The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in the USA is a historic stablecoin regulation act aimed at improving the utilization of stablecoins and integrating them better into the economy. It was introduced in the Senate by Senator Bill Hagerty on March 13, 2025, and was passed as a law on July 18, 2025, when the President of the US signed the passed act.
The act basically allows legal entities (i.e., companies) to issue stablecoins if they are backed by cash or cash-equivalent assets such as US Treasury Bills, US Gov Bonds, and similar liquid instruments.
It is being classified in the same league as the European Union’s MiCA, but provides much more comprehensive regulations.
This article comprehensively covers the GENIUS Act, its features, benefits, and impact, and also discusses criticisms.
Highlights of the GENIUS Act
The GENIUS Act is a bipartisan act for stablecoin regulations and was brought to the US Senate by Senator Bill Hagerty on March 13, 2025. It was passed by the Senate on June 17, 2025, and by the House of Representatives on July 17, 2025. The act was passed as a law after Presidential assent on July 18, 2025.
Categorization of Stablecoins
The Act defines stablecoins as payment stablecoins and non-payment stablecoins. Payment stablecoins are those that are backed by the US Dollar or dollar equivalents, such as US Treasuries and Bonds.
Furthermore, payment stablecoins are only accepted from issuers that have been registered with the Federal and State Governments.
The act clearly discourages the usage of composite asset stablecoins that are backed by crypto and algorithmic stablecoins.
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Federal Approved Issuers
Each stablecoin issuer must be approved by the Federal Government and might also be required to get compulsorily audited annually or more frequently. The step was taken possibly to reduce instances of market crashes.
Currently, the following category of companies has been covered:
- Banks
- Financial institutions
- Known stablecoin issuers with a large market presence like Tether and Circle.
High Quality Reserves
The act mandates the usage of high-quality reserves, which, as per it, are US Government Treasury, Government Bonds, liquid cash reserves, money market funds, overnight funds, etc.
These reserves ensure that the demand for US Dollars remains high and stablecoins do not become competitors to the US Dollar.
Dual Regulations by Federal and State Governments
All stablecoins will be subject to dual regulatory oversight to ensure they maintain the highest level of compliance. This oversight will also ensure neither of the two can bring undue compliance standards without the mandate of the other.
Some initial compliance task has also been delegated to the Federal Reserve, which, within one year of the passing of this act, i.e., July 8, 2026, must identify all kinds of stablecoins in the market, whether payment or non-payment.
Taxation
Stablecoins will be treated as property for the purpose of accounting and taxation. Users might also be required to provide detailed transaction records.
However, for the purpose of mere transactions, they might be treated as income and cash-equivalents.
AML and KYC Compliance
All stablecoins covered under this act must submit compliance reports with respect to their adherence to Anti Money Laundering (AML) and Know Your Customer (KYC) guidelines.
At present, all major stablecoin issuers such as Tether, Circle, First Digital, or PayPal, already adhere to AML and KYC guidelines.
Impact on the Crypto Markets
Ethereum Rally
The GENIUS Act brought out a 50% rally in Ethereum within one month of its passing in the US Senate, because most stablecoins exist on the Ethereum blockchain. Only a fraction of them exist on Tron and Solana.
Below is a chart depicting the share of different blockchains in the stablecoin market.
Increase in Stablecoin Traded Volume
As the doors for traditional markets open for stablecoins, there is an expectation of a surge in crypto market cap and trading volumes. A report on CNBC claims that the stablecoin market cap could rise to $2 trillion from the current $250 billion.
Stablecoins could find new use cases like salary payments, short-term investments, and cross-border payments. The entry of PayPal and Ripple in the stablecoin markets has started this new adoption.
Discouraging Algorithmic Stablecoins
The act discourages algorithmic stablecoins by giving all the benefits to fully backed coins. The step might seem discriminatory against new technology, but the largest crypto market crash (of around $60 billion) to date has been caused by the expected de-peg of TerraUSD, an algorithmic stablecoin that went into a death spiral between May 7 to 12, 2022.
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Benefits
The GENIUS Act is expected to provide several benefits to everyone who uses stablecoins for investments, trading, payments, and any other reason.
Clear Regulations
The act provides clear regulations on what payment and non-payment stablecoins are. This addresses the case of algorithmic stablecoins, essentially discouraging them.
Note: Algorithmic stablecoins are a lot more volatile and often have de-peg issues, putting other stablecoins in a vulnerable position. One such incident erased around $60 billion from the Terra Luna ecosystem.
Further, it provides a clear list of regulatory organizations and their respective boundaries. Previously, there used to be a lot more competition between the CFTC and the SEC for regulatory reach.
Differentiation from Other Cryptocurrencies
Stablecoins require separate laws from ordinary cryptocurrencies because of their nature. Unlike other cryptos, stablecoins are non-volatile, follow a single price of their pegged asset, and are used for a much wider range of activities.
In Europe, too, stablecoins are subject to a different set of regulations called MiCA.
The GENIUS Act could prove to be a guiding beacon for other countries.
Easier Integration of Stablecoins into Traditional Finance Markets
With the GENIUS Act, there is no confusion around the regulation on stablecoins, which prepares the traditional markets for corporate adoption. When that happens, the stablecoins are projected to reach $2 trillion in market cap.
Criticisms
Consumer Reports (formerly Consumer Union) has objected to the approval of the act, stating that it will lead to corporate firms behaving like banks without proper regulations.
The allegations leveled by the firm are based on the ability of companies to issue stablecoins into the markets as long as they hold an equivalent amount of US Government Treasuries and Bonds.
