GENIUS Act Sparks $4 Billion Stablecoin Surge in Week as Market Hits $264 Billion

The Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) was signed into law on July 18, 2025, establishing the first federal regulatory framework for stablecoins in the United States. The legislation permits banks, nonbanks, and credit unions to issue stablecoins—digital assets pegged to fiat currencies like the U.S. dollar—sparking immediate market activity. Within a week of enactment, the stablecoin market surged by $4 billion, with total market size estimated at $264 billion [7]. This rapid adoption underscores the Act’s potential to drive financial innovation but has also intensified debates over regulatory oversight and systemic risks.

Senator Elizabeth Warren (D-Mass.) has sharply criticized the law, arguing that its bipartisan passage—backed by 18 Democrats and 102 House members—reflects undue influence from the cryptocurrency industry. She warned that the Act prioritizes industry interests over public safeguards, drawing parallels to the 2008 financial crisis. “When Washington runs on industry, only a handful of people get rich, and the rest of the American people pay the price,” Warren stated, emphasizing risks of unregulated speculation [2]. Her critique extends to the Trump administration’s crypto initiatives, including the USD1 stablecoin and the Official TRUMP meme coin, which she claims exemplify conflicts of interest. While Trump denied financial ties to these projects, reports of earnings from World Liberty Financial—a firm linked to USD1—have raised concerns [5].

Academic analysts have echoed Warren’s concerns. Sergi Basco, an economist at the University of Barcelona, noted that the Act could create a “misleading perception of stability” in the stablecoin market. He warned that insufficient oversight might trigger liquidity crises, even if stablecoins are nominally backed by U.S. government bonds [4]. Critics also highlight the Act’s drafting process, shaped by industry lobbying, as a potential vulnerability. Warren reiterated that “strong” crypto legislation is necessary but cautioned against hasty approvals, stressing the need to balance innovation with safeguards [6].

The financial sector’s response has been mixed. Institutions are rapidly capitalizing on the Act’s provisions, with banks and fintech firms entering the stablecoin market under the new framework. However, regulators face pressure to address risks such as market volatility and speculative practices. Warren’s warnings underscore tensions between fostering innovation and mitigating systemic risks, particularly as the market’s growth could outpace the development of robust oversight mechanisms. Proponents argue the legislation promotes economic growth by legitimizing stablecoins as digital financial tools. The Act includes consumer protections and reserve requirements, aiming to build trust in stablecoin systems [8]. Yet the market’s rapid expansion—nearly $4 billion in a week—suggests demand may outstrip regulatory preparedness. Analysts caution that without stringent safeguards, instability akin to past crises could emerge, especially if speculative practices go unchecked.

As the stablecoin market evolves, stakeholders must navigate the dual imperatives of innovation and stability. The Act’s long-term success will depend on regulators’ ability to address risks while fostering a competitive and secure financial ecosystem. Warren’s critiques, alongside academic warnings, highlight the need for adaptive frameworks that align with public interest without stifling progress.

Sources:

[1] [title: Elizabeth Warren Warns GENIUS Act Reflects Industry Influence Echoes 2008 Deregulation Risks] [url: https://www.ainvest.com/news/elizabeth-warren-warns-genius-act-reflects-industry-influence-echoes-2008-deregulation-risks-2507/

[2] [title: Elizabeth Warren On Democrats' Support Of Crypto Bills] [url: https://www.benzinga.com/news/politics/25/07/46626113/elizabeth-warren-on-democrats-support-of-crypto-bills-long-bipartisan-tradition-of-helping-out-industry-instead-of-working-for-average-american

[4] [title: Elizabeth Warren: "GENIUS Act Will Cost Americans Dear..."] [url: https://bloomingbit.io/en/feed/news/93637

[5] [title: Elizabeth Warren On Democrats' Support Of Crypto Bills] [url: https://www.benzinga.com/news/politics/25/07/46626113/elizabeth-warren-on-democrats-support-of-crypto-bills-long-bipartisan-tradition-of-helping-out-industry-instead-of-working-for-average-american

[6] [title: Elizabeth Warren On Democrats' Support Of Crypto Bills] [url: https://www.benzinga.com/news/politics/25/07/46626113/elizabeth-warren-on-democrats-support-of-crypto-bills-long-bipartisan-tradition-of-helping-out-industry-instead-of-working-for-average-american

[7] [title: Banks Rush Into $264 Billion Stablecoin Market After Trump Signs New Law] [url: https://coincentral.com/banks-rush-into-264-billion-stablecoin-market-after-trump-signs-new-law/

[8] [title: GENIUS Act Passed, But Crypto Payments Still Need This ...] [url: https://www.bitwave.io/blog/crypto-payments-securities-trap