GENIUS Act Boosts USD-Backed Stablecoin Market Cap 1.5% to $264 Billion

The passage of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act on July 18, 2025, has catalyzed a surge in institutional participation within the U.S. dollar (USD)-backed stablecoin market. The legislation, which establishes federal oversight for fiat-backed stablecoins, mandates full reserve backing, regular audits, and licensing requirements for issuers [1]. This regulatory clarity has already spurred a nearly $4 billion increase in stablecoin market capitalization, pushing it above $264 billion and attracting banks, asset managers, and crypto firms to launch compliant products [1].

Traditional financial institutions are leveraging the new framework to develop stablecoin offerings that align with existing compliance standards. Anchorage Digital, a federally chartered crypto bank, has partnered with Ethena Labs to launch USDtb under the GENIUS Act’s guidelines, while WisdomTree introduced USDW, a dividend-paying tokenized asset stablecoin [1]. Major banks, including Bank of America, JPMorgan, and Citigroup, have also signaled intentions to issue dollar-backed stablecoins, citing the act’s role in reducing regulatory ambiguity [1]. These developments highlight a broader shift toward integrating stablecoins into mainstream financial services, with institutions emphasizing enhanced liquidity, efficiency, and transparency.

The GENIUS Act’s focus on fiat-backed stablecoins—accounting for approximately 85% of the market—has reinforced investor confidence by addressing risks associated with under-collateralization and operational transparency. Coinbase CEO Brian Armstrong underscored the democratization of stablecoin creation, stating, “I think everybody should be able to create stablecoins,” a sentiment reflective of the industry’s push for open participation [1]. Meanwhile, analysts note that the act’s exclusion of algorithmic and crypto-backed stablecoins, such as Terra’s failed algorithmic stablecoin or DAI, underscores regulatory caution toward models perceived as inherently fragile [1].

Bank of America (BofA) projects that the GENIUS Act could drive a $25 billion to $75 billion expansion in the stablecoin market, as institutional players capitalize on cross-border transaction opportunities and treasury management solutions [1]. The bank argues that stablecoin reserves—often held in short-term U.S. Treasuries—could intensify competition for Treasury bill auctions, indirectly bolstering sovereign debt markets [1]. However, challenges remain, including anti-money laundering (AML) compliance, technological integration with legacy systems, and maintaining public trust amid competition from decentralized stablecoins like USDC, which emphasize fully backed reserves and independently verified transparency [1].

The market’s evolution under the GENIUS Act is expected to reshape financial infrastructure, with institutions prioritizing consortiums to enhance trust and liquidity. BofA analysts caution that differentiation and innovation will be critical for banks to succeed in this competitive landscape, while policymakers must balance innovation with systemic stability [1]. As stablecoins gain traction in payments, asset tokenization, and decentralized finance, the act’s framework is positioned to solidify their role as a bridge between traditional and digital finance.

Source:

[1] [Bank Stablecoins: Revolutionizing Finance with $75 Billion Surge on the Horizon] [https://coinmarketcap.com/community/articles/68824cc23af4fb0d5babaf07/

[2] [How Trump's GENIUS Act Could Supercharge Tether's USDT] [https://anndy.com/op-ed/how-trumps-genius-act-could-supercharge-tethers-usdt/

[3] [4 Reasons to Buy USDC, One of the Largest Stablecoins in...] [https://www.aol.com/4-reasons-buy-usdc-one-120000378.html