On Tuesday local time, the U.S. Senate passed the landmark GENIUS Act, advancing the federal government's regulatory efforts on stablecoins and pressuring the House of Representatives to plan the next phase of national regulatory efforts on digital assets.
This marks the first time the Senate has passed significant cryptocurrency legislation. The sponsor of the GENIUS Act, Republican Senator Bill Hagerty, thanked some of his fellow senators for their support before the formal vote. Next, the House of Representatives needs to decide how to proceed. It remains unclear whether this stablecoin legislation will receive enough support in the House, as the Republican majority is only slightly higher than that of the Democrats.
What are the far-reaching impacts of the passage of the 'GENIUS Act' on the cryptocurrency Industry? How do industry insiders view the passage of this Act?
I. Review of the Seven Key Points of the GENIUS Act
On February 4, 2025, Senator Bill Hagerty introduced the "Guidance and Establishment of the U.S. Stablecoin National Innovation Act" ("GENIUS"). The bill was co-sponsored by Senate Banking Committee Chairman Tim Scott, along with Senators Kirsten Gillibrand and Cynthia Lummis, based on a discussion draft released by Senator Hagerty in October 2024. This legislation establishes a federal licensing and regulatory framework for payment stablecoins and their issuers.
The following are the seven key points of the GENIUS Act:
The bill prohibits any non-"authorized payment stablecoin issuer" from issuing payment stablecoins in the United States.
The bill defines "payment stablecoins" as digital assets that maintain a fixed value supported by fiat currency or other secure reserves.
The bill imposes federal standards on institutions approved to issue payment stablecoins, including requirements for fully-backed reserves, reserve segregation, monthly certifications, and capital and liquidity requirements, as well as a prohibition on re-hypothecation.
The bill allows state-regulated payment stablecoin issuers to issue stablecoins, provided that the applicable regulatory framework is fundamentally similar to the federal system.
The bill grants federal banking institutions enforcement authority over institutions approved to issue payment stablecoins, similar to the powers given to custodial deposit institutions and their holding companies and affiliated entities under Section 8 of the Federal Deposit Insurance Act.
The bill establishes customer protection standards for personnel providing custody services for approved payment stablecoins, including oversight and regulation, fund segregation, prohibitions on commingling, and monthly audit reports on statutory reserves.
The bill prohibits federal banking institutions, NCUA, and SEC from requiring custodial assets to be treated as liabilities. The bill also amends federal securities laws to clarify that payment stablecoins are not securities.
The GENIUS Act represents a landmark initiative by the federal government to regulate the U.S. payment stablecoin industry by establishing clear licensing and regulatory requirements. The bill balances federal and state regulatory authority, ensures transparency through audits and reporting, and establishes a clear enforcement mechanism.
If payment stablecoins are recognized within the U.S. regulatory framework, this could open the door for businesses to issue their own tokens. Reports suggest that during the debate on the GENIUS Act, Apple, Google, Social Media platform X, and Airbnb are exploring this matter, with two U.S. Senators questioning whether Meta would have similar plans if the bill is passed.
II. Exploration of the Specific Significance of the GENIUS Act
1. Provide regulatory clarity
The GENIUS Act ends years of a vicious turf war between the Federal Reserve and the U.S. Securities and Exchange Commission that has frozen product development. By providing a banking-like license for any issuer holding $10 billion or more in assets, the Act offers regulatory clarity that allows for real planning for the future, rather than waiting for law enforcement actions to set the rules. The statutory redemption rights and reserves audited by the Public Company Accounting Oversight Board (PCAOB) give stablecoins an equal legal status to Money Market Funds. This is not only beneficial for consumers but also crucial for payment service providers that need reliable settlement channels.
2. Build a bridge between traditional payments and blockchain
The GENIUS Act will establish a regulatory framework for stablecoins, allowing issuers to register with the U.S. government. In addition, issuers must provide a 1:1 backing for their stablecoins, undergo regular audits, and comply with anti-money laundering regulations.
OKX US CEO Roshan Robert stated that the GENIUS Act sends a "strong signal" that the U.S. government is taking a pragmatic approach to digital asset innovation. The Act "builds an important bridge for traditional finance to explore blockchain payment and settlement." "The GENIUS Act not only supports licensed innovation but also lays the groundwork for interoperability between centralized and decentralized systems — which we believe is the inevitable future."
Stablecoins are often seen as a key bridge connecting traditional finance and digital assets. These tokens, pegged to fiat currency (mostly to the U.S. dollar), enable people around the world to make cross-border remittances with lower fees and purchase goods at various merchants.
3. Lead the formulation of rules for the next generation of the global financial system
The GENIUS Act may lay the groundwork for the regulation of decentralized, programmable currencies, which could impact the prospects for the U.S. Central Bank Digital Currency (CBDC).
Mike Cahill, CEO of Douro Labs, stated: "The stablecoin bill is equally important. Major Financial Institutions have begun to explore the issuance of stablecoins, and clear federal regulatory measures will legitimize stablecoins, making them a new type of programmable currency - integrated into payments, settlements, and even Funds management. If the U.S. can achieve this, it will not only lead the Cryptos market but also set the rules for the next global financial system."
4. Strengthening the global financial status of the dollar.
Since Trump imposed tariffs on trade partners, discussions surrounding "de-dollarization" (i.e., the global possible move away from reliance on the dollar as the global reserve currency) have intensified. Supporters of the bill argue that, since most stablecoins are pegged to the dollar, the bill could strengthen the dollar's position, potentially enhancing its influence in the digital economy.
According to DefiLlama, the two largest stablecoins in the cryptocurrency space are pegged to the dollar - Tether's USDt and Circle's USDC, with a total Market Cap of $217.5 billion, accounting for 86.4% of the total stablecoin Market Cap of $251.7 billion.
