U.S. Passes First Federal Stablecoin Regulations With GENIUS Act

Generated by AI AgentCoin World
Monday, Aug 18, 2025 11:22 pm ET2min read
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Aime RobotAime Summary

- President Trump signed the GENIUS Act, creating the first federal stablecoin regulations requiring AML compliance and full reserves for token backing.

- The law excludes states from federal oversight, enabling state-issued stablecoins like Wyoming's WYST and raising concerns about regulatory arbitrage.

- Prohibiting yield on payment stablecoins aims to curb speculation, though critics warn exchanges could bypass restrictions through alternative methods.

- Treasury seeks public input on implementation while balancing federal oversight with states' growing crypto initiatives and systemic risk mitigation challenges.

President Donald J. Trump signed the GENIUS Act into law on July 18, 2025, establishing the first federal regulatory framework for stablecoin issuers and signaling a significant shift in U.S. cryptocurrency policy. The legislation mandates that stablecoin providers comply with anti-money laundering (AML) requirements under the Bank Secrecy Act and maintain full reserves to back their tokens [3]. The U.S. Treasury has since invited public input on implementation details, including the requirement for stablecoin issuers to hold U.S. Treasury bonds in their portfolios [4].

The GENIUS Act does not alter the tax treatment of stablecoins but introduces a new era of federal oversight for

digital asset
markets [2]. The IRS has sought industry assistance in combating digital asset fraud, emphasizing the need for stronger compliance and reporting mechanisms [2]. Treasury Secretary Scott Bessent highlighted the law’s potential to reinforce the U.S. dollar’s position as the global reserve currency and expand access to the dollar economy for billions of people [4].

However, the law creates a dual regulatory system by excluding state governments from its definition of “person,” potentially enabling states to issue stablecoins with minimal federal oversight [5]. This has led to concerns about regulatory arbitrage and a resurgence of the kind of unregulated banking practices seen during the Civil War. Wyoming, for instance, has already launched its own stablecoin—WYST—while other states like Nebraska and Texas are exploring similar initiatives [5].

The Federal Financial Stability Oversight Council will monitor the impact of these developments and issue annual reports. However, the lack of strong enforcement tools has raised questions about the federal government’s capacity to mitigate systemic risks [5]. The administration’s pro-crypto approach aligns with broader efforts to position the U.S. as a global leader in cryptocurrency innovation, with a particular focus on decentralized technologies [6].

Ethereum
is expected to benefit from the policy shift [7].

The legislation also prohibits payment stablecoin issuers from offering interest or yield to holders, a move intended to curb speculative behavior. Nevertheless, trade groups have warned that this restriction may not be effective, as exchanges and intermediaries could still facilitate yield generation through alternative methods [8].

As the U.S. Treasury moves forward with implementation, public feedback will play a key role in shaping the final form of the regulations. The agency has already begun seeking input on AML compliance and the broader implications of the GENIUS Act [1].

Source:

[1] IRS Asks for Help With Combatting Digital Asset Fraud, Thomson (https://tax.thomsonreuters.com/news/irs-asks-for-help-with-combatting-digital-asset-fraud/)

[2] GENIUS Act Revives Civil War-Era Banking Problem for States, Bloomberg (https://news.bloomberglaw.com/us-law-week/genius-act-revives-civil-war-era-banking-problem-for-states)

[3] GENIUS Act Triggers Treasury Request for Anti-Money Laundering Tech Feedback, MEXC (https://www.mexc.com/es/news/genius-act-triggers-treasury-request-for-anti-money-laundering-tech-feedback/65850)

[4] U.S. Treasury Invites Feedback on Upcoming Stablecoin Regulations, CoinTurk (https://en.coin-turk.com/u-s-treasury-invites-feedback-on-upcoming-stablecoin-regulations/)

[6] White House Unveils Crypto Policy Roadmap Meant to Usher in a 'Golden Age', MSN (https://www.msn.com/en-us/money/markets/white-house-unveils-crypto-policy-roadmap-meant-to-usher-in-golden-age/ar-AA1JBf4k?apiversion=v2&batchservertelemetry=1&domshim=1&noservercache=1&noservertelemetry=1&renderwebcomponents=1&wcseo=1)

[7] Here Are 3 Ways President Trump's Crypto Policy Could Boost Ethereum, AOL (https://www.aol.com/3-ways-president-trumps-crypto-094500936.html)

[8] Trade Groups Urge Congress To Address GENIUS Act Loopholes, Mondaq (https://www.mondaq.com/unitedstates/financial-services/1667174/trade-groups-urge-congress-to-address-genius-act-loopholes)