GENIUS Act passed by the US Senate: What impact will it have on the crypto industry?

Deng Tong, Golden Finance

On Tuesday, the U.S. Senate passed the landmark GENIUS Act, advancing the U.S. federal government's regulatory efforts on stablecoins and putting pressure on the House of Representatives to plan the next phase of the country's regulatory efforts on digital assets.  

This is the first time the Senate has passed significant cryptocurrency legislation. Republican Senator Bill Hagerty, the sponsor of the GENIUS Act, thanked some of his fellow senators for their support before the formal vote. Next, the House of Representatives needs to decide how to move forward. It is unclear whether the stablecoin bill can get enough support to pass in the House of Representatives, where the Republican majority is also slightly higher than the Democratic majority.

What far-reaching impact will the passage of the GENIUS Act have on the crypto industry? What do industry insiders think of the passage of this bill?

I. Review of the Seven Key Points of the GENIUS Act

On February 4, 2025, Senator Bill Hagerty (R-TN) introduced the Guidance and Establishment of a United States Stablecoin National Innovation Act ("GENIUS"). The bill was co-sponsored by Senate Banking Committee Chairman Tim Scott (R-SC) and Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-Wyoming), and is based on a discussion draft released by Senator Hagerty in October 2024. The legislation establishes a federal licensing and regulatory framework for payment stablecoins and their issuers.

Here are seven key points of the GENIUS Act:

1. The bill prohibits any non-"approved payment stablecoin issuer" from issuing payment stablecoins in the United States.

2. The bill defines "payment stablecoins" as digital assets that maintain a fixed value through fiat currency or other security reserve support.

3. The bill imposes federal standards on institutions approved to issue payment stablecoins, including full backing reserve requirements, reserve segregation, monthly certification, and capital and liquidity requirements, and a prohibition on re-hypothecation.

4. The bill allows state-regulated payment stablecoin issuers to issue stablecoins, provided that the applicable regulatory regime is substantially similar to the federal regime.

5. The bill gives federal banking agencies enforcement authority over approved payment stablecoins, similar to the authority that Section 8 of the Federal Deposit Insurance Act has over insured depository institutions and their holding companies and institutional affiliates.

6. The bill imposes customer protection standards on persons who provide custody services for approved payment stablecoins, including supervision and regulation, fund segregation, commingling prohibition standards, and monthly audit reports of legal reserves.

7. The bill prohibits federal banking agencies, the NCUA, and the SEC from requiring that custody assets be treated as liabilities. The bill also amends federal securities laws to make clear that payment stablecoins are not securities.
   

The GENIUS Act represents a landmark federal government effort to regulate the U.S. payment stablecoin industry by establishing clear licensing and regulatory requirements. The bill balances federal and state regulatory powers, ensures transparency through audits and reporting, and establishes clear enforcement mechanisms.

If payment stablecoins are recognized in the U.S. regulatory framework, this could open the door for companies to issue their own tokens. During the debate over the GENIUS Act, Apple, Google, social media platform X and Airbnb were reportedly looking into the matter, and two U.S. senators questioned whether Meta would have the same plans if the bill was passed.

Second, the specific significance of the GENIUS Act

1. Provide regulatory clarity

The GENIUS Act ends the vicious turf war between the Federal Reserve and the U.S. Securities and Exchange Commission that froze product development for years. By providing a bank-like license to any issuer with $10 billion or more in assets, the bill provides regulatory clarity that allows us to truly plan for the future rather than waiting for enforcement actions to make rules. Legal redemption rights and reserves audited by the U.S. Public Company Accounting Oversight Board (PCAOB) give stablecoins the same legal status as money market funds. This is not only beneficial to consumers, but also critical for payment service providers who need reliable settlement channels.

2. Build a bridge between traditional payments and blockchain

The GENIUS Act will establish a regulatory system for stablecoins, allowing issuers to register with the U.S. government. In addition, issuers must provide 1:1 guarantees for their stablecoins, undergo regular audits, and comply with anti-money laundering regulations.

Roshan Robert, CEO of OKX US, said that the GENIUS Act is a "strong signal" that the U.S. government is taking a pragmatic approach to digital asset innovation. The bill "builds an important bridge for traditional finance to explore blockchain payments and settlements." "The GENIUS Act not only supports permissioned innovation, but also lays the foundation for interoperability between centralized and decentralized systems - we believe this is the inevitable future."

Stablecoins are often seen as a key bridge between traditional finance and digital assets. These fiat-pegged tokens (mostly pegged to the US dollar) allow people around the world to easily send money across borders and pay for goods at a variety of merchants at lower fees.

3. Leading the formulation of rules for the next generation of the global financial system

The GENIUS Act could lay the foundation for the regulation of decentralized, programmable currencies, which could deal a blow to the prospects of a U.S. central bank digital currency (CBDC).

Douro Labs CEO Mike Cahill said: "The stablecoin bill is equally important. Major financial institutions have begun to explore the issuance of stablecoins, and clear federal regulatory measures will legalize stablecoins and make them a new type of programmable currency - integrated into payment, settlement, and even fund management. If the United States can do this, it will not only lead the cryptocurrency market, but also set the rules for the next global financial system."

4. Strengthen the global financial status of the US dollar

Since Trump imposed tariffs on trading partners, discussions about "de-dollarization" (that is, the world's possible break from its dependence on the US dollar as the global reserve currency) have been heating up. Supporters of the bill say that Given that most stablecoins are pegged to the US dollar, the bill could strengthen the position of the US dollar, potentially enhancing its influence in the digital economy.

The two largest stablecoins in the cryptocurrency space are pegged to the U.S. dollar — Tether’s USDt and Circle’s USDC — and these tokens have a combined market cap of $217.5 billion, or 86.4% of the total stablecoin market cap of $251.7 billion, according to DefiLlama.

