On May 19, the U.S. Senate overwhelmingly passed a procedural vote on the GENIUS Act, signaling the arrival of the country’s first unified federal regulatory framework for stablecoins. The bill aims to legally define and govern the operation of “digital dollars.” Beyond reshaping the power structure of the U.S. stablecoin market, it could trigger a profound global chain reaction across policy, economics, and monetary systems — redrawing the map of future finance.
The GENIUS Act redefines U.S. financial sovereignty by embedding stablecoins into the Treasury ecosystem and integrating on-chain assets into the dollar system. This transforms the “dollar peg” from a simple price anchor into a deeper liquidity and value anchor. Through legislation, global demand for stablecoins would be redirected into demand for U.S. Treasuries, strengthening the dollar’s role as a financial anchor in the evolving global architecture. Stablecoins would no longer be mere “digital shadows” of the dollar but sovereign monetary extensions connecting crypto and traditional finance. If implemented, this legislation could mark the beginning of a new U.S. dollar-led era, accelerating stablecoin adoption and supporting the rise of RWAs and tokenized treasuries.
This report analyzes the GENIUS Act’s legislative structure — focusing on its definitions, licensing framework, reserve requirements, and legal implications. It also explores the political debates, scope limitations, and enforcement challenges within the current version. Finally, it evaluates the Act’s direct and indirect impacts on U.S. Treasuries, stablecoins, and the RWA sector — revealing the hidden logic and systemic shifts behind this potentially “genius” piece of legislation.
Stablecoins have existed for over a decade. Since the launch of Bitcoin, they have evolved from speculative tools into payment instruments, liquidity bridges, and stores of value — pegged to fiat currencies and redeemable at a fixed value. As of May 29, 2025, the total stablecoin market capitalization approached $250 billion. Yet regulatory clarity has long been lacking, leaving key issues — such as legal status, risk segregation, and reserve transparency — unresolved.
Source: https://defillama.com/stablecoins
The GENIUS Act establishes a comprehensive regulatory framework for payment stablecoins, setting clear definitions, licensing thresholds, operational boundaries, and reserve requirements. Introduced by Senator Bill Hagerty and other bipartisan lawmakers, the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) represents the Senate’s version of the legislation. A parallel bill in the House, the STABLE Act (Stablecoin Transparency and Accountability for a Better Ledger Economy Act of 2025), proposed by Representative Bryan Steil, shares similar goals.
All payment stablecoin issuers in the U.S. are required to obtain either a federal or state license; unauthorized issuance is prohibited. A “payment stablecoin” is defined as a digital asset pegged to a fiat currency (e.g., USD), redeemable at face value, and not covered by federal deposit insurance. Issuers must maintain 100% high-quality liquid assets to back each issued token on a one-to-one basis.
Permitted reserve assets include physical cash, bank and credit union deposits, short-term U.S. Treasuries (with maturities of 93 days or less), Treasury-backed repurchase and reverse repurchase agreements, government money market funds, central bank reserves, and other low-risk assets approved by regulators. Rehypothecation is strictly prohibited. Reserve assets may only be used in limited circumstances — such as redemptions or as collateral in repo transactions — ensuring the integrity of asset backing and minimizing the risk of misuse.
To enhance transparency, issuers must publish monthly reports disclosing the outstanding supply and composition of reserves. These reports must be signed by both the CEO and CFO and reviewed by independent auditors. Issuers with more than $50 billion in circulation are also required to file annual audited financial statements.
Additionally, issuers must implement clear redemption mechanisms to guarantee one-to-one cash-out rights. These high-frequency disclosures and audit requirements are designed to address concerns over reserve sufficiency and strengthen public confidence in stablecoin systems.
The Act establishes a dual-track licensing system at both the federal and state levels. Both bank and non-bank entities are eligible to apply for issuer status. State regulators may oversee stablecoin issuers if their regulatory frameworks are deemed substantially equivalent to federal standards.
For federally licensed issuers, regulatory oversight depends on the entity type: the Office of the Comptroller of the Currency (OCC) oversees non-bank issuers, while banks are supervised by the OCC, the Federal Reserve, or the FDIC, depending on their structure. State-licensed issuers may operate nationwide if their licenses are recognized through mutual agreements. Additionally, states may collaborate with federal regulators — such as the Federal Reserve — to jointly supervise stablecoin issuers.
A $10 billion threshold triggers federal oversight under the Senate version of the bill. According to the GENIUS Act, state-regulated issuers whose market capitalization exceeds $10 billion must transition to federal supervision.
In contrast, the House version — the STABLE Act — permits continued state oversight regardless of an issuer’s size.
