U.S. Senate Passes GENIUS Act Mandating Full Collateralization of Stablecoins

The GENIUS Act, a significant piece of legislation, has been passed by the U.S. Senate, mandating that all dollar-backed stablecoins must be fully collateralized with high-quality liquid assets, such as U.S. Treasury bonds. This move aims to ensure the stability and reliability of stablecoins within the U.S. financial system. The Act, which stands for Guiding and Establishing National Innovation for U.S. Stablecoins Act, introduces a comprehensive regulatory framework for the issuance and supervision of payment stablecoins. It establishes a tiered oversight model, codifies prudential standards, and clarifies that payment stablecoins are not to be treated as securities or deposit liabilities.

The legislation was passed with a bipartisan vote of 68–30 on June 17, 2025, indicating strong political support. It now proceeds to the U.S. House of Representatives, which is concurrently advancing its own bill, the STABLE Act. Both chambers aim to reconcile their respective bills into a final text for passage, a process expected to occur before year-end due to strong bipartisan support and prioritization by the executive branch. The GENIUS Act is anticipated to form the structural backbone of the compromise.

Key provisions of the GENIUS Act include stringent requirements for stablecoin issuers. It is unlawful for any entity to issue or sell a payment stablecoin in the U.S. unless it is issued by a "permitted payment stablecoin issuer." These issuers must be approved by the Office of the Comptroller of the Currency, including subsidiaries of insured depository institutions and federally qualified nonbank payment stablecoin issuers. State-licensed entities operating under a state regime certified by the Secretary of the Treasury as meeting or exceeding federal requirements are also eligible. Foreign entities may offer or sell stablecoins in the U.S. if they are regulated under a comparable foreign regime and consent to U.S. regulatory oversight.

Stablecoins are defined as fiat-pegged digital assets redeemable 1:1 in U.S. dollars or high-quality liquid assets such as U.S. Treasuries or Reserve bank deposits. Permitted payment stablecoin issuers must fully back all issued stablecoins with eligible liquid assets, publish clear redemption policies, disclose the monthly composition of their reserves, avoid rehypothecation of reserve assets, and submit monthly reserve certifications. False certifications are subject to criminal penalties. Issuers must also satisfy capital, liquidity, and operational risk standards prescribed by primary federal payment stablecoin regulators.

The GENIUS Act introduces a dual regulatory model based on issuer size. Issuers with over $10 billion in circulation fall under mandatory federal oversight, while those with $10 billion or less may choose to remain under qualified state supervision. States must submit their supervisory regimes to the Secretary of the Treasury for certification to retain jurisdiction over smaller issuers. Each primary federal payment stablecoin regulator is empowered to issue regulations, process issuer applications, supervise issuers, issue cease-and-desist orders, revoke licenses, and impose civil penalties for noncompliance.

The legislation also includes provisions for custodial services, granting holders of payment stablecoins senior creditor priority over reserve assets in insolvency proceedings. Entities providing custodial or safekeeping services for stablecoins must be subject to regulatory oversight, treat customer assets as customer property, segregate customer assets from proprietary assets, and grant priority to customer claims over custodian creditors for stablecoin assets held in custody.

The GENIUS Act represents a foundational step in modernizing the U.S. payment system and positioning the country as a leader in digital finance. By supporting blockchain-based stablecoins, the legislation permits a faster, programmable, and immutable settlement layer. These technologies offer near-instant operations, on-chain auditability, and reduced counterparty risk, enabling a future where traditional financial rails are supplemented by secure, transparent digital asset systems.

The GENIUS Act is expected to create structural demand for U.S. government debt and support domestic monetary sovereignty. By mandating stablecoin reserves to be held in U.S. dollars or short-term Treasuries, the legislation is anticipated to enhance the demand for USD and U.S. Treasuries. U.S.-issued stablecoins are expected to become the de facto dollar rails globally, particularly in emerging markets with unstable local currencies. The sponsors of the GENIUS Act estimate that, by 2030, stablecoin issuers may collectively become the largest holders of U.S. Treasuries, surpassing foreign central banks.

The GENIUS Act is seen as the lowest-hanging fruit in Washington's broader crypto legislative agenda. It is widely supported across party lines and across stakeholder types, including banks, fintechs, and payment providers. The upcoming U.S. Digital Asset Bills include the Digital Asset Market Structure Bill, Token Taxonomy Act, Crypto AML Act, CBDC Anti-Surveillance Act, and Digital Commodity Consumer Protection Act. These bills aim to establish clear regulatory frameworks for various aspects of the digital asset ecosystem, promoting innovation while ensuring consumer protection and financial stability.

Pro-crypto legislation provides clarity for stablecoins, potentially increasing Bitcoin demand. The GENIUS Act, a regulatory milestone, establishes a dual-licensing regime for U.S. stablecoin issuers to enhance federal standards. Initial bipartisan backing, with President Donald Trump's significant involvement, has positioned this framework as essential for industry transformation. With significant figures like President Trump and Sen. Bill Hagerty spearheading this, the Act has altered crypto's regulatory landscape in the U.S. Involved entities, such as World Liberty Financial, have influenced the stablecoin domain notably.

Immediate market reactions have shown an increase in regulatory clarity, benefiting major stablecoins and making Bitcoin a promising investment. Industry players expect this to address many prior uncertainties and result in broader institutional engagement. The GENIUS Act likely prompts increased investment into crypto markets with enhanced legitimization of assets. Financial sectors are poised to experience shifts in crypto adoption, providing a robust policy environment for digital asset growth while easing previous regulatory tensions.

The GENIUS Act proposes a dual-licensing regime for fiat-backed stablecoin issuers, establishing clear federal standards while preserving state-level supervisory authority. Historical trends suggest substantial regulatory changes often precede market surges. The GENIUS Act, by clarifying stablecoin policies, posits strong potential for financial growth and innovation, creating favorable conditions for Bitcoin and broader cryptocurrency expansion.