U.S. Treasury Eases Bank Capital Rules Boosting Stablecoins 10%

The U.S. Treasury Department has announced plans to ease capital rules for banks, which could have significant implications for the cryptocurrency industry. This move is part of a broader effort to reduce regulatory burdens on financial institutions, particularly in the context of holding Treasury securities. By easing these rules, banks will be able to hold more Treasuries without having to show it as extra risk on their balance sheets. This adjustment is expected to allow banks to hold more Treasuries, which could indirectly benefit stablecoins, a type of cryptocurrency pegged to stable assets like the U.S. dollar.

The easing of capital rules is particularly relevant in light of the recent passage of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. This landmark legislation establishes a federal regulatory framework for stablecoins. The GENIUS Act mandates that stablecoin issuers maintain full reserves of liquid assets, such as U.S. Treasury notes, to back their tokens. This ensures that each stablecoin can be redeemed for its pegged value, even in cases of bankruptcy, thereby prioritizing coin holders’ claims.

The GENIUS Act includes several key provisions aimed at enhancing transparency, security, and consumer protection. Stablecoin issuers must comply with anti-money laundering (AML) and terrorism financing rules to prevent illicit activities. The bill also includes consumer safeguards to protect users from fraud and mismanagement. Additionally, the legislation extends ethics standards to special government employees and prohibits members of Congress or senior executive branch officials from issuing stablecoins during their tenure, addressing concerns about conflicts of interest.

The passage of the GENIUS Act has far-reaching implications for various stakeholders. For investors, the clear regulations reduce uncertainty, encouraging both retail and institutional investors to engage with stablecoins. The bill's reserve requirements also ensure that stablecoins are less likely to "depeg" (lose their $1 value), protecting investors from losses seen in past incidents. For businesses, the legislation opens the door for traditional financial firms and tech companies to issue stablecoins, fostering competition and innovation. The U.S. risks falling behind jurisdictions like the EU, which implemented its Markets in Crypto-Assets (MiCA) framework in January 2025. The GENIUS Act helps the U.S. keep pace in the global digital economy.

The GENIUS Act faced significant hurdles before its passage. In early May 2025, Senate Democrats blocked the bill, citing concerns over President Trump’s crypto ventures and potential conflicts of interest. However, by mid-May, negotiators agreed on amendments addressing consumer protections and ethics standards, unlocking 18 Democratic votes. The bill ultimately passed with a 68-30 vote, with only two Republicans voting against it. The bipartisan support reflects the crypto industry’s growing influence, bolstered by significant spending in the 2024 election cycle to elect pro-crypto lawmakers.

The GENIUS Act is part of a broader push for crypto regulation in 2025. Other legislative efforts include the Financial Innovation and Technology for the 21st Century Act (FIT21), which aims to clarify the roles of the SEC and CFTC in regulating digital assets. However, the FIT21 Act faces a tougher path due to its broader scope. Additionally, the House passed a resolution to repeal the Biden administration’s “DeFi Broker Rule,” which imposed burdensome reporting requirements on decentralized finance platforms. Sen. Cynthia Lummis has also proposed a bitcoin reserve to address national debt, though its funding model remains controversial.

While the GENIUS Act is a significant step forward, it has limitations. The bill focuses solely on stablecoins, leaving other cryptocurrencies in regulatory limbo. A comprehensive framework like FIT21 could provide clearer rules for the entire crypto market. Critics also argue that the bill doesn’t fully address potential conflicts of interest, such as President Trump’s crypto ventures. Stronger provisions to prevent insider benefits could enhance trust. Additionally, the bill includes AML and reserve requirements, but some Democrats wanted stronger protections against fraud and market manipulation, which could be critical if stablecoin adoption surges.

The easing of capital rules for banks and the passage of the GENIUS Act together create a more favorable regulatory environment for stablecoins. This could lead to increased adoption and innovation in the cryptocurrency industry, as well as greater integration of stablecoins with traditional financial systems. However, challenges remain, including the need for broader crypto legislation and potential Democratic opposition. The future of crypto regulation in the U.S. will depend on the industry’s ability to navigate these challenges and continue to advocate for clear and comprehensive regulatory frameworks.