June 10, 2025
Stablecoins have become a major force in the world of digital assets, growing rapidly as a preferred form of cryptocurrency. These coins combine the speed and transparency of blockchain technology with the price stability of traditional currencies, making them increasingly important for investors, businesses, and consumers worldwide.
Recognizing this surge and the need for clear rules, the United States Senate has advanced the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) — the first federal regulatory framework aimed specifically at stablecoins. This bipartisan-supported bill promises to bring much-needed clarity, protect consumers, encourage innovation, and strengthen the U.S. dollar’s role in the global financial system.
As of June 4, 2025, the GENIUS Act has not yet been fully passed into law but has made significant progress in the legislative process. The Senate recently advanced the bill with votes to overcome procedural hurdles and prepare it for final debate. The bill still requires reconciliation with the House version (the STABLE Act), followed by presidential approval.
In this blog, we’ll walk you through the GENIUS Act’s major provisions, how it regulates stablecoins, and what it means for the future of crypto markets.
What Are Stablecoins and Why Do They Matter?
Stablecoins are digital currencies designed to hold a steady value by being pegged to real-world assets, such as the U.S. dollar or other government-backed securities. Since their emergence in 2014, stablecoins have evolved beyond simple trading tools to vital components of modern finance.
Today, the stablecoin market has swelled to nearly $232 billion in market capitalization. They serve many roles, from acting as a reliable store of value and a tool for crypto trading to functioning as payment systems that can facilitate faster, cheaper, and borderless transactions.
Some prominent examples of stablecoins include:
Tether (USDT): The first and largest stablecoin, USDT is widely used for trading across multiple blockchains and platforms. It is pegged 1:1 to the U.S. dollar and is commonly used to facilitate liquidity and trading in the crypto space.
USD Coin (USDC): Issued by Circle, USDC has become one of the most trusted stablecoins in the market, especially in North America. It is known for its transparency and regular audits, with reserves held in cash and short-term U.S. government securities.
Pax Dollar (USDP): Managed by Paxos, USDP targets institutional clients and emphasizes regulatory compliance and transparency.
PayPal USD (PYUSD): A newer entrant, PYUSD leverages PayPal’s extensive user base to enable stablecoin payments and digital commerce.
One key appeal is their role in financial inclusion. For millions without access to traditional banks, stablecoins offer a way to participate in the digital economy using blockchain technology, opening doors to savings, payments, and investments previously out of reach.
Also Read: Stablecoin Adoption and Its Impact on Global Crypto Market
Overview of the GENIUS Act
Introduced by Senator Bill Hagerty (R-TN) and supported by a bipartisan group, the GENIUS Act is a groundbreaking bill aimed at establishing a clear and comprehensive federal regulatory framework for stablecoins.
Its main goals are to:
Reserve Requirements: Stablecoin issuers would be required to maintain 100% reserves in U.S. dollars and short-term Treasuries or similarly liquid assets.
Transparency: Issuers must provide monthly public disclosures of reserve compositions and annual audited financial statements if their market capitalization exceeds $50 billion.
Consumer Protections: The act prohibits misleading marketing practices, such as suggesting that stablecoins are backed by the U.S. government or are FDIC-insured.
Regulatory Oversight: The act introduces a framework for both federal and state-level regulation, with certain thresholds determining the applicable regulatory body.
The Act has passed significant hurdles in the Senate and is moving closer to becoming law, signaling a pivotal moment in U.S. crypto regulation.
Key Provisions of the GENIUS Act
The GENIUS Act establishes a comprehensive framework to regulate stablecoin issuance and operations. Below are the key provisions that define this new regulatory landscape:
Issuer Eligibility and Regulation
Only entities approved by federal or state regulators will be allowed to issue stablecoins. This includes subsidiaries of insured depository institutions, federally qualified nonbank issuers, and state-approved issuers.
Issuers with less than $10 billion in outstanding stablecoins can opt for state-level regulation if the state's rules meet federal standards. Larger issuers must register with federal agencies like the OCC.
Existing non-registered stablecoins will have a three-year grace period to transition to compliance without disrupting markets.
