What is the GENIUS Act?

GENIUS Act (full name “Guiding and Establishing National Innovation for U.S. Stablecoins Act”) is a federal law passed in the United States in 2025, aimed at regulating the issuance and use of stablecoins. Here is a detailed explanation of the act:

What are stablecoins?

Stablecoins are a type of cryptocurrency whose value is typically pegged to stable assets like the US dollar, aiming to maintain price stability. Unlike more volatile cryptocurrencies such as Bitcoin, stablecoins are widely used for transactions and as a store of value due to their stability. However, prior to this, stablecoin regulation was limited, posing risks of fraud, lack of transparency, and financial instability.

Main provisions of the GENIUS Act

To address these issues, the GENIUS Act establishes a comprehensive regulatory framework, primarily including the following key provisions:

• Reserve Requirements: Stablecoin issuers must hold US dollars or other low-risk assets (such as short-term US Treasuries) in a 1:1 ratio as reserves, ensuring each stablecoin is fully backed and redeemable at any time. This measure aims to prevent incidents like the TerraUSD collapse in 2022, when the stablecoin lost its peg, resulting in a $40 billion loss.

• Transparency and Audits: Issuers are required to disclose their reserve composition monthly and undergo annual audits by registered accounting firms. For issuers with a market cap exceeding $50 billion, additional financial reports must be submitted to ensure transparency and accountability.

• Licensing: Only certain entities can issue stablecoins, including subsidiaries of depository institutions, federally qualified non-bank issuers, or state-qualified issuers (with a issuance cap of $10 billion). This restricts issuance rights to regulated entities, reducing the entry of unregulated participants into the market.

• Consumer Protection: In the event of issuer bankruptcy, stablecoin holders will have priority over other creditors for repayment. Additionally, the act enforces anti-money laundering (AML) and anti-terrorism financing regulations to prevent stablecoins from being used for illegal activities.

• Non-Security Classification: The act explicitly states that stablecoins are not considered securities under US law, and therefore are not under the jurisdiction of the Securities and Exchange Commission (SEC), but are accepted as a payment tool under specific regulation.

Legislative Background and Impact

The GENIUS Act was introduced by Senator Bill Hagerty, a Republican from Tennessee, and passed in the Senate on June 17, 2025, with a bipartisan majority of 68 to 30. It aims to encourage innovation while ensuring the stability and security of the US financial system. However, the bill has also sparked some controversy, such as criticism from Senator Elizabeth Warren, a Democrat from Massachusetts, who argued that it insufficiently addresses conflicts of interest (e.g., President Trump’s cryptocurrency-related enterprises) and has limitations in protecting consumers and the overall economy.

Summary

The GENIUS Act is the first major regulatory legislation targeting stablecoins in the US. By setting issuance standards, transparency requirements, and consumer protections, it brings stablecoins into the federal regulatory framework. It not only paves the way for digital currencies to integrate into mainstream finance but also sets a precedent for future cryptocurrency regulation. $TESTZEUS **$RLUSD **$US