US Senate Moves to Regulate Stablecoins with GENIUS Act

The United States Senate is poised to debate a significant piece of legislation that could revolutionize the stablecoin sector. The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which passed a procedural vote on May 20 with a 66–32 margin, aims to establish clear regulations for stablecoins, including rules for collateralization and compliance with Anti-Money Laundering laws. This legislation is seen as a crucial step towards legitimizing stablecoins for global institutional adoption.

Andrei Grachev, managing partner at DWF Labs and Falcon Finance, highlighted the importance of the GENIUS Act, stating that it not only regulates stablecoins but also legitimizes them. He emphasized that clear rules bring confidence, which institutions have been waiting for. Grachev believes that stablecoins are evolving from being a crypto experiment to a superior form of money, offering faster, simpler, and more transparent transactions compared to fiat currency. He predicts that stablecoins will eventually become the default form of money.

Grachev also suggested that the GENIUS Act could be the first step towards a unified digital financial system that is borderless, programmable, and efficient. He noted that when the US takes action on stablecoin policy, the world takes notice. Republican Senator Cynthia Lummis, a co-sponsor of the bill, indicated that Memorial Day could be a potential target for its passage.

However, Grachev pointed out that regulatory clarity alone will not drive institutional adoption. He stressed the need for products that offer stable and predictable yield. Falcon Finance is currently developing a synthetic yield-bearing dollar product tailored for this market. Yield-bearing stablecoins, which now represent 4.5% of the total stablecoin market, have seen significant growth, reaching $11 billion in total circulation.

Despite broad support for the GENIUS Act, some critics argue that the legislation does not fully address offshore stablecoin issuers, such as Tether, which continue to play a significant role in global liquidity. Vugar Usi Zade, the chief operating officer at Bitget exchange, noted that US-based issuers will face steeper costs, potentially accelerating market consolidation and favoring well-resourced players who can meet the new regulatory thresholds. Nevertheless, Zade acknowledged that the legislation could bring greater stability to regulated offerings, depending on its final wording and enforcement.