GENIUS Act Clears Senate Hurdle as the US Edges Closer to Stablecoin Regulatory Clarity
Digital Asset Market: While Bulls pushed BTC to near $106K and ETH surges 8%, the US Senate has voted 66-32 to advance the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), a key bill to regulate stablecoins, following earlier Democratic opposition due to concerns about President Donald Trump’s extensive involvement in the cryptocurrency sector and the bill’s anti-money laundering provisions. Some Democrats, including Mark Warner, Adam Schiff, and Ruben Gallego, shifted their votes to allow the bill to proceed to Senate floor debate, acknowledging the importance of US leadership in blockchain regulation despite worries over potential conflicts of interest. Senator Elizabeth Warren emerged as one of the bill’s fiercest critics, warning that it would fail to address Trump’s “crypto corruption,” particularly in light of the Trump family’s recent ventures into various crypto projects. The GENIUS Act, introduced by Senator Bill Hagerty, calls for strict regulations over the estimated $250 billion stablecoin market, mandating full asset backing, regular audits, and licensure for issuers, while restricting algorithmic stablecoins. The bill, which builds on an earlier draft by former Representative Patrick McHenry, could be voted on by Memorial Day, with backers emphasizing the need for the US to shape crypto policy before other nations set the standards
Macro Economics: Japanese government bonds suffered a significant selloff, particularly in the super-long maturities, following the weakest demand at a 20-year bond auction since 2012, intensifying concerns about the Bank of Japan’s (BOJ) retreat from large-scale bond purchases. Yields on 20-, 30-, and 40-year bonds all surged to multi-decade or record highs, highlighting deep structural challenges, investor worries about growing government debt, and the absence of major buyers, such as life insurers, now that the BOJ is reducing its presence in the market. The bond curve in Japan has become the steepest among major economies, reflecting heightened fiscal anxieties amplified by Prime Minister Shigeru Ishiba’s remarks likening Japan’s fiscal situation to that of Greece and his resistance to funding tax cuts through additional borrowing. With the Japanese economy already showing signs of weakness and facing ongoing trade uncertainties with the US, investor sentiment toward government debt has deteriorated, evidenced by the plunging bid-to-cover ratio and the longest auction "tail" since 1987. Market participants are divided over how quickly the BOJ should further wind down its bond buying. Unless authorities take measures to shore up sentiment, the risk of continued instability in Japan’s bond market remains elevated.
Equities: U.S. markets slipped on Tuesday, with the S&P 500 falling 0.3%, Nasdaq dropping 0.4%, and the Dow declining by 0.1%, pausing after a rapid five-week rally powered largely by optimism around eased U.S. tariffs that sent the S&P 500 up over 20% from its April low—though investors remain uncertain as trade negotiations continue. The tech sector led losses, with Nvidia down 2% and other giants like Meta, Apple, and Microsoft sliding; however, the overall market is still just 3% below record highs. Amid the U.S. action, European equities surged as the DAX hit an all-time high, Spain’s market touched its highest since 2008, and Greek stocks reached levels not seen since 2010, following a landmark EU-UK agreement on economic ties since Brexit—an event analysts say injects renewed confidence in European prospects, with the UK ETF also reaching its best level in a decade.
The Fed and US Treasury: The 30-year U.S. Treasury yield briefly surpassed 5%, a level not seen since November 2023, after Moody’s downgraded the U.S. credit rating from Aaa to Aa1, citing rising government debt and high interest costs. Although yields pulled back as investors began buying bonds later in the session, concerns lingered over the nation’s fiscal path, as ongoing political measures, such as proposed tax cuts and increased spending, threaten to further balloon deficits. With all major rating agencies now rating U.S. credit below the highest tier, analysts highlight growing doubts about America’s fiscal discipline and the reliability of Treasurys as a safe haven, especially amid fears that tariff and tax policies could worsen the government’s financial trajectory. Meanwhile, JPMC's Jamie Dimon still cautions that a U.S. recession remains a real possibility despite the recent rollback of tariffs on China. He noted that while his bank’s economists have lowered recession odds to just below 50%, the risk is still “elevated.” Dimon, speaking to Bloomberg, welcomed the 90-day tariff pauses between the U.S. and several nations as a positive step, but warned that overall tariff levels are still much higher than last year, causing business uncertainty and discouraging investment. At the same time, the economic outlook remains uncertain and policy shifts could still impact growth.
Geopolitical: President Trump held a two-hour call with Russian President Vladimir Putin on Monday to discuss a possible ceasefire in Russia's war in Ukraine, following similar talks with Ukrainian President Zelenskyy and European leaders. While Putin did not agree to an immediate ceasefire, both sides announced plans to pursue future peace negotiations, potentially hosted at the Vatican. The recent diplomacy follows limited progress in Istanbul talks, where Russia and Ukraine agreed to a prisoner swap but not a ceasefire, while Russian attacks on Ukraine continued. Zelenskyy reiterated demands for increased pressure on Moscow and warned Trump against making decisions about Ukraine without Ukrainian input. Despite diplomatic efforts, Putin signaled that Russia would continue its military campaign, believing that time and military advantage are on Russia's side.
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Crypto Outlook: Bullish Momentum Aligns with 2025 Targets
Crypto bulls are charging back, with stronger conviction and deeper structural support than in prior cycles. Our outlook remains highly optimistic, particularly for Bitcoin, where supply dynamics continue to tighten. Institutional buying is accelerating, and reports of sovereigns accumulating discreetly are increasing. Prediction markets now suggest a 65%+ probability of BTC surpassing $125,000 this year, and options markets imply a more than 33% chance of $150,000. These implied price targets are plausible and align closely with our internal outlook for Bitcoin through 2025. We believe the setup for digital assets, particularly Bitcoin, remains compelling and asymmetric in its risk-reward.
Geopolitical Risks: Cautious Optimism in the Middle East
At the same time, global macro conditions remain fluid. The recent agreement with China has offered temporary relief to financial markets, but it does not eliminate the deeper geopolitical and economic risks still at play. President Trump’s visit to the Middle East, along with his high-profile speech in Saudi Arabia, signals a potential thawing in long-tense relationships. The removal of certain sanctions is also a meaningful step forward. We are hopeful that this leads to longer-term stability and, ultimately, peace in the region. However, given the complex history and entrenched obstacles, we, like the markets, remain cautiously optimistic. Continued progress is essential before peace can be considered the base case. Clear and consistent diplomatic momentum will be the key to resetting expectations and unlocking risk appetite across broader markets.
Domestic Headwinds: Credit Recalibration Ahead
On the domestic front, the resumption of federal student loan payments introduces a new headwind for consumer spending. While this is a necessary policy shift, its delay under the previous administration has left many households financially unprepared. This challenge will be further compounded later this year as federal housing agencies begin scaling back assistance programs. As a result, we expect growing strain across consumer credit markets, with rising delinquencies in student loans, auto financing, mortgages, and even point-of-sale credit providers, underscored by Klarna’s recently reported loan losses. While this recalibration of credit risk is a necessary part of the economic cycle and will ultimately lead to healthier long-term dynamics, we anticipate it will first manifest in consumer pain and tighter financial conditions through year-end and into Q2 2026.
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The 1Konto Team
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