Understanding The GENIUS Act—Stablecoin Regulation in the United States

With stablecoins increasing in popularity and becoming a preferred payment method globally, the urgency to regulate these digital assets has become essential, hence the need for a bill, The Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act).

The GENIUS Act is a proposed legislative bill to regulate payment stablecoins, which are digital assets pegged to fiat currencies like the U.S. dollar. 

Introduced in the 119th Congress as S.394 and S.1582, the GENIUS Act establishes rules for stablecoin issuance, reserve management, and consumer protection. With S.1582 passing the Senate on June 17, 2025, this law will change the digital finance sector.

What Are Payment Stablecoins and Why Regulate Them?

Payment stablecoins are digital assets designed to maintain a fixed value, typically pegged 1:1 to a fiat currency like the U.S. dollar, and backed by collateral and reserves like cash, Treasury bills, or money market funds. 

Unlike the regular volatile cryptocurrencies like Bitcoin, stablecoins like Tether (USDT) and USD Coin (USDC) allow low-cost, instant transactions for payments, remittances, and decentralized finance (DeFi). With a global market capitalization above 257 billion as of June 2025, stablecoins have continued to show their increasing role in finance.

Top stablecoins by market cap (Source: CoinMarketCap)

Yet, with great potential comes great risk. Unregulated stablecoins can facilitate illicit activities like money laundering, threaten financial stability, and expose consumers to losses from mismanagement. 

Regulation is important for cryptocurrencies, especially stablecoins, to promote financial stability, protect consumers, and align the U.S. with global standards. 

The GENIUS Act: A Blueprint for Stability and Innovation

The Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) is a bipartisan Senate bill to regulate payment stablecoins.

Introduced as S.394 on Feb. 4, 2025, by Senators Bill Hagerty (R-TN), Tim Scott (R-SC), Kirsten Gillibrand (D-NY), and Cynthia Lummis (R-WY), and as S.1582 on May 1, 2025, by the same sponsors, it provides guidelines for issuance, reserves, and oversight.

S.1582, the refined version of S.394, was approved in the Senate on June 17, 2025, with a 68-30 vote and is now under House review. 

The GENIUS ACT will provide a balance of innovation and stability that would make stablecoins safe, competitive, and integral to the future of finance.

Key Provisions of the GENIUS Act

Moving forward, the GENIUS Act establishes a comprehensive regulatory framework with the following core components:

• Issuer Restrictions: Only subsidiaries of insured depository institutions, federally qualified nonbanks, or state-qualified issuers may issue stablecoins, ensuring only trusted firms enter the market.
• Reserve Requirements: Issuers must maintain 1:1 reserves in high-quality assets, such as U.S. currency or Treasury bills with maturities of 93 days or less. As rehypothecation is restricted to liquidity purposes with regulatory approval.
• Transparency: Issuers must provide monthly public disclosures of reserve composition, audited by registered firms and certified by CEOs and CFOs, to ensure accountability.
• Consumer Protections: Customer assets are segregated, with stablecoin holders prioritized in cases of insolvency. Issuers comply with the Bank Secrecy Act for anti-money laundering
• Capital and Liquidity: Regulators will enforce measures to prevent financial instability, making sure issuers remain resilient.
• State-Federal Balance: Issuers with a market capitalization below $10 billion are subject to state regulation, while those exceeding $10 billion transition to federal oversight within 360 days.
• Supervision and Enforcement: Regulators can impose fines of up to $100,000 per day for non-compliance, ensuring adherence to the law.
• Additional Measures: S.1582 bans yield-bearing stablecoins, restricts tech firms from issuing stablecoins, mandates a study of algorithmic stablecoins within 365 days, and supports international transaction reciprocity.

These regulations intend to boost trust and stability and reduce risks while promoting innovation for the stablecoin market.

Why the GENIUS Act Matters

The GENIUS Act will address systemic risks in a $250 billion stablecoin market, where mismanagement could destabilize financial systems, while unlocking the potential of stablecoins. Its objectives include

• Financial Stability: Strict reserve and capital requirements reduce the risk of market disruptions.
• Consumer Protection: Segregated assets, insolvency protections, and transparent disclosures protect users. 
• U.S. Financial Leadership: By setting a global standard, the U.S. can lead digital finance ahead of other countries.
• Innovation: A stable regulatory system will encourage the development of stablecoin-based products, driving economic growth and modernizing payments.

