The legislation is viewed as a significant move towards regulatory clarity in the cryptocurrency space, potentially facilitating institutional adoption while imposing stricter entry requirements for issuers.

On June 17, 2025, the Senate passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act, known as the Genius Act, which aims to provide a regulatory framework for the stablecoin industry.

Critics, including Senator Elizabeth Warren, argue that the Genius Act does not provide adequate protections against fraud or issuer bankruptcy, as it does not equate to FDIC insurance for bank deposits.

Under the GENIUS Act, only approved financial entities, such as banks and federally qualified issuers, can issue stablecoins, effectively excluding Big Tech firms and foreign entities.

Concerns have been raised about systemic risks associated with stablecoins, particularly if nonbanks are allowed to issue them without the liquidity support that banks receive from the Federal Reserve.

This legislation establishes the first comprehensive framework for stablecoins in the U.S., addressing concerns regarding the stability and security of these digital assets.

The GENIUS Act will take effect 18 months after being signed into law or 120 days after regulators finalize their rules, with a three-year compliance window for digital asset service providers.

The passage of the Genius Act could propel cryptocurrencies further into mainstream finance, but it is crucial for the legislation to effectively address consumer protections and systemic risks.

This landmark bipartisan legislation requires payment stablecoins to be fully backed by reserves held in ultra-safe assets, undergo regular audits, and receive federal approval for issuance.

The GENIUS Act is part of broader efforts to regulate the growing cryptocurrency industry, aiming to build trust and ensure the reliability of stablecoins as a medium of exchange.

Investor protection advocates have raised concerns that the lack of regulatory intervention mechanisms in stablecoin systems could lead to severe financial instability, reminiscent of past financial crises.

While unregulated stablecoins cannot be sold on U.S. platforms, individuals are still permitted to use them in private transactions.