In a landmark move for the cryptocurrency industry, the U.S. Senate passed the GENIUS Act (S.1582) on June 17, 2025, with a decisive 68-30 vote, establishing the first comprehensive federal framework to regulate stablecoins—digital currencies like Tether (USDT) and USD Coin (USDC) designed to maintain a stable value, typically pegged to the U.S. dollar. The legislation, which cleared a procedural hurdle on June 11 with a 68-30 vote, aims to enhance market stability and protect consumers while fostering innovation in the rapidly growing $232 billion stablecoin market.
What is the GENIUS Act?
The GENIUS Act (Generating Exceptional National Initiatives for U.S. Stablecoins) sets strict rules for stablecoin issuers, requiring them to hold one-to-one reserves in liquid assets like U.S. Treasuries or cash to back their tokens. It mandates compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations to prevent illicit activities, addressing long-standing concerns about stablecoins’ role in financial systems. The act distinguishes between issuers based on size: those with a market cap below $10 billion are regulated by states, while larger issuers face federal oversight from the Office of the Comptroller of the Currency (OCC) or the Federal Reserve.
Senator Bill Hagerty, the bill’s sponsor, hailed it as a step toward “unleashing innovation and opportunity for Americans while enhancing our national security and ensuring the dollar remains the world’s reserve currency”. The legislation also excludes stablecoins from being classified as securities, placing them under banking-like supervision rather than Securities and Exchange Commission (SEC) oversight.
Why Stablecoin Regulation Matters
Stablecoins, which account for over 10% of the $3.27 trillion global crypto market as of June 18, 2025, are critical for trading, cross-border payments, and decentralized finance (DeFi). Unlike volatile cryptocurrencies like Bitcoin (BTC), stablecoins aim to maintain a steady value, making them a popular choice for investors and businesses. However, high-profile failures like Terra Luna’s collapse in 2022 exposed risks of de-pegging and fraud, underscoring the need for regulation.
The GENIUS Act addresses these risks by ensuring transparency and reserve backing, which could prevent runs on stablecoins during market stress. “The GENIUS Act sets a high bar for consumer protections, giving stablecoin holders priority in bankruptcy proceedings,” said Senator Cory Booker, a supporter of the bill. Chainalysis notes that stablecoins saw a surge in trading activity during the 2024 U.S. presidential election, highlighting their sensitivity to macroeconomic events and the need for robust oversight.
Controversies and Criticisms
Despite bipartisan support, the GENIUS Act faced criticism. Senator Elizabeth Warren warned that the bill “puts the entire financial system at risk” and lacks safeguards against conflicts of interest, particularly citing President Donald Trump’s ties to World Liberty Financial’s USD1 stablecoin. Warren argued that the legislation fails to address potential corruption risks, especially given Trump’s crypto ventures.
The bill’s 122 proposed amendments, many unrelated to crypto (e.g., credit card fee caps), also sparked debate, delaying progress until a streamlined version was approved. Critics further noted that stablecoin growth could increase demand for U.S. Treasuries, potentially introducing volatility to traditional financial markets.
What’s Next?
The GENIUS Act now heads to the House, where the STABLE Act, a similar bill, is under consideration. While the GENIUS Act emphasizes OCC oversight, the STABLE Act proposes joint federal regulator rules, creating potential differences to reconcile. Bipartisan momentum suggests a final law could emerge by late 2025, providing clarity for the $232 billion stablecoin market.
The legislation could reshape the crypto landscape, boosting confidence in stablecoins while aligning the U.S. with global regulatory trends. As Senator Adam Schiff noted, “This bill ensures America stays competitive in the digital economy while protecting consumers”.
Key Concepts of the GENIUS Act
One-to-One Reserves : Stablecoins must be backed 1:1 by liquid assets like U.S. Treasuries or cash to ensure stability and prevent de-pegging.
AML/KYC Compliance : Issuers must follow anti-money laundering and know-your-customer rules to combat fraud and illicit transactions.
Federal/State Oversight : Issuers with over $10 billion in market cap face federal regulation; smaller issuers are state-regulated.
Consumer Protections : Stablecoin holders get priority in bankruptcy, reducing risks of financial loss.
Innovation Boost : Regulatory clarity aims to drive mainstream adoption of stablecoins for payments and DeFi.
The post U.S. Senate Passes GENIUS Act to Regulate Stablecoins appeared first on Cryptopress.
