The US Senate has taken a major step toward shaping the future of digital payments by passing the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act. Approved by a 51-23 vote on June 17, this landmark bill now heads to the House of Representatives, signaling a pivotal moment for the regulation of payment stablecoins in the United States 1 2 3.
What Is the GENIUS Act?
The GENIUS Act introduces the first comprehensive federal framework specifically for payment stablecoins—digital assets pegged to the US dollar or other stable assets, designed to minimize volatility and facilitate everyday transactions 2 3. Unlike other cryptocurrencies, payment stablecoins are not considered national currency, securities, or commodities under existing US law .
Key Provisions and Consumer Protections
The Act sets out clear rules for stablecoin issuers, focusing on transparency, consumer protection, and national security :
• Full Reserve Backing: Issuers must hold reserves equal to the number of tokens in circulation, backed by US dollars, short-term Treasuries, or insured deposits. This ensures that every stablecoin is fully redeemable, reducing risks for users.
• No Yield Payments: Stablecoin issuers are prohibited from paying interest or yield to holders, distinguishing these tokens from traditional investment products 1.
• Segregated Reserves: Reserves must be kept separate from the issuer’s operating funds, further protecting consumers in case of insolvency 1.
• Priority in Bankruptcy: In the event of bankruptcy, stablecoin holders are given priority for repayment, enhancing user confidence 2.
• Transparency and Audits: The Treasury Department will publish quarterly audit templates, and issuers with over $50 billion in market capitalization must undergo annual financial audits and monthly public disclosures of reserve composition 1.
• Strict Compliance: Issuers must implement Bank Secrecy Act programs, including anti-money laundering (AML) checks, customer due diligence, and suspicious activity reporting 1 2.
Who Can Issue Stablecoins?
The Act allows two main types of entities to issue payment stablecoins 3:
• Subsidiaries of insured depository institutions: These are regulated under existing banking laws, providing robust oversight.
• Federally qualified nonbank issuers: These entities must obtain approval from the Comptroller of the Currency, opening the market to non-bank innovators under strict federal standards.
Entities with more than $10 billion in liabilities will require a federal charter, while smaller issuers can operate under state regimes that meet federal standards, subject to joint federal and state oversight 1.
National Security and Enforcement
The GENIUS Act also addresses national security concerns by requiring issuers to have the technical ability to freeze or burn tokens and comply with US sanctions. The Commodity Futures Trading Commission (CFTC) will have limited enforcement powers in the spot market, and foreign issuers that do not comply with US standards may be barred from the market 1.
Economic Impact and Industry Outlook
Senator Bill Hagerty, the bill’s lead sponsor, emphasized that the GENIUS Act will help cement US dollar dominance, protect consumers, and drive demand for US Treasuries. By mandating that stablecoins be backed by short-term Treasuries or cash, the Act could make stablecoin issuers some of the largest holders of US government debt by 2030, potentially lowering borrowing costs and expanding the reach of dollar-based digital payments worldwide 1 2.
What’s Next?
With Senate approval secured, the GENIUS Act now awaits consideration in the House. If enacted, it will provide much-needed clarity and stability for the rapidly growing stablecoin sector, balancing innovation with robust consumer and financial protections 1 2 3.