By preserving the U.S. dollar’s dominance and prioritizing consumer trust, the GENIUS Act positions the United States as a global leader in digital finance.

Real-World Applications of the GENIUS Act

The GENIUS Act supports stablecoin to transform multiple sectors:

• Digital Payments: Stablecoins lower transaction costs for fintech platforms, ultimately improving e-commerce efficiency.
• Remittances: Migrant workers benefit from low-cost, cross-border payments through stablecoin-powered fintech platforms.
• Decentralized Finance (DeFi): Regulated stablecoins allow secure lending, borrowing, and trading on DeFi platforms.
• Banking Integration: Traditional banks can issue stablecoins for digital wallets, bridging conventional and digital finance.
• International Trade: Reciprocity provisions will ease global settlements, boosting trade efficiency.

By mandating reserve integrity and regulatory compliance, the bill boosts confidence and accelerates stablecoin adoption across industries.

Comparing the GENIUS Act to Other Legislation

The GENIUS Act is similar to two other notable bills in the 119th Congress: the STABLE Act and the Clarity for Payment Stablecoins Act (H.R. 232). Here’s how they compare:

STABLE Act:

• Issuer Scope: Requires all issuers to hold banking charters, a stricter requirement than the GENIUS Act’s inclusion of qualified nonbanks.
• Reserve Rules: Mandates FDIC-insured deposits, while the GENIUS Act specifies assets like Treasury bills ≤93 days.
• Regulatory Approach: Focuses on federal banking regulation with minimal state involvement, unlike the GENIUS Act’s balanced state-federal model.
• Progress: Pending in committee.

Clarity for Payment Stablecoins Act

• Issuer Scope: Allows more participation, including fintechs, making it less restrictive than the GENIUS Act.
• Reserve Rules: Requires 1:1 reserves but permits a wider range of “high-quality” assets.
• Regulatory Approach: Prioritizes state regulation, risking inconsistency compared to the GENIUS Act’s balanced model.
• Progress: Approved by the House Financial Services Committee on April 2, 2025, with a 32-17 vote.

The GENIUS Act’s approach blends the STABLE Act’s banking-focused model with the Clarity for Payment Stablecoins Act’s state-focused flexibility, creating a balanced and forward-thinking regulatory model.

Current Status and Legislative Path

As of June 29, 2025, S.394 remains in the Senate Banking, Housing, and Urban Affairs Committee with no actions since its introduction on Feb. 4, 2025.

Meanwhile, S.1582’s Senate approval on June 17, 2025, marks a major milestone, with the bill now under consideration in the House.

However, the GENIUS Act faces challenges:

• Bipartisan Tensions: Critics like Sens. Elizabeth Warren and Bernie Sanders argue the bill may weaken consumer protections or allow illicit finance.
• Competing Bills: The presence of S.394, H.R. 232, and the STABLE Act creates legislative complexity, though S.1582 has emerged as the frontrunner.
• Industry Concerns: Smaller stablecoin issuers criticize the $10 billion federal threshold as being too restrictive.
• Public Debate: Opinions are divided, with some praising the bill’s innovation-friendly approach and others warning of its risks.

Despite these challenges, S.1582’s Senate approval reveals bipartisan support, potentially incorporating refinements from S.394 as it moves toward House negotiations.

The Future of the GENIUS Act and Stablecoins

If signed into law, the GENIUS Act could transform the financial landscape by:

• Increase Adoption: Major players like Visa or Mastercard may integrate stablecoins, expanding their use in payments.
• Establish Global Leadership: Make the United States a regulatory standard-setter and global leader.
• Promote Innovation: A clear framework will support blockchain-based innovations, such as tokenized securities and smart contracts.

House amendments may address privacy concerns, algorithmic stablecoins (studied under the bill), or tech firm restrictions, further refining the bill’s impact.

Conclusion

The GENIUS Act, especially S.1582, represents a bold step toward regulating payment stablecoins, balancing innovation with financial stability and consumer protection.

By addressing risks and allowing payment, DeFi, and international trade use cases, the bill positions the United States to lead the global digital finance revolution.

As S.1582 advances through the House as of June 29, 2025, its progress is a sign of a transformative moment for stablecoins and the future of money.