The Wall Street Journal reported today that Amazon and Walmart are exploring potentially issuing their own stablecoins, or failing that, using an existing one. A lot depends on the outcome of the GENIUS Act stablecoin legislation winding its way through the Senate. Another e-commerce giant mulling a digital currency is travel firm Expedia.
While Amazon and Walmart likely pay lower fees than some merchants, for credit cards the charges are around 2.9%, whereas on many blockchains, the fees can be negligible. Additionally, there are delays in receiving the funds from card payments, whereas the receipt of stablecoin funds can be almost instant.
One of the options being considered is a consortium of merchants led by a stablecoin issuer. We’d observe that the Global Dollar stablecoin initiated by Paxos has a similar consortium structure for financial services companies, which share in the interest revenues on the stablecoin balances.
The timing of the news is rather awkward for the stablecoin legislation. Democrats have been arguing that there are insufficient restrictions on Big Tech firms. This week Senator Warren wrote to Meta asking if it was again exploring the issuance of a stablecoin. Facebook initiated the Libra stablecoin consortium in 2019, but the group gave up after repeatedly being obstructed by regulators.
While the GENIUS Act received sufficient bipartisan support in a procedural vote this week, some of the Democrats that dissented are doubtless lobbying their colleagues to highlight that this news proves their concerns are well-founded. A final vote on the legislation is expected next week. There’s also a separate STABLE Act being debated in the House, with the two needing to be consolidated for a final stablecoin law.
Next week we’re publishing a series of articles on stablecoins for retail payments. Watch this space!
What does the GENIUS Act say?
The Senate’s draft legislation contains several relevant provisions. The current version of the GENIUS Act, which is likely final, has a clause that affects large listed non-financial companies, which would cover both Amazon and Walmart.
In order to be allowed to issue a stablecoin, a Committee consisting of the Chairs of the Federal Reserve, the FDIC and the Secretary of the Treasury has to approve the issuer as not causing undue financial stability risks. The company must also agree not to exploit the payment data for other purposes, such as for customer targeting or to sell it to third parties. Additionally, they must avoid tying, which typically involves using the company’s market power in one sphere to force a partner or customer to use a second offering, such as a stablecoin.
The relevant GENIUS Act clause was recently expanded to also apply to large listed firms not based in the United States. Plus, the Committee has to produce rules clarifying the application of this clause within a year of the passage of the legislation.
While banking regulations historically prohibit non-financial company ownership due to conflict of interest concerns, some argue these don’t apply to stablecoins since they don’t grant credit. Previous House legislation included ownership caps (24.9%), but the current draft of the House STABLE Act contains no such restrictions.
It’s not just Democrats that have concerns on this topic. For example, Republican Senator Josh Hawley has proposed a GENIUS Act amendment which appears to block social media platforms, search engines, communication platforms and e-commerce marketplaces with more than 25 million users from launching a stablecoin. This would impact Amazon, but possibly not Walmart because it’s a store not a marketplace.
Given this latest news, there could be some haggling over the weekend before the final GENIUS Act vote next week.
