One of the most significant developments in the U.S. crypto landscape is the introduction of the “Guiding and Establishing National Innovation for U.S. Stablecoins of 2025 Act (GENIUS Act),” which aims to provide regulatory clarity for some of the most popular and beginner-friendly cryptocurrencies — stablecoins.
This Act aligns with previous stablecoin legislation efforts and has already garnered bipartisan support, highlighting the current administration’s commitment to advancing the crypto sector.
If passed, the bill will help create a comprehensive framework for payment stablecoins, potentially encouraging wider adoption by institutional and global investors.
Here, we take an in-depth look at the GENIUS Act‘s key points and what they could mean for the crypto market.
The GENIUS Act is a stablecoin bill introduced by Senator Bill Hagerty (R-TN) on February 4, 2024, and co-sponsored by Senator Cynthia Lummis (R-WY), Senator Kirsten Gillibrand (D-NY), and Senate Banking Committee Chairman Tim Scott (R-SC). The bipartisan sponsorship is a testament to legislators’ commitment to providing regulatory clarity in the crypto sector.
The primary purpose of the GENIUS Act is to develop a comprehensive and clear regulatory framework for stablecoins — digital assets whose value is pegged to stable real-world assets like fiat currency — in the U.S. It is designed to drive crypto innovation and adoption.
In line with this, the GENIUS Act includes several critical provisions:
The Act builds upon prior stablecoin legislation, such as the “Clarity for Payment Stablecoins Act of 2023,” introduced by Former Chairman of the House Financial Services Committee, Patrick McHenry, and the “Lummis-Gillibrand Payment Stablecoin Act,” introduced by the current Act’s co-sponsors in 2024.
Like these earlier initiatives, the GENIUS Act aims to establish a framework that clearly defines stablecoins and clarifies federal and state regulation requirements.
It also addresses one of the main challenges with previous proposals — concerns over state and federal oversight of stablecoins — by providing a compromise between federal and state-level regulation. Under the new Act, small payment stablecoin issuers can choose state-level regulation if its framework meets federal standards.
The GENIUS Act lays out guidelines for stablecoin regulation, balancing oversight with innovation. From defining who can issue stablecoins to setting compliance standards, the bill establishes a structured path for broader adoption. Here are the most important points:
The Act specifies that only federally or state-approved entities, such as depository institution subsidiaries (like credit unions), federally qualified nonbank payment stablecoin issuers, and state-qualified issuers, can legally issue stablecoins in the U.S. The goal is to make sure all issuers operate under provided regulatory standards.
As with the EU Markets in Crypto-Assets (MiCA) Regulation, the GENIUS Act mandates that all payment stablecoin issuers back their stablecoins with fiat currency (U.S. dollars) or high-quality liquid reserves (like central bank deposits or U.S. treasury securities) in a fixed 1:1 ratio.
Issuers are expected to hold the funds separately from operational funds and avoid using them for anything other than backing their coins.
The Act also requires issuers to disclose their financial reserves and implement public redemption policies — failure to do so may result in criminal penalties. These provisions aim to promote stablecoin stability and protect investors from the repercussions of issuer insolvency.
The Act proposes bank-like regulation for all payment stablecoin issuers. It, therefore, mandates that they not only maintain a full 100% reserve backing for their coins but also undergo regular financial disclosures and third-party audits from registered accounting firms.
It also requires issuers to implement stringent risk management measures and adhere to the Bank Secrecy Act and the customer privacy requirements provided under the Gramm-Leach-Bliley Act.
One of the most significant challenges with previous proposals is balancing oversight between federal and state bodies. The GENIUS Act provides a solution by harmonizing regulation responsibilities between the two.
Under the Act, regulatory oversight is based on issuer size — those with a market capitalization of $10 billion or less can opt out of federal regulatory frameworks and operate under state-level oversight.
Of course, this comes with a condition — they can only opt into state-level regulation if their states’ regulatory frameworks are “substantially similar” to federal standards. State regulators must certify this annually to the Treasury Secretary.
The Act further states that issuers whose market cap grows beyond the provided $10 billion have 360 days to opt into the federal regulatory framework implemented by the Federal Reserve Board or Comptroller of the Currency. The only exception is if either federal body allows the issuer to remain under state-level regulation.
The GENIUS Act establishes a structured regulatory and enforcement framework to prevent jurisdictional overlaps. It designates the Office of the Comptroller of the Currency (OCC) as the primary supervisory and enforcement authority over federal nonbank payment issuers.
On the other hand, the Act tasks state regulators with overseeing small state-qualified issuers within their jurisdictions. This is one of the provisions differentiating the GENIUS Act from the McHenry Bill, which proposed that the Federal Reserve take over this role.
That said, federal agencies still have some secondary oversight over state-qualified issuers. They can offer backup enforcement in circumstances where there are risks to issuers’ financial stability.
Beyond offering jurisdictional guidance, the GENIUS Act also imposes customer protection standards on issuers and custody providers. They are required to separate company funds from customer assets, implement robust cybersecurity measures and anti-fraud safeguards, and file monthly audited compliance reports.
The Act clarifies that stablecoins are classified as non-securities under federal law. Further, it restricts the U.S. Securities and Exchange Commission (SEC) from requiring issuers to classify the coins as securities.
This clarification removes jurisdictional ambiguities and facilitates the integration of banks and cryptocurrencies by positioning them within a framework that allows for bank-like oversight. It also ensures that stablecoins are regarded as payment instruments rather than investment vehicles.
Additionally, the Act prohibits new mandates requiring issuers to access Federal Reserve master accounts. By restricting such mandates, the GENIUS Act prevents payment stablecoin issuers from being compelled to cultivate direct relationships with the Federal Reserve.
If passed, the GENIUS Act will have several impacts on the crypto sector, including:
Just like other bills that have laid the groundwork for the GENIUS Act, this bill could serve as the foundation for future crypto legislation. This may result in broader crypto regulation and clearer guidelines for digital asset oversight.
Removing ambiguity from the digital asset sector can, in turn, encourage innovation, fostering a more vibrant market.
Some institutional investors are skeptical about investing in stablecoins and other crypto assets because of the market’s uncertainties.
The GENIUS Act may alleviate their concerns by providing regulatory clarity. This could encourage more institutional players to adopt stablecoins, increasing their use in mainstream financial transactions and digital payments.
The Act’s proposal for strict risk management measures and robust oversight may also increase trust among institutional investors and promote wider adoption.
With a market capitalization of over $216 billion, saying that stablecoins are popular is a gross understatement — they have become an integral part of the global financial ecosystem.
With this growth comes the need for cohesive global regulatory frameworks. The GENIUS Act supports this need by aligning U.S. stablecoin regulations with international standards to promote greater cross-border interoperability and lend credibility to U.S.-based stablecoins in the global financial system.
As mentioned before, the GENIUS Act builds upon various other stablecoin legislations, including:
The GENIUS Act may lay the foundation for clearer crypto regulation, encouraging more institutional and global investors to adopt U.S.-based stablecoins.
The Act defines stablecoins, establishes consumer protection measures, and provides federal and state oversight guidelines, positioning it as one of the most comprehensive stablecoin bills. As such, it has the potential for positive reception.
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