Bill Sebell, executive director of the XDC Foundation, said: "The discussion of de-dollarization ignores a more important point: Dollar-backed stablecoins are the new financial weapon of the 21st century." If the GENIUS Act is passed, now "anyone with a smartphone can hold a compliant digital dollar, which will increase the coverage and relevance of the dollar at a time when critics predict that the dollar will depreciate."

5. Impact on the crypto market

US Treasury Secretary Scott Bessent said: “Recent reports predict that the stablecoin market could reach $3.7 trillion by 2020. With the passage of the GENIUS Act, this is even more likely to happen.”

1confirmation founder Nick Tomaino posted on the X platform that the GENIUS Act is very favorable to cryptocurrencies, and the market value of stablecoins will increase 10 times as a result.

Third, criticism or approval? What do industry insiders think of this historic moment?

Criticism:

On the one hand, critics believe that the GENIUS Act lacks sufficient safeguards, especially in terms of the possibility that entities authorized to issue stablecoins may engage in self-dealing.

• Senator Elizabeth Warren has been one of the most vocal opponents, warning that the bill could "actively facilitate" abuses associated with Trump's cryptocurrency business.

• The Senate-passed GENIUS Act puts consumers, investors, and the economy at risk, according to Amanda Fischer, policy director and chief operating officer (COO) at Better Markets. Stablecoins are not "the future of payments." Instead, they represent an unstable future with little regard for unsuspecting ordinary Americans and the economic guardrails they rely on. The GENIUS Act promotes the use of stablecoins but fails to address the problems that have plagued the crypto market in recent months, such as stablecoin companies’ vulnerability to runs, bankruptcies, and the need for taxpayer-funded bailouts. The bill also encourages the use of stablecoins to purchase goods and services without applying any laws that provide consumer protections in the payments space. Under the proposed law, large technology companies and non-financial companies could issue their own currencies, raising concerns about fair competition, data privacy, and surveillance. The GENIUS Act and its supporters also fail to address the myriad national security risks unique to cryptocurrencies while providing loopholes for opaque foreign stablecoins such as Tether. The House should reject this legislation.

On the other hand, critics of the GENIUS Act argue that the bill undermines the decentralization of cryptocurrencies and could lead to corruption, such as officials favoring specific stablecoins under the new regulations.

• Senator Jeff Merkley (D-Ore), who opposed the current bill, said: “We need to have guardrails to ensure that government officials are not openly asking people to buy their coins to increase personal or family profits.Where are the guardrails in this bill? They are completely nonexistent.”

Some critics also said that the bill gives too many entities the ability to create new stablecoins, which could make it more difficult to enforce regulatory standards.

Agree:

Supporters say it would help protect investors and regulate the stablecoin market, ensuring issuers have the reserves needed to give stablecoins value.  

• U.S. Treasury Secretary Bessant posted on social media, "A thriving stablecoin ecosystem will drive private sector demand for U.S. Treasuries, which are the asset backing for stablecoins. This new demand could reduce government borrowing costs and help control national debt. At the same time, it could open the door to the dollar-based digital asset economy for millions of users around the world. This is a win-win situation for all parties involved: the private sector benefits; the U.S. Treasury benefits; and consumers benefit. This is the result of wise, pro-innovation legislation."

• Tennessee Republican Senator Bill Hagerty, who proposed the bill, said: "If we don't act now, not only will these benefits disappear, we will also fall behind in global competitiveness. Without a regulatory framework, stablecoin innovation will flourish overseas, not in the United States!"

• Republican Senator Hagerty said: “The passage of this bill brings the United States one step closer to becoming a global leader in cryptocurrency. The GENIUS Act establishes a growth-friendly regulatory framework for payment stablecoins. This bill will solidify the dollar’s ​​dominance, protect consumers, and drive demand for U.S. Treasuries.” Coinbase Chief Legal Officer Paul Grewal said:  “A year ago, even I thought this was nothing more than a fever dream. Think about how far we have come.”

• Patrick Gerhart, president of banking at Telcoin, said in an email that the GENIUS Act would be a major shift in the stablecoin landscape. “It’s not necessarily about quantity, but quality. Regulation opens the door for new issuers to emerge, but compliance, interoperability, and practicality will ultimately determine the winners. It’s not just about who has the deepest pockets or the biggest brands, it’s about who can integrate with existing financial infrastructure, meet regulatory expectations, and serve local populations.” Gerhardt said that while banks and large technology platforms may have a huge advantage at the outset, “the real long-term value will come from stablecoins that enable programmable, low-cost, and mobile-first financial services.”

• Amanda Tuminelli, executive director and chief legal officer of the DeFi Education Fund, said in a similar statement:“This is a victory for the United States, a victory for innovation, and an important step for the United States to properly regulate digital assets.”

• Ryan Peters, an assistant professor at the Freeman School of Business at Tulane University in New Orleans, pointed out that GENIUS is a necessary first step towards a mature stablecoin infrastructure. Whether stablecoins can become a resilient payment medium or suffer setbacks in their first real stress test depends entirely on how seriously policymakers take subsequent actions.

• Erbil Karaman, co-founder of PayFi network Huma Finance, believes that the Senate’s passage of the GENIUS Act will be a "key turning point" and predicts that stablecoins will "go beyond speculative trading and become important financial infrastructure." He said in an email that the DeFi summer is coming, and it will be very different from the summers of the past.

• Bezalel Eithan Raviv, CEO of blockchain security company Lionsgate Network, said: "Overall, this bill will be better than any bill currently in effect."

Source: Golden Finance, Reuters, Jinshi Data, CoinTelegraph, CNBC, Covington, CoinDesk, Payments Dive, The Block, Better Markets, etc.