Stablecoins

What Are Stablecoins?

Stablecoins are digital assets designed to maintain a stable value, typically pegged to the U.S. dollar. Unlike volatile cryptocurrencies like Bitcoin, stablecoins aim to maintain a consistent 1:1 value with traditional currency. They've grown rapidly in use, facilitating crypto trading, cross-border payments and dollar access in emerging markets.

The GENIUS Act

The Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) became law when President Donald Trump signed it on July 18, 2025. This represents the first comprehensive federal framework governing cryptocurrency in the United States.

Legislative Journey

Republican Senator Bill Hagerty introduced the bill on May 21, 2025, and it gained strong bipartisan support. The Senate passed it on June 17, 2025, with a vote of 68–30, with most Republicans and about half of Democrats voting in favor. The House passed it on July 17, 2025.

Key Requirements

The GENIUS Act establishes strict standards for stablecoin issuers:

Reserve Requirements: Any issuer of payment stablecoins must hold high-quality, liquid reserve assets backed at least at a 1:1 basis (100% reserve). Acceptable reserves include U.S. dollars, Treasury bills, and similar liquid assets.

Who Can Issue: Only certain entities can issue stablecoins — bank subsidiaries, nonbanks supervised by the Office of the Comptroller of the Currency (OCC), and state-chartered entities with federal approval.

Operational Restrictions: Issuers must hold US dollar reserves on a one-to-one basis, provide monthly certification of those reserves, implement strict anti-money laundering controls, and are forbidden from rehypothecating reserves or paying interest to holders.

Regulatory Status: Payment stablecoins are neither a security nor a national currency, nor do they have deposit insurance or automatic access to Federal Reserve payment services.

Market Impact

Following enactment, global crypto assets briefly surpassed $4 trillion, which observers partly attribute to increased confidence in clearer regulatory standards for stablecoins. The law has also attracted attention from traditional financial institutions exploring participation in the stablecoin market.

Implementation Timeline

The act includes a three-year transition period, with full implementation expected by January 2027. During this time, regulators must develop specific capital, liquidity, and risk management standards for issuers.

The GENIUS Act represents a significant shift in how the United States approaches digital assets, providing clarity and consumer protections while allowing innovation to continue within a regulated framework.