Compiled by: Plain Language Blockchain
Recently, the global situation has been tumultuous—wars, policies, and summits follow one another. Turmoil in the Middle East has also impacted the crypto market, but fortunately, the market quickly absorbed the shock. If geopolitical turmoil is merely a brief 'interlude' in the development of cryptocurrency, then the stablecoin regulatory bill—GENIUS Act—passed by the U.S. Senate with 68 votes in favor and 30 against undoubtedly ignites a fire in the crypto space.
According to the Associated Press, on June 17, the U.S. Senate passed the GENIUS Act, which has now been submitted to the House of Representatives, increasing pressure to shape the next phase of digital asset regulation in the U.S. The bill establishes a federal regulatory framework for stablecoins, requiring 1:1 reserves, consumer protection, and anti-money laundering mechanisms.
At first glance, this seems like a victory for regulatory order. However, behind the legislation lies a complex network of political interests. From potential conflicts of interest for the presidential family to the reshaping of industry dynamics and new thresholds for stablecoin issuance, the GENIUS Act—by its very name—is destined to face turbulent waters.
What exactly is the GENIUS Act?
GENIUS is an acronym for the 'Gaining Essential National Interest Using Stablecoins Act', aimed at establishing a unified federal framework for stablecoin regulation.
The bill is not a sudden inspiration, but rather the result of years of market evolution and growing risks. The stablecoin market's total value has exceeded $160 billion, and USDT and USDC have become key tools for trading, clearing, and decentralized finance (DeFi) liquidity. However, problems have also emerged: insufficient reserve transparency, unclear governance structures, and inconsistent state standards.
Through the GENIUS Act, the U.S. shifts from 'regulatory silence' to a clear framework, moving from fragmented management to national uniformity.
Analyzing the GENIUS Act: Five core provisions
Let's break down the core contents of the bill:
Establish a federal regulatory framework
Stablecoin issuance will be regulated by federal financial institutions, such as the Office of the Comptroller of the Currency (OCC) or the Federal Reserve. In other words, issuing stablecoins is no longer 'laissez-faire' but requires a formal 'digital dollar license', similar to banking license requirements.
1:1 reserve requirement
Stablecoins must be backed 1:1 by highly liquid assets such as U.S. dollars, U.S. Treasury bonds, or cash. Volatile assets such as cryptocurrencies, stocks, or derivatives are prohibited as reserves. This benefits issuers like USDC that already hold large amounts of U.S. Treasury bonds, while posing challenges to mixed asset models.
Mandatory audits and transparency
Issuers must regularly disclose reserve compositions to the public and regulators and undergo third-party audits. This will enhance trust and curb shadow banking risks.
Anti-money laundering (AML) and know your customer (KYC) compliance
All stablecoin issuance and circulation must comply with U.S. anti-money laundering and know your customer standards. This may limit the anonymity of DeFi but paves the way for institutional capital to enter.
Consumer protection and emergency agreements
Issuers must establish mechanisms to cope with extreme events, such as large-scale redemptions or decouplings. Although FDIC insurance has not been introduced, this suggests an early model of systemic protection.
Federal and state jurisdiction
Federal rules take precedence, but states retain limited authority to issue licenses for local stablecoin issuers.
Notably, the bill does not prohibit government officials or their families from directly or indirectly profiting from stablecoin issuance, which has become a focal point of opposition from Democrats. Public records show that Trump-affiliated businesses profited over $57 million from token sales through the World Liberty Financial project last year, raising allegations of 'legislation becoming a source of family income'.
Why pass it now? Three major driving forces
Global competition intensifies
The EU has passed the MiCA framework, and Asia (Singapore, Hong Kong) is also establishing licensing systems. If no action is taken, U.S. dollar stablecoins may lose their dominant position to 'compliant euro coins' or 'compliant Hong Kong dollar coins'.
Frequent black swan events
From the Terra crash in 2022 to the decoupling of USDC from SVB and the Tether reserve controversy, recent history has exposed systemic risks. The GENIUS Act is a structural response to these failures.
Institutions need regulatory clarity
Institutional investors have long been interested in the stablecoin space but have hesitated due to unclear compliance costs. This bill lays the groundwork for capital inflow.
Three major affected market participants
Compliant stablecoin issuers will thrive
Projects focused on transparency and regulation, such as Circle (USDC) and Paxos (USDP), will benefit. They may gain formal recognition and become preferred partners for banks, payment systems, and platforms like Apple Pay, Visa, or SWIFT.
Offshore stablecoins may be marginalized
Although Tether (USDT) leads in market capitalization, its transparency issues are prominent. With the implementation of the GENIUS Act, American users and platforms will tend towards compliant options, potentially excluding offshore stablecoins from exchanges and payment systems. Regional differentiation is expected: USDT will dominate the Asia-Pacific and Middle East; USDC will dominate the U.S. and Europe.
DeFi/GameFi projects will face identity transformations
Currently, most DeFi platforms lack KYC infrastructure. If on-chain assets need to comply, protocols must integrate identity filtering and risk modules. Many platforms will launch 'professional' or 'institutional' versions to meet GENIUS requirements.
Future trends: Three potential directions
Regulatory technology (RegTech) will thrive
Compliance technology needs such as identity verification, on-chain risk control, and real-time auditing will surge. Companies like Chainalysis, TRM Labs, and Blockpass are expected to grow rapidly.
Wave of stablecoin migration
Platforms like Coinbase, Kraken, and Robinhood will fully transition to compliant stablecoins. Non-compliant tokens are expected to be delisted, and funds will flow into regulated liquidity pools.
Integration of banks and stablecoins
It is expected that banks such as Citibank and JPMorgan will issue or custody stablecoins. This will bridge the gap between traditional banking and cryptocurrency, ushering in a true 'digital dollar'.
Summary
For the stablecoin industry, the GENIUS Act is not suppression but regulatory empowerment. Its passage marks a turning point: from disorder to legitimacy.
For issuers, this is a compliance challenge.
For users, this is a restoration of trust.
This is a historic opportunity for the entire industry.