Bill Sebell, Executive Director of the XDC Foundation, stated: "Discussions on de-dollarization overlook a more important point: dollar-backed stablecoins are the new financial instruments of the 21st century." If the GENIUS bill is passed, now "anyone with a Smart Phone can hold compliant digital dollars, which will enhance the coverage and relevance of dollars at a time when critics predict the dollar will depreciate."
5. Impact on the crypto market.
U.S. Treasury Secretary Scott Bessent stated: "Recent reports predict that by 2020, the stablecoin market size could reach $3.7 trillion. With the passing of the GENIUS bill, this scenario is more likely to be realized."
Nick Tomaino, founder of 1confirmation, stated on the X platform that the GENIUS bill is very favorable for cryptocurrencies, and the Market Cap of stablecoins will therefore grow rapidly by 10 times.
Three, criticism or approval? How do industry insiders view this historic moment?
Criticism:
On one hand, critics believe that the GENIUS Act lacks sufficient safeguards, particularly regarding the potential for entities authorized to issue stablecoins to engage in self-dealing.
Senator Elizabeth Warren has been one of the most outspoken opponents, warning that the bill could 'actively encourage' abuses related to Trump's cryptocurrency business.
Amanda Fisher, policy director and COO of Better Markets, believes that the GENIUS Act passed by the Senate puts consumers, investors, and the economy at risk. Stablecoins are not the 'future of payment.' Instead, they represent an unstable future, almost disregarding the unwary American public and the economic safeguards they rely on. The GENIUS Act advocates for the use of stablecoins but fails to address the issues within the cryptocurrency market over the months, such as the susceptibility of stablecoin companies to runs, bankruptcies, and the need for taxpayer-funded bailouts. The bill encourages the use of stablecoins for purchasing commodities and services but does not apply any laws providing consumer protection in the payment space. Under the proposed law, large tech companies and non-financial firms could issue their own currencies, raising concerns about fair competition, data privacy, and surveillance. The GENIUS Act and its supporters also fail to address the countless national security risks unique to cryptocurrencies while providing loopholes for opaque foreign stablecoins like Tether. The House should reject this legislation.
On the other hand, critics of the GENIUS Act argue that it undermines the decentralization of cryptocurrencies and could lead to corruption, such as officials favoring specific stablecoins under the new regulations.
Senator Jeff Merkley, who opposes the current bill, stated: 'We need to establish safeguards to ensure that government officials do not openly request people to buy their coins to enhance personal or family profits. Where are the safeguards in this bill? They are entirely absent.'
Some critics also argue that the bill grants too much power to entities to create new stablecoins, which could make enforcement of regulatory standards more challenging.
Agree:
Supporters say this will help protect investors and regulate the stablecoin market, ensuring issuers have the reserves necessary to provide value to stablecoins.
U.S. Treasury Secretary Bessent stated on Social Media, "A thriving stablecoin ecosystem will drive private sector demand for U.S. Treasuries—bonds that are indeed the asset backing stablecoins. This new demand may lower government borrowing costs and help control national debt. It may also open the door to a dollar-based digital asset economy for millions of users worldwide. This is a win-win situation for all parties involved: the private sector benefits; the U.S. Treasury benefits; consumers benefit. This is precisely the result of wise, innovation-supportive legislation."
Senator Bill Hagerty, a Republican from Tennessee who introduced the bill, stated: "If we don't act now, these benefits will not only disappear, but we will also fall behind in global competitiveness. Without a regulatory framework, stablecoin innovation will thrive overseas, not in the U.S.!"
Senator Hagerty stated: "The passage of this bill brings the U.S. a step closer to becoming a global leader in the cryptocurrency space. The GENIUS Act establishes a regulatory framework conducive to the growth of payment stablecoins. This legislation will solidify the dollar's dominance, protect consumer rights, and boost demand for U.S. Treasuries."
Coinbase Chief Legal Officer Paul Grewal stated, "A year ago, I felt this was just a fever dream. Think about how far we have come."
Patrick Gerhardt, Telcoin's Banking Operations President, stated in an email that the GENIUS Act will be a significant shift in the stablecoin landscape. "It's not necessarily about the quantity but the quality. Regulation opens the door for the emergence of new issuers, but compliance, interoperability, and practicality will ultimately determine the final winners. This is not just about who has the deepest pockets or the loudest brand, but about who can integrate with existing financial infrastructure, meet regulatory expectations, and serve local communities." Gerhardt indicated that while banks and large tech platforms may initially have huge advantages, "the real long-term value will come from stablecoins that can provide programmable, low-cost, and mobile-first financial services."
Amanda Tuminelli, Executive Director and Chief Legal Officer of the DeFi Education Fund, stated in a similar statement: "This is a victory for America, a victory for innovation, and an important step for the U.S. toward appropriate regulation of digital assets."
Ryan Peters, an assistant professor at Tulane University's Freeman School of Business in New Orleans, pointed out: GENIUS is a necessary first step towards a mature stablecoin infrastructure. Whether stablecoins can become a resilient medium of payment or face setbacks in their first real stress test completely depends on policymakers' attention to subsequent actions.
Elbile Karamann, co-founder of the PayFi network Huma Finance, believes that the Senate's passage of the GENIUS Act will be a "critical turning point," predicting that stablecoins will "go beyond speculative trading and become an important financial infrastructure." He stated in an email that the summer of DeFi is coming, and it will be distinctly different from previous summers.
Bezalel Eithan Raviv, CEO of blockchain security company Lionsgate Network, stated: "Overall, the effect of this bill will be better than any current bill."
Editor/joryn
