GENIUS Act Adds Stablecoin Regulatory Clarity But Tax Rules Unchanged

The U.S. Senate’s passage of the bipartisan GENIUS Act in June 2025 has clarified regulatory expectations for stablecoin issuers but left critical tax implications unchanged. The legislation, formally titled the Guiding and Establishing National Innovation for U.S. Stablecoins Act, mandates 1:1 asset backing, monthly financial audits, and enhanced transparency for stablecoin providers. However, it does not reclassify stablecoins as legal tender or currency for tax purposes, maintaining the existing IRS framework that treats them as property [1]. This means transactions involving stablecoins—whether exchanged for goods, services, or fiat—remain subject to capital gains taxation, with investors required to track cost bases and fair market values at the time of each trade [6].

The Act’s focus on consumer protection and regulatory oversight has drawn mixed reactions. Proponents argue it aligns U.S. stablecoin regulations with the EU’s Mica framework, fostering innovation while preserving the dollar’s dominance in global payments [5]. Critics, however, caution that the law’s exclusion of tax-payment functionality—stablecoins cannot be used directly to settle IRS obligations—fails to address practical compliance challenges for crypto-native businesses [7]. Additionally, the absence of legal tender status leaves stablecoins in a gray area for everyday transactions, limiting their acceptance beyond niche platforms [2].

Analysts emphasize that the IRS’s continued classification of stablecoins as property underscores regulatory uncertainty. The agency’s 2023 guidance reiterated that digital assets, including stablecoins, face the same capital gains rules as stocks or real estate, a policy unchanged by the GENIUS Act [3]. This creates complexities for investors, who must navigate taxable events for every swap or conversion, despite stablecoins’ functional similarities to fiat currencies. The Financial Times editorial board noted that the Act’s reduced regulatory burden on stablecoins could displace traditional banking roles, potentially destabilizing the financial system [4]. Meanwhile, advocates highlight the legislation’s bipartisan support as a signal of political consensus on balancing innovation with oversight [8].

The market’s response remains divided. While some view the Act as a step toward mainstream adoption of stablecoins, others stress the need for broader tax reforms to address digital assets’ unique challenges. The law’s narrow focus on stablecoin issuer regulation, rather than tax reform, suggests further legislative action may be necessary to align policy with the evolving crypto landscape. Until then, investors and businesses must operate under a regime where stablecoins retain the same tax treatment as other crypto assets, despite their role as a de facto medium of exchange.

The Act’s passage coincides with broader regulatory shifts in the crypto sector, including relaxed day-trading rules and the entry of regulated prediction markets like Polymarket into the U.S. These developments reflect a maturing industry but do not alter the core tax implications for stablecoins. As the market continues to evolve, stakeholders are likely to push for comprehensive reforms that reconcile innovation with investor protection, while adhering to existing property tax frameworks [8].

Sources:

[1] https://www.forbes.com/sites/greatspeculations/2025/07/24/crypto-tax-implications-after-the-genius-act/

[2] https://medium.com/@jonnyfry175/usd-stablecoins-not-legal-tender-yet-abb2fea63729

[3] https://clsbluesky.law.columbia.edu/

[4] https://seekingalpha.com/article/4802962-bitcoin-demise-is-inevitable

[5] https://www.crefc.org/cre/advocacy/advocacy.aspx

[6] https://hubbardobrieneconomics.com/

[7] https://live.house.gov/

[8] https://www.jdsupra.com/post/fileServer.aspx?fName=71580209-605b-4480-a6d0-4d152175a43d.pdf