House Passes GENIUS Act Reshaping Stablecoin Regulation

The House of Representatives has passed the GENIUS Act, a significant development in the regulation of stablecoins in the United States. This legislation introduces federal oversight, reserve requirements, and licensing frameworks for payment stablecoins, aiming to reshape the digital asset landscape. The GENIUS Act defines payment stablecoins as digital assets intended for everyday transactions that can be redeemed at a 1:1 ratio at any time. These stablecoins will not be classified as securities or commodities under SEC/CFTC jurisdiction but will fall under banking-style supervision by the OCC, Fed, FDIC, and NCUA. The act mandates full backing with U.S. currency, demand deposits, ≤93-day Treasuries, repos, or government money-market funds, effectively eliminating algorithmic stablecoins as payment methods. Additionally, it prohibits payment stablecoins from paying interest, dividends, rewards, or financial returns to holders. The GENIUS Act also grants payment stablecoin holders senior claims over reserve assets in insolvency proceedings and mandates cross-chain interoperability for payment stablecoins. Unauthorized issuance of payment stablecoins will face hard penalties, including $1 million daily fines and 5-year prison terms.

The CLARITY Act, introduced alongside the GENIUS Act, aims to establish a comprehensive crypto market structure framework. This legislation sets clear rules for custody, trading, token classification, and jurisdictional boundaries between the SEC and CFTC. The CLARITY Act defines digital commodities as assets intrinsically linked to a blockchain system and digital securities as investments of money in a common enterprise with an expectation of profits from the efforts of third parties. It also recognizes blockchain networks as "mature" when no person or group controls them and introduces a 4-year timeline to achieve that status. The act allows for initial token sales to be exempt from securities registration if issuers commit to decentralizing their networks and requires the CFTC/SEC to coordinate with international regulators. Banks and trust companies will be allowed to hold digital commodity tokens without treating them as liabilities or holding capital reserves against them. The CLARITY Act also establishes custodian criteria, including asset segregation, insurance, and internal controls, to mitigate risks in collapses like FTX.

The passage of the GENIUS Act and the CLARITY Act is expected to have a significant impact on the crypto market. The GENIUS Act alone would boost stablecoin adoption and likely impact Ethereum as the dominant settlement layer for stablecoins. However, without the CLARITY Act, many crypto assets would remain trapped in regulatory limbo, and institutional investors might continue avoiding anything beyond BTC and ETH. The full bull case for late 2025–2026 requires both GENIUS and CLARITY to be enacted. The GENIUS Act and its amendments will take effect either 18 months after signing or 120 days after Treasury and Federal Reserve finalize regulations implementing its substance. The CLARITY Act is expected to become law 360 days after signing, except sections requiring agency rules, which start 60 days after those rules are published in the Federal Register.

The passage of these acts represents the endgame for cryptocurrency as we know it, integrating crypto into traditional finance and ending the Wild West era. This transition means the market inefficiencies and get-rich-quick opportunities that have characterized crypto will diminish with each passing day as institutional standards take hold. Institutional adoption will make crypto drastically safer for mainstream users and create vast new crypto-native products. In the end, we might get the final generational bull run, like what they were during crypto's former glory days.