On June 6, 2025, the U.S. Senate advanced a landmark stablecoin bill that could significantly reshape both the cryptocurrency market and segments of the U.S. Treasury market. Under the proposed legislation, stablecoin issuers would be required to back their tokens with high-quality liquid assets—specifically, cash or short-term U.S. Treasury bills. Currently, major issuers like Tether and Circle hold a combined $166 billion in Treasuries, and this requirement is expected to drive demand even higher. Proponents argue that tying stablecoins directly to liquid reserves will enhance trust, while critics warn it may introduce volatility into short-term government debt markets if redemptions occur en masse.

Implications for the Treasury Market

As stablecoins grow toward an estimated $2 trillion market cap by 2028, requiring issuers to hold significant Treasury allocations could strain certain maturities—namely, 3- and 6-month bills. Analysts predict that sustained stablecoin backing may lower yields on these securities, effectively strengthening the dollar’s status in global transactions. However, if market sentiment shifts—such as a sudden surge in stablecoin redemptions—Treasury dealers could face abrupt selloffs, exacerbating short-term interest rate volatility.

Bipartisan Support and the GENIUS Act

The bill, formally titled the “Guiding and Establishing National Innovation for U.S. Stablecoins of 2025” (GENIUS Act), has garnered broad bipartisan backing. According to Senator Ruben Gallego, Republicans adopted numerous Democratic amendments to address consumer protection concerns and ensure rigorous audit and disclosure standards. With at least 16 Democrats expected to vote in favor, the GENIUS Act may clear the Senate floor soon—and could reach the President’s desk by mid-summer.

Industry Reaction and Market Momentum

Major crypto advocacy groups have lobbied for a “clean passage” without unrelated amendments, emphasizing that any delay could stall broader market confidence. Concurrently, stablecoin issuer Circle made headlines with its June 5 NYSE debut, where shares surged over 168 percent from the IPO price, valuing the company at $18.36 billion. This strong performance underscores investor optimism around stablecoins, especially given the supportive regulatory environment under the Trump administration and the looming regulatory clarity promised by the GENIUS Act.

Potential Risks and Next Steps

Despite the bill’s promise, some critics warn that tighter integration between stablecoins and Treasury securities could crowd out traditional buyers—like banks—which might reduce overall demand for government debt and push yields higher on longer-term bonds. Furthermore, issuers might attempt to “game” collateral requirements by adjusting portfolio composition to appear conservative while keeping riskier assets off balance sheets. Observers also note that if issuers rush to purchase Treasuries ahead of the legislation’s passage, it could temporarily distort auction outcomes and secondary market liquidity.

Outlook

Should the GENIUS Act become law, stablecoin issuers will transition from minimal reserve standards to a framework requiring full transparency, regular audits, and stringent capital safeguards. Proponents believe these measures will foster mainstream adoption by reducing counterparty risk and aligning stablecoins with conventional financial safeguards. Opponents caution that the new rules could inadvertently heighten systemic risk if issuer behavior shifts abruptly. As the Senate prepares for a final vote, market participants and policymakers alike are closely monitoring developments, aware that stablecoins’ next chapter may redefine the intersection of digital assets and traditional finance
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