Trump Signs GENIUS Act Mandating 100% Stablecoin Backing

On July 18, 2025, President Trump signed the GENIUS Act into law at the White House, establishing federal regulations for stablecoins in the United States. The act mandates that all stablecoins in the U.S. be fully backed by U.S. dollars or similar liquid assets, impacting issuers' compliance costs. This measure aims to bolster market confidence and transparency, instituting annual audits for issuers with market caps over $50 billion.

The GENIUS Act, supported by a bipartisan coalition, now requires stablecoin issuers like USDT and USDC to maintain full U.S. dollar backing. This legislation marks the first federal regulation targeting stablecoins in the U.S., creating a legal framework that ensures market stability and trust. The law mandates that stablecoins must be fully backed by liquid assets, such as U.S. dollars or short-term Treasury bills, to prevent the commingling of customer funds and ensure that stablecoin holders have priority in the event of bankruptcy.

Compliance demands may increase operational costs for issuers, necessitating adjustments across the sector. Stablecoin issuers must now ensure auditable and liquid backing or risk losing access to U.S. financial markets. The new law also establishes federal licensing pathways for stablecoin issuers, providing a clear regulatory framework for companies operating in this space. This development is seen as a step towards much-needed regulation in the crypto industry, which has long been criticized for its lack of oversight. The GENIUS Act places oversight responsibilities within a federal framework, ensuring that stablecoin issuers are held accountable for their actions.

The legislation also prohibits the commingling of customer funds, ensuring that stablecoin reserves are kept separate from other assets. This provision is designed to protect investors and maintain the integrity of the stablecoin market. Additionally, the law demands that issuers disclose publicly the composition of their reserves, providing greater transparency to investors and regulators alike. The GENIUS Act represents a significant milestone in the regulation of stablecoins, providing a clear and comprehensive framework for their issuance and management. By mandating strict reserve requirements and oversight, the legislation aims to enhance the stability and trustworthiness of stablecoins, which are increasingly being used in financial transactions.

Market observers anticipate shifts in token allocations, emphasizing a re-evaluation of on-chain strategies to adopt newly compliant practices. The GENIUS Act is expected to have a positive impact on the crypto industry, providing greater clarity and certainty for investors and issuers alike. This development is seen as a transformative effect on digital asset regulation, fostering innovation under new regulatory parameters. The legislation's transformative effect on digital asset regulation is anticipated to lead to widespread reassessment of DeFi protocols reliant on stablecoin liquidity, fostering innovation under new regulatory parameters.