Reserve and Collateral Requirements
The Act mandates a full 1:1 reserve backing, requiring stablecoins to be fully backed by U.S. dollars or similarly liquid and safe assets such as short-term Treasuries.
Reserve assets cannot be rehypothecated freely, meaning issuers cannot reuse or lend out the collateral backing the stablecoins for other purposes. This ensures the reserves remain dedicated solely to backing the stablecoins.
Issuers must publish monthly disclosures detailing reserve composition and submit annual audits if their market cap exceeds $50 billion.
Consumer Protection Measures
Transparency is key. Issuers are required to disclose their redemption policies clearly and cannot mislead consumers by suggesting stablecoins are legal tender or government-backed.
Stablecoin holders are given priority in insolvency cases, protecting their claims over other creditors.
Marketing restrictions prevent deceptive naming or advertising practices.
Anti-Money Laundering (AML) and National Security
Issuers must comply with the Bank Secrecy Act, maintain robust AML and sanctions programs, monitor transactions, and report suspicious activity.
The Act requires technical capabilities to freeze, burn, or block tokens upon lawful orders. It helps prevent misuse such as fraud, money laundering, or financing illegal activities. This ensures regulators and issuers can quickly respond to suspicious or unlawful transactions, protecting the financial system and users.
Foreign stablecoin issuers must meet U.S. standards to operate in the country and can be barred if they fail to comply.
Prohibitions and Restrictions
Issuers are prohibited from offering interest or yield payments on stablecoins, and yield-bearing models are banned to protect financial stability.
Secondary market trading of stablecoins from non-compliant foreign issuers will be restricted.
Understanding Stablecoin Laws and Compliance Requirements
The U.S. stablecoin regulatory environment has been fragmented, but the GENIUS Act aims to unify oversight with a clear framework.
Federal vs. State Regulation: Larger issuers fall under federal oversight by the Office of the Comptroller of the Currency (OCC). Smaller issuers (under $10 billion) may opt for state-level regulation if the state’s rules align with federal standards. This hybrid system balances flexibility with consistent consumer protections.
AML and Compliance: The Act strengthens anti-money laundering requirements. Issuers must monitor suspicious activities, comply with sanctions, and have the technical ability to freeze or burn tokens when required by law.
Comparison to Traditional Payments: Unlike Visa or SWIFT, stablecoins enable faster, cheaper cross-border payments by cutting out intermediaries. However, traditional payment systems benefit from decades of established federal oversight, a level that stablecoins are just beginning to reach.
By establishing these regulatory standards, the GENIUS Act is expected to increase trust and acceptance of stablecoins, encourage their use in mainstream finance and promote greater financial inclusion worldwide.
How the GENIUS Act Differs from Previous Stablecoin Bills (STABLE & Clarity Acts)
The GENIUS Act differs significantly from earlier legislative efforts. Unlike the Clarity for Payment Stablecoins Act, which designates the Federal Reserve as the primary regulator, the GENIUS Act places the Office of the Comptroller of the Currency (OCC) at the helm of stablecoin oversight. This shift highlights a preference for banking-focused supervision aimed at strong risk management.
Additionally, the GENIUS Act shares the collaborative state-federal regulatory approach found in the Lummis-Gillibrand Act, offering issuers the flexibility to choose state or federal oversight depending on their size and operational scope. This allows smaller issuers to operate under state rules if they meet federal standards.
Compared to the STABLE Act of 2020, the GENIUS Act adopts a more flexible stance by easing entry barriers for stablecoin issuers, promoting innovation while still enforcing consumer protections and reserve requirements. The STABLE Act had required stablecoin issuers to be insured depository institutions like banks, subjecting them to strict federal oversight. While it focused heavily on consumer protection and financial stability, it was seen as restrictive because it limited issuance mainly to banks, potentially stifling innovation in the stablecoin space.
This balance aims to encourage growth without sacrificing security.
