In a landmark move, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act).1 This bipartisan bill establishes the first comprehensive federal framework for stablecoin regulation in the United States.2 The GENIUS Act could reshape digital payments in the U.S., expand regulated blockchain-based finance, and help cement the U.S. dollar’s dominance in global crypto markets. However, the Act’s critics also warn of unintended consequences.3
Stablecoins are a type of digital asset (often referred to as cryptocurrencies or crypto) with value pegged to “stable reserve asset[s],” such as the U.S. dollar or short-term U.S. Treasuries.4 These specific digital assets were created to reduce the volatility typically associated with many digital assets and create a financial bridge between traditional financial payment systems and digital asset transactions utilizing blockchain-based networks.5
A recent TRUM Labs’ report claimed that stablecoins now account for over 60 percent of cryptocurrency transactions, with more than of 90 percent of stablecoins’ value tied to the U.S. dollar.6 These novel assets exist in a largely unregulated market, prompting scrutiny from politicians and regulatory bodies.
One popular stablecoin, USDC, is designed to always maintain its peg equal to a value of one dollar.7 It is designed to be easy to buy, sell, and transfer between different blockchain networks quickly using a system called Cross-Chain Transfer Protocol (CCTP).8 This system works by “burning” tokens on one blockchain and “minting” them on another, wherein all actions are verified by an independent company called Circle; CCTP can also be automated with smart contracts.9 USDC operates on major blockchains like Ethereum and Polygon.10 It can be traded on both traditional centralized exchanges (CEXs11) and decentralized finance platforms or exchanges (DEXs), letting users avoid the usual delay that occurs when converting crypto back into USD, which can take one to three business days.12 USDC is “issued by regulated financial” companies, is regularly audited, follows strict rules,13 and is licensed in many U.S. states, although there is no current federal license.14
Under the GENIUS Act, stablecoin issuers must maintain 100 percent reserve backing in liquid assets such as cash and U.S. Treasuries, provide monthly public disclosures of reserve compositions,15 comply with anti-money laundering (AML) laws, and adhere to consumer protection requirements.16 Large technology companies are prohibited from issuing stablecoins directly unless they partner with licensed financial institutions.17 The Act assigns primary regulatory authority to the U.S. Treasury Department, while allowing state regulators to participate through a federal certification process.18 The GENIUS Act provides a 12-month grace period before federal requirements are fully enforced.19
President Donald Trump’s issuance of multiple Executive Orders signals his Administration’s support for the continued growth of cryptocurrencies. The Department of Labor also recently reversed CAR 2022-01, removing the caution against including crypto in 401(k) plans.20 The reversal affected a restoration of “asset class neutrality,” enabling retirement plan sponsors to consider crypto investing, while remaining subject to fiduciary responsibility obligations.21
Potential Impacts of GENIUS Act
The GENIUS Act could create a fundamental shift in how digital payments operate in the U.S. The legislation provides clear federal guidelines for payment stablecoin issuance, establishes reserve requirements, requires monthly transparency disclosures, and builds in consumer safeguards with respect to “permitted payment stablecoin issuers” under the oversight of federal agencies like the Federal Reserve, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation.22 By providing federal structure and oversight, the GENIUS Act may accelerate mainstream adoption of blockchain-based payments and transform both the financial and retail sectors.
Already, major financial institutions are moving to capitalize on this statutory clarity. At least one large financial institution has publicly confirmed plans to expand its blockchain-based payment systems, including the potential issuance of its own dollar-backed stablecoin.23 Three others are reportedly developing similar tokenized asset platforms, investing in stablecoins as the next evolution of their respective digital payments infrastructures.24 These national banking associations, other insured depository institutions, and nonbank stablecoin issuers must receive approval to issue payment stablecoins pursuant to a process for licensing and regulation that is to be established by the appropriate “primary Federal payment stablecoin regulator.”25
The GENIUS Act does not limit the acceptance of deposits and issuance of digital assets – “deposit tokens” – that represent deposits by banks, savings associations and credit unions, nor does it prevent such institutions from providing custodial services for payment stablecoins.26
At the same time, retail giants like Walmart and Amazon are reportedly exploring proprietary stablecoin models for use in supply chain payments, loyalty programs, and consumer transactions.27 By eliminating traditional interchange fees and settlement delays, these companies may seek to reduce costs and increase transaction efficiency by bypassing traditional payment processors.28
Payment industry incumbents, such as Visa and Mastercard, appear to be working on integrating stablecoin transaction rails, potentially signaling movement toward real-time, blockchain-settled commerce.29 These payment processing pivots could redirect trillions in annual transaction volume away from legacy credit networks and onto continuous, real-time, 24/7 blockchain-based systems.30
Despite the promise of faster and cheaper transactions, the GENIUS Act’s passage could increase regulatory and financial system risks. Critics warn that the legislation’s limited federal oversight could encourage rapid growth without sufficiently addressing systemic risk, going so far as to draw parallels to the unregulated expansion of financial instruments prior to the 2008 crisis.31 Concerns also surround the possibility that fragmentation in stablecoin networks, combined with potential over-reliance on private issuers, could introduce new points of failure into the U.S. financial system.32
Furthermore, if stablecoins begin to act as de facto substitutes for traditional bank deposits, unintended impacts on bank liquidity, consumer protections, and monetary policy control may follow, especially if large stablecoin issuers operate without direct Federal Reserve oversight.33
However, Supporters remain optimistic that the GENIUS Act will enable the U.S. to remain competitive globally and cement the U.S. dollar’s dominance in the digital economy, all while fostering private-sector innovation in the stablecoin space.34 Regardless of debate as to its merits or flaws, the GENIUS Act represents a pivotal moment in the evolution of U.S. digital finance.
