U.S. Turns Stablecoins into Dollar Powerhouses with G.E.N.I.U.S. Act

The U.S. Federal Reserve has moved to reinforce the regulatory framework for stablecoins through the passage of the G.E.N.I.U.S. (Guiding and Establishing National Innovation for U.S. Stablecoins) Act. Signed into law on July 18, 2025, the Act mandates that stablecoin issuers maintain full 1:1 reserves in cash, short-term U.S. Treasuries, or equivalent government-backed instruments. The legislation, which cleared both chambers of Congress with bipartisan support under President Donald Trump, aims to integrate stablecoins into the broader U.S. monetary infrastructure by ensuring transparency, liquidity, and compliance from the outset [2].

The G.E.N.I.U.S. Act introduces a tiered oversight system that prioritizes systemic issuers, ensuring that stablecoin platforms with the largest market presence are subject to the highest regulatory scrutiny. The law also includes provisions for bankruptcy protections that elevate the status of stablecoin holders, reinforcing the legal standing of these digital assets in the event of issuer insolvency. These measures are intended to embed stablecoins as secure, sovereign-aligned financial instruments within the U.S. economy [2].

The implications of the Act extend beyond regulatory reform. By requiring stablecoins to be fully backed by U.S. government assets, the legislation creates a structural demand for Treasury securities, which could have broader macroeconomic effects. As the stablecoin market grows—now rivaling traditional payment systems in transaction volume—the demand for U.S. debt could anchor yields, influence the yield curve, and create new fiscal arbitrage opportunities. Analysts project that stablecoin supply could reach $2–$4 trillion by 2030, potentially absorbing trillions in Treasuries and reinforcing the dollar’s dominance in global digital finance [2].

The G.E.N.I.U.S. Act also positions the U.S. as a global leader in digital finance, particularly as other jurisdictions, such as the European Union and parts of Asia, move more cautiously on stablecoin regulation. The law effectively sets a de facto standard for stablecoin issuance, requiring offshore issuers to either establish regulated entities in the U.S. or meet stringent American standards. This regulatory export is expected to reinforce the dollar’s role as the default currency for global value transfers, particularly in economies experiencing high inflation, such as Argentina and Turkey, where stablecoins already function informally as de facto currency [2].

The Act is part of a broader federal initiative to integrate digital assets into institutional and retail financial systems. It is paired with the CLARITY Act, aimed at defining the regulatory boundaries for decentralized finance (DeFi) and crypto platforms, and an executive order under development to expand retirement account investment options to include digital currencies. Together, these measures signal a coordinated effort to embed crypto into the core of the U.S. financial infrastructure, ensuring that compliance and institutional participation become central to the future of digital finance [2].

The G.E.N.I.U.S. Act is expected to trigger a significant shakeout in the stablecoin industry. Smaller, less-compliant players with opaque governance models or insufficient reserves are likely to be forced out of the market, leaving room for top-tier issuers to evolve into regulated digital financial institutions. These entities will operate with governance boards, audit trails, and risk dashboards akin to traditional banks, but with the efficiency and innovation of blockchain technology. The result is a more resilient and institutionalized stablecoin ecosystem that aligns with broader U.S. monetary goals [2].

Source:

[1] NOWPayments data shows stablecoins at 45% in merchant crypto payments (https://cointelegraph.com/press-releases/nowpayments-data-shows-stablecoins-at-45-in-merchant-crypto-payments)

[2] Stablecoins Supercharged (https://www.wisdomtree.com/investments/blog/2025/08/19/stablecoins-supercharged)