GENIUS Act: Impact on Stablecoin Market

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Introduction to the GENIUS Act

The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS Act) represents a pioneering federal legislative effort aimed at regulating stablecoins, whose market capitalization now surpasses $238 billion. The proposed law outlines four key requirements to ensure stability and transparency in the stablecoin market:

1. 100% Reserve Backing: All stablecoins must be backed by U.S. dollars, short-term U.S. Treasury bills, or other high-liquidity assets.
2. Monthly Public Reporting: Issuers are required to publish monthly reports detailing the composition of their reserves.
3. Annual Audits: Issuers with over $50 billion in capitalization must undergo yearly audits.
4. Compliance with AML/BSA: Adherence to Anti-Money Laundering and Bank Secrecy Act regulations, including freezing or burning tokens as necessary.

Legislative Timeline

Related: Genius Group Incorporates Bitcoin into Their Treasury Strategy

The GENIUS Act has been making its way through the legislative process, with significant milestones:

• March 13, 2025: The Senate Banking, Housing, and Urban Affairs Committee backed the project with an 18-6 vote.
• May 21, 2025: The Senate voted 66-32 to proceed with discussions.
• June 11, 2025: Debates were limited with a 68-30 vote in favor.
• June 17-20, 2025: The Senate plans to vote before the Independence Day recess.

Once the Senate approves, the bill will move to the House of Representatives, with hearings anticipated in July.

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Key Proponents and Opponents

Related: Surge in Euro Stablecoin Market Fueled by MiCA Regulations

The GENIUS Act is spearheaded by Senator Bill Hagerty (R-TN), with support from Senators Kirsten Gillibrand (D-NY), Tim Scott (R-SC), Cynthia Lummis (R-WY), and Angela Alsobrooks (D-MD). Major financial institutions like JPMorgan, Citi, and Wells Fargo, as well as retailers like Amazon and Walmart, endorse the initiative. However, it faces criticism from Democratic Senators Jeff Merkley and Elizabeth Warren, alongside consumer advocacy groups.

Arguments For and Against

Supporters argue that the act will protect investors by minimizing risks through uniform reserves and audits, bolster the U.S. dollar’s dominance, and foster competition by attracting new players into the market. Critics warn that it could undermine decentralization by granting the government token-freezing powers, pose corruption risks due to lack of restrictions on officials owning regulated stablecoins, and complicate oversight with numerous issuers.

Related: Former Senator Pat Toomey Comments on Challenges Faced by Proposed Stablecoin Bill

Potential Market Impacts

1. New Market Entrants: Licensing could attract banks, fintech startups, and large tech companies, providing users with more stablecoin options.
2. Reduced Fees: Integrating stablecoins into payment networks like Visa and Mastercard may lower cross-border transaction costs.
3. DeFi and Traditional Finance Convergence: Fully-backed stablecoins could become acceptable settlement assets for corporations.
4. Global Regulatory Standard: Following Europe’s MiCA, the U.S. has the opportunity to set a “gold standard” for worldwide regulation.

Future Outlook

If the Senate approves the GENIUS Act this week, the House of Representatives will hold hearings in July, with the White House aiming to sign the bill before the August recess. This marks a shift for the digital asset market from a “Wild West” environment to a regulated financial infrastructure.