U.S. Senate Passes the GENIUS Act: A Milestone in Stablecoin Regulation

On June 17, 2025, the U.S. Senate passed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act with a bipartisan vote of 68-30, marking a significant milestone in the regulation of digital assets. The legislation now moves to the Republican-controlled House of Representatives for further consideration.

The GENIUS Act aims to establish a comprehensive federal regulatory framework for stablecoins—cryptocurrencies pegged to the U.S. dollar. Key provisions include:

• Reserve Requirements: Issuers must back stablecoins with high-quality liquid assets, such as U.S. dollars and short-term Treasury bills, ensuring a 1:1 reserve ratio.

• Disclosure Obligations: Issuers are mandated to disclose the composition of their reserves monthly to promote transparency.

• Licensing and Oversight: The Act introduces a dual regulatory approach:

• Issuers with over $10 billion in market capitalization will be regulated by federal agencies like the Federal Reserve and the Office of the Comptroller of the Currency.

• Smaller issuers can opt for state-level regulation, provided they meet federal standards.

• Prohibition of Algorithmic Stablecoins: The legislation explicitly bans algorithmic stablecoins, which are not backed by tangible assets, to prevent scenarios similar to the Terra/Luna collapse.

Following the Senate's approval, the market capitalization of stablecoins surged to a record $251.7 billion, marking a 22% increase in 2025. Analysts attribute this growth to the regulatory clarity provided by the GENIUS Act, which is expected to bolster investor confidence and promote further adoption of stablecoins.

Shares of Circle Internet Financial, the issuer of the USDC stablecoin, rose by 16% after the bill's passage. Circle recently went public, and its share price increased to $173.60 from an IPO price of $31.

Despite bipartisan support, the GENIUS Act has faced criticism. Some Democrats express concerns about potential conflicts of interest involving President Donald Trump and his family's investments in the cryptocurrency industry. Notably, President Trump has financial ties to World Liberty Financial and its stablecoin USD1, reportedly earning $57.35 million from token sales in 2024. The bill includes provisions that ban Congress members and their families from profiting off stablecoins but exempts the President and his family, raising ethical questions.

Consumer protection groups have also raised alarms about the GENIUS Act’s potential to legitimize risky crypto schemes. Public Citizen, a prominent consumer advocacy group, warned that the bill could destabilize financial markets and erode consumer protections.

The passage of the GENIUS Act aligns the U.S. with other jurisdictions that have implemented stablecoin regulations. The European Union's Markets in Crypto-Assets Regulation (MiCA) took effect in June 2024, and countries like Singapore, Hong Kong, the UAE, and Japan have also established their own frameworks. This global trend underscores the growing recognition of stablecoins' role in the financial system and the need for regulatory oversight.

If enacted, the GENIUS Act could transform stablecoins from niche digital assets into essential components of the financial infrastructure, facilitating instant payments and broader financial integration. The regulatory clarity provided by the Act is expected to attract institutional investors and traditional financial institutions to the stablecoin market, potentially leading to increased adoption and innovation. However, critics argue that it may not adequately address consumer protection concerns, particularly regarding potential systemic risks and the adequacy of anti-money laundering measures.

In conclusion, the passage of the GENIUS Act by the U.S. Senate represents a pivotal moment in the regulation of stablecoins. While it offers a framework that could legitimize and integrate stablecoins into the mainstream financial system, it also raises important questions about political ethics, consumer protection, and the future landscape of digital assets.