The passage of the GENIUS Act by the Senate marks a significant step toward regulating stablecoins for the first time, garnering bipartisan support. The bill, aimed at establishing federal standards for issuing, trading, and custodianship of stablecoins, sailed through with a 68-30 vote, including endorsement from 18 Democrats.
The Senate’s Role
For the legislation to become law, it now awaits approval from the House. The Senate’s action may have been particularly challenging given the opposition of some outspoken critics of crypto and digital assets within its ranks. “This clears a major hurdle,” commented James Wester, Director of Cryptocurrency at Javelin Strategy & Research, “especially since some of the most vocal crypto skeptics occupy seats in this chamber.”
The Impact on Global Crypto Regulation
With approximately 97% of stablecoins denominated in U.S. dollars, regulation in the United States could have far-reaching effects on the global crypto industry. European banks are already responding to this shift. For instance, France’s Société Générale is launching a stablecoin tied to the U.S. dollar after its euro-backed stablecoin struggled to gain traction.
The Regulatory Framework
The GENIUS Act creates a federal framework for Permitted Payment Stablecoin Issuers, allowing state supervision to continue under national standards. This approach aims to provide financial institutions and large entities with clear pathways into the market while maintaining consistency in expectations. Walmart and Amazon have reportedly explored developing their own stablecoins within this regulatory framework.
Each stablecoin must be fully backed by U.S. dollar reserves, subject to monthly audits for verification of these reserves. The law’s goal is to safeguard investor interests and promote stability across the broader stablecoin market by ensuring issuers maintain sufficient reserves.
Compliance Requirements
In addition to reserve requirements, all stablecoin issuers must comply with anti-money laundering (AML) and Know Your Customer (KYC) regulations. These measures are designed to protect against illicit activities within the crypto space.
The Path Forward
For the bill to become law, it now needs to pass the House of Representatives, which has been considering its own STABLE Act. While both proposals share common goals, there remain significant differences, particularly regarding yield-bearing stablecoins and the entities authorized to issue them.
“The next step is reconciliation,” Wester observed, “aimed at aligning GENIUS with the House’s STABLE Act.” This process could be contentious but signals substantial progress. Both bills indicate a serious effort to provide market participants with legal clarity. If successful, this could finally establish a regulatory framework allowing bank-issued, fintech-issued, and platform-issued stablecoins to comply. Such a framework is long overdue.
