*

Law requires tokens to be backed by liquid assets

*

Measure is first major crypto law enacted in US

*

Some crypto firms look to gain bank licenses

By Hannah Lang

July 18 (Reuters) - U.S. President Donald Trump on

Friday signed a law to create a regulatory regime for

U.S.-dollar-pegged cryptocurrencies known as stablecoins, a

milestone that could pave the way for the digital assets to

become an everyday way to make payments and move money.

The bill, dubbed the GENIUS Act, passed by 308 to 122,

receiving support from nearly half the Democratic members and

most Republicans.

The law is a huge win for crypto supporters, who have long

lobbied for such a regulatory framework in a bid to gain greater

legitimacy for an industry that began in 2009 as a digital Wild

West famed for its innovation and speculative chaos.

"This signing is a massive validation of your hard work and

pioneering spirit," said Trump at a signing event that included

several crypto executives.

Stablecoins are designed to maintain a constant value,

usually a 1:1 U.S. dollar peg, and their use has exploded,

notably by crypto traders moving funds between tokens. The

industry hopes they will enter mainstream use for sending and

receiving payments instantly.

The new law requires stablecoins to be backed by liquid

assets - such as U.S. dollars and short-term Treasury bills -

and for issuers to disclose publicly the composition of their

reserves monthly.

Crypto companies and executives have argued such legislation

will enhance stablecoins' credibility and make banks, retailers

and consumers more willing to using them to transfer funds

instantly.

The stablecoin market, which crypto data provider CoinGecko

said is valued at more than $260 billion, could grow to $2

trillion by 2028 under the new law, Standard Chartered bank

estimated earlier this year.

The law's passage culminates a long lobbying effort by the

industry, which donated more than $245 million in last year's

elections to aid pro-crypto candidates including Trump,

according to Federal Election Commission data.

The Republican president, who has since launched his own

coin, in turn aligned himself with the industry and told a

crypto conference during his presidential campaign that he would

make the U.S. "the crypto capital of the planet."

But Democrats and critics have said the law should have

blocked big tech companies from issuing their own stablecoins,

which could increase the clout of an already powerful sector,

contained stronger anti-money laundering protections and

prohibited foreign stablecoin issuers.

COULD BOOST DEMAND FOR T-BILLS

Big U.S. banks are internally debating an expansion into

cryptocurrencies as regulators give stronger backing to digital

assets, but banks' initial steps will be cautious, centering on

pilot programs, partnerships or limited crypto trading, Reuters

reported in May.

Meanwhile, several crypto firms including Circle

and Ripple are seeking banking licenses. This would enable the

companies to settle payments faster and cut costs by bypassing

intermediary banks, as well as enhancing their legitimacy.

Backers of the bill have said it could potentially give rise to

a new source of demand for short-term U.S. government debt, or

T-bills, because stablecoin issuers will have to purchase more

T-bills to back their assets.

But others worry this activity could increase volatility in

the Treasury bills market. In an April research note, JPMorgan

analysts estimated that stablecoin issuers could become the

third-largest buyer of Treasury bills in the coming years.

TRUMP CREATES BITCOIN RESERVE

Trump has sought to broadly overhaul U.S. cryptocurrency

policies, signing an executive order in March establishing a

strategic bitcoin reserve.

The president has moved personally into digital assets,

launching a meme coin called $TRUMP in January and partly owning

crypto company World Liberty Financial.

Democrats in Congress grew increasingly critical of Trump

and his family members promoting their personal crypto projects,

and their ire threatened to derail the legislation at one point.

The White House has said there are no conflicts of interest

for Trump and that his assets are in a trust managed by his

children.