The GENIUS Act and the New Age of Stablecoins
Stablecoins were born from a simple promise. Crypto needed something steady that moved like digital cash. A coin that held one dollar of value for every token in circulation. Traders used them to escape volatility. Businesses used them to settle payments instantly. For a while, the idea felt solid.
Then the first cracks showed.
People still remember the collapse of UST. It was a stablecoin that relied on an algorithm instead of real reserves. When pressure began to build, the system broke apart. Billions of dollars vanished, and many people lost savings they thought were safe. The crash hurt trust across the entire industry and raised a question that still hangs in the air. What exactly backs these digital dollars?
Even before UST collapsed, Tether (USDT) lived under constant speculation. Critics claimed that USDT was not fully backed. Supporters insisted that it was. Reports and attestations appeared but doubts never sat completely still. Each time the market shook, people watched Tether more closely to see if it would hold. It always did, but the uncertainty showed how fragile trust can be when a stablecoin grows far faster than the rules around it.
This is the world the GENIUS Act walks into. Years of confusion, a few painful failures, and a market that desperately needs clarity. Stablecoins have become too important to live in a grey zone. They carry billions of dollars every day across exchanges, wallets and networks. Yet until now, no one had clear federal guidance on how they should be issued or supervised.
The GENIUS Act tries to solve that problem by setting rules that define who can issue stablecoins, how the reserves must be handled, and what kind of oversight is required. It gives both institutions and ordinary users a foundation they can trust. It also gives the industry a chance to move forward without the shadows of past scandals.
These are the key points the act focuses on:
1. Clear rules for who can issue stablecoins
The act states that only approved and supervised entities can issue stablecoins. These can include:
• Registered financial institutions
• Licensed payment companies
• Entities that meet strict reserve and reporting standards
This stops unregulated groups from creating coins that pretend to be stable but carry hidden risks.
2. Full backing of stablecoins by safe assets
The act requires stablecoins to be backed by high quality, liquid assets. These usually include:
• Cash
• US Treasury bills
• Short term government securities
This removes the risk of “algorithmic backing” like the failed UST model.
3. Regular proof of reserves
Issuers must provide frequent and transparent reports showing that they actually hold the assets they claim. This helps solve long standing public doubts about stablecoins that do not offer full clarity on their backing.
4. Consumer protections
Holders of regulated stablecoins must have:
• The right to redeem tokens for actual dollars
• Confidence that reserves cannot be misused
• Clear legal recourse if an issuer fails
This brings stablecoins closer to how regulated financial products operate.
5. Federal oversight
Instead of leaving regulation to a patchwork of state laws, the act places stablecoin supervision under a federal authority. This makes rules uniform across the country and easier for institutions and developers to work with.
6. Guard rails for banks issuing stablecoins
The act outlines how US banks could create their own stablecoins while staying compliant with federal banking rules. This is a big step because it opens the door for:
• Bank backed digital dollars
• Instant settlement systems
• Integration with global payment rails
This is one of the reasons many analysts expect rapid growth of stablecoin adoption once the act is fully implemented.
7. Rules for operational resilience
Stablecoin issuers must prove they can handle:
• Cybersecurity threats
• Large redemption volumes
• System failures
This is meant to prevent crises like the runs that hit some stablecoins during market stress.
What the Act Does Not Do
Here are things it does not appear to do:
• It does not ban non US stablecoins
• It does not force stablecoins to become CBDCs
• It does not replace all state regulations overnight
• It does not dictate blockchain networks or technology choices
It is not only stablecoins that will be affected by the GENIUS Act. The rules placed on stablecoin issuers will influence every part of the on chain economy that depends on reliable digital dollars. Tokenized assets, DeFi applications, payment networks and even traditional financial institutions that want to explore blockchain will all feel the impact.
Stablecoins are the first layer of this change, but they are not the final destination. Once stablecoins become safer and more transparent under federal oversight, the entire environment around them becomes easier to build on. Tokenized Treasury bills, tokenized bonds and other real world assets depend on trusted settlement currency. DeFi protocols depend on stable liquidity. Businesses exploring on chain payments depend on predictable digital value. Clear rules bring more confidence to all these areas.
This is why the act has wider consequences than it seems. By defining how stablecoins must operate, it indirectly strengthens the systems that rely on them. This creates a smoother path for banks, fintechs and global institutions to enter the space with less hesitation.
This broader shift is captured well by Ignacio Aguirre, the Chief Marketing Officer at Bitget, who sees the GENIUS Act as a key turning point for the next two years:
“With the GENIUS Act now providing clearer federal oversight for stablecoin issuance, we expect 2025–2026 to bring a deeper integration of tokenized assets into mainstream financial rails, especially if major US banks begin issuing their own stablecoins. That would meaningfully expand global liquidity, enhance DeFi composability, and pull more real-world use cases, like payments, trade finance and settlement onchain. The key risks of regulatory harmonization and operational resilience remain, but those barriers are steadily declining. For now, the indicators worth watching are stablecoin settlement volumes, RWA market cap growth, and liquidity flows into tokenized Treasury products.”