This divergence highlights a key tension between federal and state regulatory control, which will require reconciliation in the final version of the legislation.
The Act legally classifies compliant payment stablecoins as neither securities nor commodities, placing them outside the jurisdiction of the SEC and CFTC. They are also not considered bank deposits and therefore are not insured by the FDIC. U.S. bankruptcy law will be amended to grant stablecoin holders priority claim rights over reserve assets in the event of issuer insolvency.
To enhance consumer protection, individuals with a criminal financial history are prohibited from serving in executive roles. Issuers must fully comply with anti-money laundering (AML) and sanctions regulations. Designated as financial institutions under the Bank Secrecy Act, they are required to implement know-your-customer (KYC) procedures, report suspicious activities, and monitor transactions. FinCEN will issue specific AML guidelines for digital assets and mandate that issuers possess the technical capability to freeze, destroy, or block stablecoins in response to legal orders.
Amid bipartisan negotiations, the bill has undergone multiple revisions. Key concerns include insufficient consumer protections, potential AML loopholes, inadequate oversight of foreign stablecoins such as USDT, and fears of potential gains for crypto-linked businesses associated with the Trump family. In response, lawmakers introduced several consumer protection measures — clarifying that federal licensing does not exempt issuers from compliance with state-level financial consumer laws. Ethical conduct provisions were also added to prevent government officials from participating in stablecoin issuance, addressing conflict-of-interest concerns.
While both the Senate’s GENIUS Act and the House’s STABLE Act share core objectives, key differences remain:
Despite its significance, the Act presents several limitations:
On May 19, several previously undecided, crypto-friendly Democratic senators pledged their support after key safeguards were added to the revised bill. That evening, the Senate voted 66–32 to advance the bill to full chamber debate.
A final Senate vote is expected in early June. If passed by a simple majority, the bill will proceed to the House. The STABLE Act has already cleared the House Financial Services Committee with bipartisan backing and awaits a full vote. Lawmakers aim to reconcile and finalize both versions before the summer recess and present the unified bill to President Trump for signature. Trump has repeatedly endorsed stablecoin legislation, stating that “crypto will strengthen the global dominance of the U.S. dollar.”
If successful, the GENIUS Act is expected to become law by August 2025 — marking the first comprehensive stablecoin statute in U.S. history.
As of May 2025, the total U.S. federal debt exceeds $36 trillion, representing about 123% of GDP — a historic high. Persistent fiscal deficits and soaring interest costs have created dual challenges for the Treasury market: ongoing debt expansion alongside tightening capital sources. The GENIUS Act mandates that stablecoin reserves be primarily allocated to highly liquid assets such as short-term U.S. Treasuries. This channels global demand for digital dollars directly into demand for U.S. Treasuries, potentially easing refinancing pressure while reinforcing the dollar’s dominance within the crypto financial ecosystem.
Source: https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/
As of now, fiat-backed stablecoins dominate the total supply with $115 billion (90.5%), followed by crypto-collateralized stablecoins at $11.3 billion (8.9%), and algorithmic stablecoins at just $0.8 billion (0.6%). USDT and USDC continue to lead the market. The GENIUS Act is poised to reshape the stablecoin landscape by altering issuer dynamics, restoring market confidence, and accelerating compliance among existing players.
Source: https://dune.com/KARTOD/stablecoins-overview
With the passage of the GENIUS Act, the U.S. financial system is quietly opening its doors to Real World Asset (RWA) tokenization. Beyond regulating stablecoins, the Act signals that regulated financial institutions can now legally engage in blockchain activities, including on-chain asset issuance.
Source: https://defillama.com/stablecoin/blackrock-usd
The GENIUS Act represents more than just a regulatory milestone — it marks a rare convergence of national strategy and market innovation. By formally integrating stablecoins into the U.S. financial infrastructure, it builds critical institutional bridges between the crypto ecosystem and traditional finance. From reinforcing demand for U.S. Treasuries to reshaping stablecoin competition and enabling Real World Asset (RWA) tokenization, the message is unmistakable: the U.S. aims to dominate not only the real-world payment system but also the on-chain flow of value.
Stablecoins emerge as powerful instruments for dollar expansion, with their reserve allocations serving as strategic financial levers. While the Act faces challenges — particularly concerning decentralization, cross-border oversight, and political neutrality — it lays a vital foundation. Its ultimate success will hinge on effective execution, market response, and international collaboration.
In the long run, the GENIUS Act legitimizes stablecoins and acts as a catalyst for broader digital asset legislation. The goal transcends merely regulating stablecoins; it seeks to establish stable, clear regulation for the entire crypto economy — potentially redefining the global financial order in the digital age.
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