

  • SEC acknowledges stablecoins backed 1:1 with low‑risk liquid reserves, redeemable on demand. Labels those as Covered Stablecoins.

  • SEC says stablecoin issuers fall under Bank Secrecy Act rules. Monitors anti‑fraud violations but does not treat them as securities if compliant.

4. Prognosis: Stablecoins & RWA Tokenization – U.S. spillover to Malaysia

  • U.S. clarity fuels institutional adoption. Stablecoin market projected to hit $3–4 tn by 2030

  • More trust, yield, lower costs. But risk: lack of central bank backstop, potential bank-run events, repo market strain.

  • Institutional players (Amazon, Visa, banks) interested. Stablecoin-based tokenization of real‑world assets (RWA) is gaining traction.

  • Expect RWA tokenization growth: real estate, bonds, private credit tokens. GENIUS’s foreign issuer rules hint at cross‑border interplay.

5. Malaysian Context – Regulatory authorities

Securities Commission Malaysia (SC)

  • Digital asset offerings and exchanges fall under SC via CMSA and digital asset guidelines. Stablecoins today are treated as securities by default.

Bank Negara Malaysia (BNM)

  • Crypto remains non-legal tender. BNM warns currency substitution risk if stablecoins or foreign CBDCs are widely used. Stablecoins governed via AML/CFT frameworks; no direct e‑money regime.

Labuan Financial Services Authority (Labuan FSA)

  • In Labuan IBFC, credit token license regime exists. Tokens issued under it are not deemed securities under LFSSA. By 2023, about 18 firms had it, mainly for asset‑backed tokenization.

6. Options for Malaysians launching stablecoins

  1. Onshore via SC license: Tough. Must treat it as a security offering under CMSA. Must register, prepare disclosures, investor protections. Realistically slow.

  2. Circulating offshore via Labuan: Using Labuan credit token license. Labuan token isn’t a security inside IBFC. Could issue asset‑backed tokens (including fiat‑pegged ones) for global markets. But Malaysian domestic access would be tricky—still SC jurisdiction.

  3. Partnerships & foreign reciprocity: If U.S. or EU adopt regimes to recognize Labuan-compliant foreign issuers, might route a token into Malaysian users indirectly. No current reciprocity framework.

  4. Waiting for local e‑money legislation: BNM hasn’t yet provided explicit stablecoin regulation. A sandbox may open. Could mimic GENIUS-style framework but no timeline.

7. Forecast — What’s ahead

  • U.S. clarity offers blueprint. Malaysia likely studies GENIUS and CLARITY model.

  • Expect SC to gradually carve a tailored regime. Maybe classify stablecoins separately from securities via new order.

  • Labuan likely expands credit token license uptake. RWA tokenization to grow—real estate, trade finance, Sukuk-like tokens.

  • Domestic stablecoin issuance may remain on hold until SC/BNM approves more rules. Cross-border token flow via Labuan is the low-hanging fruit.

8. Summary of Positions

SEC (U.S.) – Stablecoins not securities if fully backed; only anti‑fraud oversight.
GENIUS Act – Central federal framework: licensing, capital, liquidity, reserve audits.
CLARITY Act – Clarifies crypto oversight: SEC vs CFTC for non‑stable token assets.
BNM – Cautious. Not legal tender. AML‑risk focused; worried about currency substitution.
SC Malaysia – Treats stablecoins as securities; governs all token issuance under CMSA.
Labuan FSA – Offers credit token permits. Token = token, not security. Best offshore path.

9. Final take

If Malaysian token projects want agility now, Labuan’s credit token license is golden. Offshore issuance of fiat‑backed tokens to global clients is viable. Domestic adoption waits on SC/BNM policy shifts. When local frameworks mirror GENIUS-style clarity, we’ll see real growth. RWA tokenization via Labuan is already happening. Stablecoins? They’ll follow—once legal fog lifts.