Ongoing Criticisms and Challenges
Despite bipartisan support, the GENIUS Act faces criticism from some Senate Democrats concerned about gaps in anti-money laundering (AML) policies and oversight of foreign stablecoin issuers. There are calls for more stringent national security measures to prevent abuse and ensure financial system stability.
The debate continues over how to strike the right balance between encouraging innovation in the crypto space and protecting consumers and the broader economy. Some worry the bill may not fully address emerging risks tied to technological complexity and international coordination. Because stablecoins work globally and use fast-changing blockchain tech, regulations must adapt constantly and coordinate internationally to manage risks like money laundering and fraud.
As the bill moves through Congress, further amendments and negotiations are expected to strengthen enforcement provisions and clarify roles among regulators, reflecting ongoing efforts to craft a responsible yet forward-looking framework.
What’s Next for the GENIUS Act?
The GENIUS Act is making its way through Congress and is poised for full approval and the President’s signature. Once it becomes law, it will set a clear regulatory path for stablecoins in the U.S.
After enactment, federal and state regulators will work together to create detailed rules, licensing processes, and oversight standards for stablecoin issuers. This means significant changes are coming that will impact how stablecoins operate in the market.
Here's what to keep in mind going forward:
Stay informed: Keep up with legislative updates and regulatory announcements to understand upcoming compliance requirements.
Evaluate your exposure: If you’re a business using or investing in stablecoins, review your current practices to anticipate changes.
Engage with experts: Consult legal and financial advisors who specialize in crypto regulations to prepare your strategies.
Plan ahead: Consider how new rules might affect your stablecoin usage, investments, or product offerings, and adapt accordingly.
Being proactive today will help you navigate the regulatory shift smoothly and seize emerging opportunities in the stablecoin ecosystem.
Wrapping Up
The GENIUS Act represents a pivotal moment for the future of stablecoins and digital finance in the U.S. By introducing clear rules and strong protections, it not only boosts confidence among investors and consumers but also creates fertile ground for innovation to thrive. This balance between oversight and opportunity will help the U.S. set the global standard for stablecoin regulation while ensuring a safer and more resilient financial ecosystem.
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Users can earn rewards by staking SperaxDAO’s native token, SPAs, participating in yield farming, or holding its fully collateralized stablecoin yield aggregator, USDs. The stablecoin automatically generates yield without manual staking, letting users grow their holdings passively.
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With automated processes, robust security, and easy access, SperaxDAO is designed to help both new and experienced investors maximize crypto earnings while navigating the evolving decentralized finance landscape.
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FAQs
What will the GENIUS Act do?
The GENIUS Act creates a federal regulatory framework for stablecoins—digital assets pegged to currencies like the U.S. dollar. It aims to promote innovation, ensure consumer protection, and provide clear oversight for issuers to safely operate within the financial system.
What is the Clarity for Payment Stablecoins Act?
The Clarity for Payment Stablecoins Act of 2024 increases state authority over stablecoin issuers. It exempts those with less than $10 billion in stablecoin issuance from federal oversight, allowing them to remain regulated by state agencies rather than federal regulators.
What are the 4 types of stablecoins?
There are four main stablecoin types: fiat-backed (pegged to currencies like USD), commodity-backed (linked to assets like gold), crypto-backed (collateralized by cryptocurrencies), and algorithmic stablecoins (using algorithms to maintain price stability without direct collateral).
What is the stablecoin rule?
The stablecoin rule (S. 919) defines payment stablecoins as digital assets redeemable at a fixed value (e.g., $1). Issuers must maintain a one-to-one reserve of permitted assets to back every stablecoin in circulation, ensuring stability and redeemability.
What is the difference between tokenized deposits and stablecoins?
Stablecoins, issued by non-banks, use diverse reserves and operate on public blockchains. Tokenized deposits, offered by traditional banks, are backed one-to-one by deposits and operate on private, regulated networks, making them more tightly integrated with traditional banking systems.
What is the most traded stablecoin?
Tether’s USDT and Circle’s USDC are the two largest stablecoins, with a combined market cap exceeding $200 billion. Both are fiat-backed and maintain reserves in real-world assets to ensure stability and widespread use across crypto markets.