U.S. Stablecoin Law Fortifies Dollar's Digital Dominance

The U.S. Congress passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) on July 17, 2025, with a bipartisan vote of 308–122, and President Donald Trump signed it into law the following day. This landmark legislation establishes the first federal regulatory framework for "payment stablecoins," digital assets pegged to fiat currencies and designed for payments. The GENIUS Act mandates that only "permitted payment stablecoin issuers" may legally issue such tokens in the U.S., subject to reserve requirements, anti-money laundering (AML) compliance, and transparency standards. The law is expected to take effect by January 18, 2027, or 120 days after regulators finalize implementing rules, whichever occurs first Stablecoins and the Genius Act: What you need to know^[1].

Under the GENIUS Act, payment stablecoins must be fully backed 1:1 by high-quality, liquid assets such as U.S. dollars, Treasury bills, or other cash-equivalent instruments. Reserves must be segregated from the issuer's corporate assets and audited monthly by PCAOB-registered accounting firms. Issuers are prohibited from rehypothecating reserves, except in limited circumstances. Additionally, stablecoin holders gain priority claims in bankruptcy proceedings, ensuring their reserves are protected ahead of other unsecured creditors The GENIUS Act: A Comprehensive Guide to US Stablecoin Regulation^[2]. The Act also clarifies that compliant stablecoins are neither securities nor commodities, reducing regulatory ambiguity for market participants.

The legislation introduces a dual regulatory framework, allowing smaller issuers (with less than $10 billion in outstanding stablecoins) to operate under state-level regimes certified as "substantially similar" to federal standards by the Stablecoin Certification Review Committee (SCRC), a body chaired by the Treasury Secretary and including the Federal Reserve and FDIC. However, state-qualified issuers exceeding $10 billion in issuance must transition to federal oversight within 360 days, with potential waivers granted under strict criteria. This structure aims to balance innovation with systemic risk management while preventing regulatory arbitrage The GENIUS Act: Key Highlights and Anticipated Impacts^[3].

AML and consumer protections are central to the Act. Permitted issuers are classified as financial institutions under the Bank Secrecy Act, requiring robust AML programs, customer due diligence, and compliance with U.S. sanctions. The Treasury Department is tasked with issuing regulations to address illicit finance, including innovative detection methods. Furthermore, the Act prohibits misleading marketing practices, such as portraying stablecoins as government-backed or legal tender, and bans interest-bearing stablecoins. These measures aim to enhance trust and mitigate risks associated with money laundering and fraud Stablecoin Framework Signed into Law^[4].

The GENIUS Act has drawn comparisons with global stablecoin regulations, including the EU's Markets in Crypto-Assets (MiCA) framework and Hong Kong's Stablecoin Ordinance. While both MiCA and the GENIUS Act require 1:1 reserve backing and redemption rights, the U.S. law imposes stricter restrictions on foreign issuers and mandates federal oversight for large-scale operations. Additionally, the Act's emphasis on separating stablecoin issuance from core banking activities aligns with U.S. regulatory traditions, contrasting with the EU's approach to cross-border harmonization Crypto Rule Comparison: The US GENIUS Act versus EU's MiCA^[5].

Market participants are expected to adapt to the new framework as regulators finalize rules within one year of enactment. The law also paves the way for the Digital Asset Market Clarity Act (CLARITY Act), which is under consideration in the Senate and aims to expand the regulatory scope to broader crypto assets. Analysts suggest that the GENIUS Act could spur innovation in cross-border payments, real-time payroll solutions, and supply chain finance while reinforcing the U.S. dollar's role in the digital economy. However, challenges remain in global coordination, particularly as countries like China and the EU navigate their own regulatory priorities MiCA vs. GENIUS Act (2025)^[6].