U.S. Senate Passes GENIUS Act to Regulate Stablecoins
Binance Blog published a new article, highlighting the U.S. Senate's recent approval of the GENIUS Act, a pioneering legislative effort to establish a national framework for regulating payment stablecoins. This landmark bill, passed with a 68-30 vote, aims to set stringent guidelines on reserves, transparency, and consumer protections while prohibiting algorithmic and interest-bearing stablecoins. If the House of Representatives approves the bill and it is signed into law, it could significantly influence stablecoin adoption across the crypto, fintech, and traditional finance sectors, impacting U.S. consumers and potentially setting a global precedent.
The GENIUS Act, co-sponsored by a bipartisan group of Senators including Tim Scott, Bill Hagerty, Kirsten Gillibrand, and Cynthia Lummis, marks a shift from enforcement-by-litigation to constructive policymaking. This move aligns with the current administration's focus on fostering financial innovation in the United States. The bill introduces a framework specifically for "payment stablecoins," which are digital tokens pegged to stable assets like the U.S. dollar, designed for everyday transactions. It mandates 1:1 reserve backing, requiring issuers to hold liquid, high-quality assets to fully back their tokens. This requirement is enforceable through monthly public disclosures and mandatory audited financial statements for large issuers.
The legislation also bans yield-bearing stablecoins and algorithmic stablecoins, mandating a comprehensive study by the Treasury Department on the latter. These measures aim to distinguish payment stablecoins from investment products and minimize risks of destabilizing feedback loops. The GENIUS Act introduces a tiered regulatory model, placing large issuers under federal oversight while allowing smaller issuers to operate under state-based frameworks if they meet federal standards. Custodians must adhere to strict rules to protect consumer assets, ensuring they are kept separate from the custodian's funds and legally recognized as the consumer's property.
For the crypto industry, the GENIUS Act could be transformative by providing clarity where there was once confusion. It codifies best practices for responsible issuers and signals that regulatory compliance will be rewarded with broader market access. Offshore issuers will face new barriers, needing to appoint a U.S.-based registered agent for legal matters. The bill may also encourage non-crypto companies to integrate stablecoin technology, reducing legal risks and fostering competition. However, some industry players may view the ban on interest-bearing stablecoins as restrictive.
The bill now moves to the House of Representatives, where it will be reconciled with the STABLE Act. Early indications suggest the GENIUS Act will pass with bipartisan support, and U.S. President Donald Trump is expected to sign it into law. Once enacted, federal regulators will develop detailed guidelines, ushering in a new era of licensing and oversight for stablecoin issuers. This legislation represents a significant moment in cryptocurrency history, signaling the U.S.'s commitment to shaping the future of digital finance.
