The GENIUS act advances one step

US Stablecoin regulation on the way

Alex Speedie

June 3, 2025

The U.S. Senate is moving forward with the GENIUS Act, a major proposal to regulate stablecoins (digital currencies tied to the dollar). On May 19, lawmakers voted to move the bill closer to a full debate, after earlier concerns about crypto links to the Trump family, weak consumer protections, and regulatory gaps.

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The GENIUS Act sets up a two-level system. States can approve stablecoin issuers with less than $10 billion in circulation, but once that limit is passed, federal oversight is required within a year. This approach offers flexibility for small startups while keeping big players in check. A key part of the bill requires all payment stablecoins to be backed one-to-one with safe, liquid assets like cash or U.S. Treasury bills. This reduces financial risk and makes stablecoins more like secure investment tools. It could also help the government by increasing demand for U.S. debt. Stablecoins are becoming a core part of digital payments because they’re fast and stable. But without clear rules, there’s risk from mismanaged funds to consumers losing money if issuers fail. The bill aims to fix this with monthly reports, audits, and rules to protect money in case of bankruptcy. Issuers also can't pay interest to users, so they avoid being classified as investments.

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Consumer protection is a big focus. The bill requires identity checks, anti-money laundering measures, and gives the government power to freeze transactions in extreme cases. Issuers must follow strong rules for risk management and cybersecurity. To avoid conflicts of interest, the bill bans members of Congress and senior officials from issuing stablecoins while in office. It also blocks risky practices like using reserves for high-risk investments and excludes algorithmic stablecoins for now, after past failures like TerraUSD.

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However, critics say the bill has problems. Some worry that letting states license issuers could lead to weak enforcement. The $10 billion cutoff might delay oversight until it’s too late. The ban on paying interest may also hurt innovation and limit competition. Privacy advocates are concerned about government powers to freeze transactions, which could be misused. Others think the bill doesn’t do enough to protect consumers in emergencies or to clarify how stablecoins would work with future U.S. digital dollars.

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Big tech firms can issue stablecoins through separate regulated companies to avoid monopolies. Non-bank firms like Circle and Paxos would benefit from clear national rules and easier access to financial systems, including international payments and decentralised finance. The act also includes a national passport letting approved issuers operate in all states without extra red tape. This helps reduce confusion and promotes consistency. But some worry the market could end up dominated by just a few companies. Globally, the GENIUS Act could influence other countries’ rules. With Europe already enforcing its MiCA law, the U.S. could lead in setting global crypto standards. Foreign stablecoins that don’t meet U.S. rules would eventually be banned, boosting U.S. influence.

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Two unrelated proposals attached to the bill could delay or derail it: one affecting credit card fees and another capping interest rates. Critics say these additions risk blocking important stablecoin rules.

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For the US government, at a time when it is likely to face record borrowing requirements, the GENIUS act is designed to be a magnet for foreign capital to circumvent the requirement for the administration to borrow directly. However, it is unclear what lenders are likely to see in return, other than an appreciation in the value of the coins. For context, US Bonds come with an interest coupon, for stablecoins there is no such guarantee, and if the dollar continues to depreciate against a basket of currencies, investors could decide against investing. After all, there is no substitute for robust economic policy.

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Nonetheless, the GENIUS Act is an important step toward regulating digital money. It offers clear rules, protects consumers, supports innovation, and helps position the U.S. as a global leader in digital finance. Similarly, for the UK, with the Financial Services reforms yet to be announced, the GENIUS act is likely to influence Governmental thinking, on crypto regulation, therefore for British people interested in crypto, what happens with this legislation will directly influence the UK.

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The GENIUS act advances one step

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