The GENIUS Act stablecoin regulation has officially become law, marking a watershed moment for the American digital asset landscape. On 18 July 2025, President Donald Trump signed the “Guiding and Establishing National Innovation for US Stablecoins of 2025” Act into law, creating the first comprehensive federal framework for stablecoin regulation in the United States.
The legislation promises to reshape how stablecoins operate, who can issue them, and what protections consumers can expect. Yet beneath the celebratory language of the White House fact sheet lies a complex regulatory framework that has divided industry experts, politicians, and consumer advocates.
What does the GENIUS Act do?
The GENIUS Act establishes three key categories of “permitted payment stablecoin issuers” who can legally issue stablecoins in the US:
Subsidiaries of insured depository institutions that have been approved under the new framework
Federal qualified non-bank payment stablecoin issuers regulated by the Office of the Comptroller of the Currency (OCC)
State-qualified payment stablecoin issuers operating under substantially similar state frameworks
According to the legislation, “It shall be unlawful for any person other than a permitted payment stablecoin issuer to issue a payment stablecoin in the United States.”
The Act mandates that stablecoin issuers maintain “reserves backing the issuer’s payment stablecoins outstanding on an at least 1-1 basis” using only highly liquid assets, including US currency, Treasury bills with a maturity of 93 days or less, and deposits at insured institutions.
Reserve requirements and consumer protections
One of the most significant provisions requires full reserve backing. The White House fact sheet emphasises that “The GENIUS Act requires 100% reserve backing with liquid assets like US dollars or short-term Treasuries and requires issuers to make monthly, public disclosures of the composition of reserves.”
The legislation also establishes a crucial consumer protection mechanism: “In the event of insolvency of a stablecoin issuer, the GENIUS Act prioritises stablecoin holders’ claims over all other creditors, ensuring a final backstop of consumer protection.”
Under Section 507 of Title 11 of the US Code, the Act creates a new bankruptcy priority, stating that “any claim of a person holding payment stablecoins… issued by a debtor shall have priority over any other claim against the debtor.”
Industry reaction: Enthusiasm meets scepticism
The industry response to the GENIUS Act stablecoin regulation has been decidedly mixed. Major financial institutions have responded with notable enthusiasm, particularly following the Senate’s passage of the bill in June.
“The GENIUS Act will protect consumers, enable responsible innovation, and safeguard the dominance of the US dollar,” said Sen. Kirsten Gillibrand, one of the sponsors of the bill.
Traditional Wall Street banks are moving quickly to establish their positions. JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and other leading American banks are in the early stages of conversations about banding together to launch their stablecoin, according to Wall Street Journal reports.
JPMorgan CEO Jamie Dimon, despite his historical scepticism about cryptocurrencies, acknowledged the inevitability of stablecoin adoption. “We’re going to be involved in both JPMorgan deposit coins and stablecoins to understand it, to be good at it,” Dimon said during an earnings conference call about whether his company would be involved in stablecoins. “I think they’re real, but I don’t know why you’d want to [use a] stablecoin as opposed to just payment.”
Critical voices and regulatory concerns
Not everyone views the GENIUS Act as progress. Several Democratic senators have raised substantial concerns about the legislation’s adequacy.
“While a strong stablecoin bill is the best possible outcome, this weak bill is worse than no bill at all,” Sen. Elizabeth Warren said on the Senate floor last month, according to an ABC News article.
Critics highlight several key shortcomings:
Conflict of interest concerns: Critics say the shortcomings of the bill are exemplified by its inability to address conflict-of-interest concerns raised by Trump’s dealings in stablecoins. In March, Trump-backed cryptocurrency firm World Liberty Financial issued a stablecoin USD1.
Limited consumer protections: Ravi Sarathy, a professor of international business and strategy at Northeastern University, notes significant gaps in consumer protection. “For example, you and I have deposit protection of up to $250,000. I don’t see anything of the sort in the GENIUS Act.”
Technical security risks: Sarathy also highlights operational vulnerabilities: “The problem with stablecoin is you need to have a private key and a digital wallet, and if you lose the private key, you can’t access the wallet. There’s also the possibility that the digital wallet could be hacked.”
Regulatory framework and oversight structure
The GENIUS Act creates a complex regulatory structure with multiple oversight bodies. For larger stablecoin issuers with over US$10 billion in outstanding tokens, federal regulation is mandatory.
Payment stablecoin issuers with consolidated total outstanding issuance over US$10 billion would be required to directly comply with federal stablecoin regulations unless granted a waiver by a federal banking regulator.
The legislation explicitly subjects stablecoin issuers to existing financial regulations. “A permitted payment stablecoin issuer shall be treated as a financial institution for purposes of the Bank Secrecy Act.”
However, activities are strictly limited. The Act specifies that permitted issuers may only “issue payment stablecoins; redeem payment stablecoins; manage related reserves (including purchasing and holding reserve assets); provide custodial or safekeeping services for payment stablecoins… and undertake other functions that directly support the work of issuing and redeeming payment stablecoins.”
Market impact and future implications
The market has already begun responding to the regulatory clarity. Since 2020 in particular, stablecoins have seensignificant growth in both issuance and adoption, with the total market cap approaching US$232 billion as of May 2025.
The legislation’s passage has prompted a race among traditional financial institutions to enter the stablecoin market. “Many of the users out there today are not aware of stablecoins, or not interested in stablecoins, and they should not be,” said Jose Fernandez da Ponte, PayPal’s SVP of blockchain, cryptocurrency and digital currencies.
Major corporations are also moving quickly. Coinbase announced a deal with e-commerce platform Shopify to bring USDC payments to merchants. Payments firm Fiserv announced a stablecoin to pair with the 90 billion transactions it processes every year.
What does this mean for the future
The GENIUS Act stablecoin regulation represents more than just regulatory clarity – it signals America’s intention to dominate the digital dollar space globally. As the White House fact sheet notes, “By driving demand for US Treasuries, stablecoins will play a crucial role in ensuring the continued global dominance of the US dollar as the world’s reserve currency.”
However, questions remain. The legislation’s effectiveness will ultimately depend on implementation, enforcement, and whether it strikes the right balance between innovation and consumer protection.
Critics argue that by excluding stablecoins from securities regulation and limiting federal oversight, the Act may create regulatory gaps that could expose consumers to risks similar to those seen in previous cryptocurrency collapses. Supporters contend that clear rules will attract institutional investment and legitimise stablecoins as a mainstream financial tool.
The path forward will likely see continued tension between fostering innovation and ensuring adequate protection. As major banks enter the stablecoin space and regulation takes effect, the true test of the GENIUS Act will be whether it achieves its stated goals of consumer protection while maintaining America’s competitive edge in digital finance.
The coming months will reveal whether this landmark legislation represents a masterstroke of regulatory balance or, as some critics suggest, a missed opportunity to establish truly robust oversight of a rapidly evolving financial technology.
Photo: White House social media account.See also: China could test Yuan stablecoin Hong Kong route but faces headwinds – Morgan Stanley
