Wall Street Pushes for GENIUS Act Revisions to Ease Stablecoin Legal Risks

Wall Street is intensifying its push for amendments to the GENIUS Act, a bipartisan piece of legislation passed in the summer of 2025. Designed to provide a legal framework for stablecoins by granting stablecoin holders priority claims over certain institutional creditors, the law has sparked concerns among traditional financial institutions and consumer advocates. Critics argue that its current provisions create legal uncertainties that could hinder institutional participation in the stablecoin market [1].

The American Bankers Association, supported by 52 other organizations, has formally requested revisions to the act, emphasizing the need for clearer operational definitions and parameters to facilitate broader market engagement [4]. A particular point of contention is Section 11(a)(1), which may restrict traditional financial institutions from offering stablecoin-related services without exposing themselves to legal risks [5].

Major Wall Street firms, including Citigroup, are preparing to expand their digital asset offerings, such as stablecoin custody and payment services. These plans, however, depend on a more predictable and aligned legal framework that supports institutional requirements [2]. Citigroup's strategy reflects a wider industry trend as traditional banks seek to incorporate digital assets into their service portfolios [6].

Meanwhile, financial institutions are exploring new business models enabled by the GENIUS Act, such as interest-bearing stablecoins, which are being positioned as tools to enhance liquidity and attract institutional capital. Wendy from fintech.tv notes that while the Act has brought some clarity to governance and regulation, further refinements are necessary to unlock the full potential of the stablecoin market [7].

JPMorgan and other banks have already begun internal reviews of how the GENIUS Act and other dormant laws could impact their stablecoin initiatives. This has led to a more cautious industry approach, with many institutions waiting for regulatory clarity before pursuing new ventures [6]. The abrupt shift in Wall Street's stance toward crypto has been partly attributed to these legal uncertainties and the need for a more favorable regulatory environment [6].

Industry advocates argue that the current wording of the GENIUS Act may inadvertently exclude stablecoin issuers from key financial networks, potentially leading to market fragmentation and an uneven playing field [5]. Over 50 banking and consumer advocacy groups have joined the call for reform, signaling a growing consensus on the need for legislative adjustments [4].

Sources:

[1]title1 (https://www.ainvest.com/news/banking-groups-push-genius-act-reforms-clarify-stablecoin-rules-2508/)

[2]title2 (https://coincentral.com/wall-street-giant-citigroup-plans-crypto-custody-services-for-stablecoins-and-etfs/)

[4]title4 (https://intellectia.ai/news/crypto/banking-groups-seek-changes-to-us-stablecoin-legislation)

[5]title5 (https://www.reuters.com/legal/litigation/genius-act-law-unintended-consequences-are-stablecoin-issuers-going-be-boxed-out-2025-08-14/)

[6]title6 (https://www.santafenewmexican.com/nyt/behind-wall-streets-abrupt-flip-on-crypto/article_c77bc047-4ba2-5c07-954c-c17c29a1a115.html)

[7]title7 (https://fintech.tv/the-rise-of-interest-bearing-stablecoins-what-it-means-for-financial-institutions/)