U.S. Passes GENIUS Act to Regulate Stablecoins with Asset Backing and Licensing Requirements

The U.S. passage of the GENIUS Act has introduced a comprehensive regulatory framework for stablecoins, aiming to enhance transparency, stability, and institutional confidence in the sector. The Act mandates that stablecoin issuers maintain one-to-one asset backing with high-quality liquid assets, undergo independent reserve audits, and obtain federal licensing before operating in the U.S. market. These requirements are expected to provide much-needed clarity for investors and institutions, encouraging broader adoption of stablecoins as a reliable medium for digital transactions [1]. Fabian Dori, chief investment officer at Sygnum Bank, emphasized that such measures are crucial for fostering responsible innovation and financial stability [1].

A key provision of the Act is the prohibition of yield-bearing stablecoins, which could reshape the role of stablecoins within decentralized finance (DeFi) ecosystems. According to Dori, this restriction will create a clearer market distinction between stablecoins used for payments and tokenized money market products that generate yield [1]. This separation could drive innovation in structured financial products while ensuring that stablecoins remain primarily a vehicle for transactions rather than investment vehicles.

The Act also reflects a broader divergence in regulatory approaches between the U.S. and Europe. The U.S. has adopted a more innovation-driven framework, whereas Europe, with its cautious digital euro initiative, may now face pressure to accelerate its own regulatory development. Dori noted that this divergence could influence the global competitive landscape, potentially encouraging both new and existing stablecoin issuers to operate within the U.S. jurisdiction, further solidifying the dollar’s dominance in the stablecoin market [1].

To ensure balanced oversight, the Act introduces a two-tier system for stablecoin issuance. State-level banks can issue stablecoins up to a limit of $10 billion, while federally regulated banks are allowed to issue up to $50 billion. This framework aims to foster innovation while maintaining appropriate regulatory control over larger issuers [4]. However, the Act has also raised concerns within the banking sector. Bankers have expressed worries about the potential for fraud and compliance challenges associated with the rise of stablecoins [7]. Additionally, political scrutiny has emerged, with lawmakers such as Sen. Elizabeth Warren examining the Act’s implications for nonbank issuers, including entities with political connections [2].

While the GENIUS Act marks a significant step toward regulating stablecoins, its long-term effects on the global crypto market remain to be seen. As the U.S. establishes a clear legal precedent, other jurisdictions may follow suit or adapt their own frameworks accordingly. The Act’s emphasis on transparency, regulatory alignment, and institutional confidence could ultimately shape the future of stablecoins in both traditional and decentralized finance [1].

Source:

[1] The State of Stablecoins after GENIUS Act: Expert Weighs In (https://cointelegraph.com/news/the-state-of-stablecoins-after-genius-act-expert-weighs-in)

[2] Warren Presses New OCC Chief Over Trump Family Stablecoin Business (https://subscriber.politicopro.com/article/2025/07/warren-presses-new-occ-chief-over-trump-family-stablecoin-business-00486251)

[4] Stablecoin Certification Review Committee, Mandated By (https://www.forbes.com/sites/vipinbharathan/2025/07/31/stablecoin-certification-review-committee-mandated-by-the-genius-act/)

[7] Bankers Are 'Very Concerned' About Stablecoins, Check Fraud (https://www.americanbanker.com/news/bankers-are-very-concerned-about-stablecoin-check-fraud)