Ethereum News Today: GENIUS Act Sparks Regulatory Clash Over Stablecoins and Ethereum

The U.S. Congress passed the GENIUS Act in July 2025, a move intended to protect the use of permissionless blockchains by stablecoin issuers and ensure they are not denied licenses solely because of their choice of network [1]. The legislation specifically targets the Federal Reserve’s Policy Statement 9(13), issued in January 2023, which advises state member banks to avoid certain activities involving open blockchains, stating that the issuance of tokens on such networks “is highly likely to be inconsistent with safe and sound banking practices” [1]. This policy remains in effect, creating regulatory tension as major financial institutions announce new blockchain infrastructure projects and consider how to navigate these conflicting guidelines.

Ethereum remains the dominant blockchain for stablecoin activity, holding 49–54% of the $271.1 billion global stablecoin supply as of August 2025 [1]. USDC alone processes over $20 billion in daily transfers on Ethereum, far exceeding other networks. Ethereum also supports the majority of DeFi-integrated stablecoins and institutional tokenized assets, including BlackRock’s $2.3 billion BUIDL treasury fund. Despite this, the Fed’s cautious stance has prompted some institutions to explore alternative solutions that align more closely with regulatory expectations.

Recent developments include Circle’s announcement of Arc, an EVM-compatible layer-one blockchain designed for regulated stablecoin finance. Positioned as a compliance-focused platform, Arc will enter public testnet in fall 2025 and is intended to bridge to public networks like Ethereum [1]. Similarly, Stripe is reportedly developing a blockchain called Tempo in partnership with Paradigm, though the company has not officially confirmed the project [1]. These efforts reflect a growing trend toward permissioned or semi-permissioned blockchain infrastructure, which may serve as a regulatory buffer before bridging to public chains.

The White House’s July 2025 Digital Assets Report called on the Federal Reserve to rescind Policy Statement 9(13) immediately, arguing that regulatory bias against permissionless blockchains could harm U.S. competitiveness and favor legacy institutions [1]. Senator Cynthia Lummis (R–Wyo.) pressed Federal Reserve Chair Jerome Powell directly during a June 2025 Senate Banking Committee hearing, asking whether the Fed would rescind the policy and allow American banks to lead in permissionless innovation [1]. Powell responded that while the Fed appreciates Congressional action, its primary duty remains safety and soundness, and it continues to evaluate the policy in light of new legislation while maintaining “appropriate caution with respect to permissionless platforms.”

The divergence between the GENIUS Act’s intent and the Federal Reserve’s guidance creates uncertainty for institutions considering stablecoin projects. Under current regulations, issuing dollar-backed tokens on permissionless networks requires extensive compliance with safety and soundness requirements, which many find impractical [1]. This regulatory ambiguity has led to hybrid approaches, where institutions build permissioned platforms first and later connect to public blockchains. Such strategies allow for compliance while still leveraging the scale and liquidity of networks like Ethereum.

Ethereum continues to process the majority of stablecoin volume and remains the primary platform for institutional DeFi applications [1]. However, the key question is whether future bank-issued stablecoins will launch directly on Ethereum or adopt a two-step model of permissioned issuance followed by public network bridging. This choice will depend heavily on how the Fed interprets and applies its policy in light of the GENIUS Act.

Looking ahead, the regulatory direction taken in the coming months will shape how stablecoins interact with open blockchain platforms like Ethereum. A balanced framework that reconciles the GENIUS Act’s mandate for open network access with the Fed’s emphasis on safety and soundness could foster both innovation and risk management [1]. Hybrid approaches combining permissioned infrastructure with public network bridging may offer a practical path forward. Advances in blockchain analytics and regulatory technology (RegTech) could also ease compliance burdens and improve trust in blockchain-based finance, provided policymakers and regulators align on a shared vision [1].

Source: [1] Forbes - [https://www.forbes.com/sites/jasonbrett/2025/08/12/genius-act-vs-fed-policy-on-stablecoins-raises-questions-for-ethereum/](https://www.forbes.com/sites/jasonbrett/2025/08/12/genius-act-vs-fed-policy-on-stablecoins-raises-questions-for-ethereum/)