What Happened?
The GENIUS Act has made significant progress in the United States Senate, passing with a vote of 68 to 30. This legislation will establish a clear regulatory framework for stablecoins, requiring issuers to register, ensuring that stablecoins are backed by a 1:1 reserve, and mandating compliance with auditing and anti-money laundering regulations. It is viewed as an “important bridge” connecting traditional finance with blockchain, potentially providing a pragmatic regulatory environment for digital asset innovation.
The passage of the GENIUS Act could enhance the dominance of the U.S. dollar in the digital economy. Since most stablecoins in the market are currently pegged to the dollar, the implementation of the Act will lend legitimacy to the “digital dollar” and promote its global adoption, effectively countering the arguments for “de-dollarization” and potentially drafting a “rulebook” for the future global financial system.
Despite the optimistic outlook, the GENIUS Act still faces challenges. Some Democrats have expressed concerns over the lack of adequate safeguards in the legislation, particularly regarding potential conflicts of interest and self-dealing issues related to the Trump family’s cryptocurrency business.
The U.S. GENIUS Act: A Milestone in Stablecoin Regulation, Key Layout to Strengthen Digital Dollar Dominance
The U.S. Congress is currently deliberating the “Guiding and Establishing National Innovation for US Stablecoins Act,” abbreviated as the GENIUS Act, which is progressing towards final approval following critical procedural votes in the Senate. If successfully enacted, this legislation not only promises a long-awaited regulatory framework for the U.S. cryptocurrency industry but also aims to solidify the dollar’s position in the digital economy and lay the groundwork for the future global financial system.
The much-anticipated stablecoin legislation, if successfully passed, is expected to provide the U.S. cryptocurrency industry with the long-awaited regulatory framework and strengthen the dollar’s position in the digital economy, potentially countering the narrative of “de-dollarization.”
Analysis of the Legislative Process and Positions on the GENIUS Act
The GENIUS Act has successfully advanced in the U.S. Senate with a voting result of 68 to 30, although it is not yet the final version. Before the final vote, legislators can still propose and discuss amendments to the bill’s content.
Initially hindered by concerns from some Democrats over the connections to Trump’s cryptocurrency industry, the Act ultimately gained the support of a bipartisan majority. This reflects a high level of consensus in Congress regarding the need to establish a clear regulatory framework for digital assets, especially for stablecoins.
The industry generally holds an optimistic view of the Act. Paul Grewal, Chief Legal Officer at Coinbase, pointed out that the legislation is expected to bring regulatory clarity. A clear regulatory environment is crucial for the development of blockchain technology, effectively reducing uncertainties for businesses and attracting more traditional financial institutions into the digital asset space.
However, there are critics who express concerns over the lack of sufficient safeguards in the Act, particularly regarding potential self-dealing issues that may arise from stablecoin issuers. Senator Elizabeth Warren has warned that the Act could “actively facilitate” abuses related to Trump’s cryptocurrency business. In response, amendments have been proposed in the legislation to prevent elected officials and their families from issuing stablecoins to address potential conflicts of interest.
GENIUS Act: A Robust Stablecoin Regulatory Framework and Its Far-reaching Implications
The core objective of the GENIUS Act is to establish a robust supervisory system for stablecoins. This U.S. stablecoin regulatory bill mandates that stablecoin issuers must register with the U.S. government and ensure their stablecoins are backed by a 1:1 reserve, while also being subject to regular audits and compliance with anti-money laundering (AML) regulations.
These stringent provisions aim to enhance the transparency and security of stablecoins, safeguard investor rights, and prevent financial crimes. Roshan Robert, CEO of OKX US, believes that the GENIUS Act sends a “strong signal” of the U.S. government’s pragmatic approach to digital asset innovation.
He emphasized that the Act provides an “important bridge” for traditional finance to explore blockchain-driven payments and settlements. A clear regulatory framework helps establish responsible and transparent infrastructure, promoting interoperability between centralized and decentralized systems, with stablecoins viewed as a key bridge connecting traditional finance with digital assets.
These fiat-pegged tokens, especially those tied to the dollar, are expected to facilitate low-cost cross-border fund transfers and commodity payments globally. Data from the analytics platform DefiLlama shows that the two largest stablecoins by market capitalization (Tether’s USDT and Circle’s USDC) are both dollar-pegged, together accounting for a staggering 86.4% of the total stablecoin market capitalization.
This further underscores the dominant position of stablecoins in the current digital asset market and their close ties to the dollar.
How the GENIUS Act Strengthens the Dollar’s Position and the Future of the “Digital Dollar”
The passage of this Guiding and Establishing National Innovation for Stablecoins Act may have profound implications for the dollar’s status in the digital economy and is expected to counter the narrative of “de-dollarization.” Supporters argue that since most stablecoins are pegged to the dollar, the implementation of the GENIUS Act will reinforce the dollar’s influence. Bill Sebell, Executive Director of the XDC Foundation, remarked, “Dollar-backed stablecoins are the new financial power tools of the 21st century.” He believes that if the GENIUS Act passes, it will enable “anyone with a smartphone to hold compliant digital dollars, enhancing the dollar’s reach and relevance amid predictions of its decline.”
In other words, even in the absence of a Central Bank Digital Currency (CBDC), the dollar can circulate globally in digital form through regulated stablecoins, expanding its influence. The proliferation of this “digital dollar” will provide strong support for the U.S. to maintain its leading position in the global financial system.
The “Rulebook” of Global Finance and Potential Impacts
In addition to solidifying the dollar’s position, the GENIUS Act may lay the groundwork for the regulation of decentralized and programmable currencies, which could impact the development prospects of the U.S. Central Bank Digital Currency (CBDC). Mike Cahill, CEO of Web3 infrastructure development company Douro Labs, stated that this stablecoin bill is crucial as major financial institutions are already exploring issuance, and clear federal guardrails will legitimize stablecoins as a new type of programmable currency, integrating them into payments, settlements, and even treasury management.
He further pointed out that if the U.S. handles this correctly, it will not only lead the cryptocurrency market but also write the rulebook for the next global financial system.
Outlook and Challenges: The Final Fate of the GENIUS Act
Although the Senate has passed the amended bill, its prospects in the House of Representatives remain uncertain, as the Republicans hold only a slim majority there. Moreover, the association between Trump and the cryptocurrency industry continues to be a focal point of concern for some Democratic lawmakers. U.S. Treasury Secretary Scott Bessent believes that the passage of the GENIUS Act will provide a critical regulatory foundation for explosive growth in the stablecoin market, scaling it to an astonishing level. He anticipates that if the GENIUS Act passes, the total market capitalization of global stablecoins could reach $3.7 trillion by 2030.
In addition to the GENIUS Act, the House is also awaiting a vote on the CLARITY Act. The aim of the CLARITY Act is to establish a clear market structure for digital assets (such as various cryptocurrencies), defining their classifications, trading methods, regulatory responsibilities, and more.
Although both pieces of legislation have passed through the relevant committees in the House and are preparing to enter the full House voting phase, they face similar resistance as the GENIUS Act.
Regardless, the passage of the GENIUS Act will mark an important step for the U.S. in the field of stablecoin regulation, profoundly impacting the cryptocurrency industry, the global standing of the dollar, and the future global financial system. However, its ultimate fate will depend on further deliberations and votes in both chambers of Congress.
References: cointelegraph, cointelegraph
Further Reading: The Stablecoin Act GENIUS Act Passed; Which Crypto Assets Will Benefit?