Pure GENIUS? America just gave stablecoins a rulebook

The GENIUS Act is a foundational part of President Trump's digital asset strategy and follows a series of bold public and private initiatives such as the creation of the Strategic Bitcoin Reserve, the launch of presidential memecoins of Donald and Melania Trump, and Trump Media’s recent acquisition of over $2 billion in bitcoin and bitcoin-linked securities, alongside an additional US $300 million allocated to an options acquisition strategy for bitcoin-related securities.

A fact sheet published by the White House outlines the core aims of the GENIUS Act as follows:

1.    Make America a leader in digital assets

The GENIUS Act is designed to make the United States the global hub for digital finance and innovation. It seeks to attract investment, foster innovation and provide regulatory clarity that encourages responsible growth. President Trump called it “American brilliance at its best” and emphasised that it will deliver on his promise to make the US the “crypto capital of the world”:

[The GENIUS Act] is going to make America the UNDISPUTED Leader in Digital Assets — Nobody will do it better, it is pure GENIUS! Digital Assets are the future, and our Nation is going to own it. We are talking about MASSIVE Investment, and Big Innovation. The House will hopefully move LIGHTNING FAST, and pass a ‘clean’ GENIUS Act. Get it to my desk, ASAP — NO DELAYS, NO ADD ONS. This is American Brilliance at its best, and we are going to show the World how to WIN with Digital Assets like never before!

2.    Protect consumers in digital markets

The GENIUS Act mandates that all stablecoins be fully backed by either cash, cash equivalents or short-term US Treasury securities. Issuers are required to publish monthly reserve composition reports and are prohibited from making misleading claims that their stablecoins are backed by the US government, federally insured or legal tender. In case of issuer insolvency, stablecoin holders' claims will take precedence over other creditors to ensure a “final backstop of consumer protection”.

3.    Ensure US dollar global reserve currency status

By requiring stablecoin issuers to hold US dollars or Treasuries, the GENIUS Act aims to increase global demand for US debt as reserve backing for stablecoins. This reinforces the dollar’s role as the primary reserve currency, while tying the evolution of digital finance more tightly to US financial strategy.

4.    Combat illicit activity in digital assets

Stablecoin issuers will now fall under the Bank Secrecy Act, subjecting them to strict anti-money laundering and sanctions compliance programs (for example, verifying customer identities). The legislation contemplates that issuers will be subject to requirements to freeze, seize or destroy tokens if lawfully ordered by law enforcement. Further Treasury consultations are expected on such measures in the coming months.

The future of money?

The regulatory clarity provided by the GENIUS Act is expected to accelerate adoption of stablecoins by major corporations and financial institutions. Companies like Amazon and Walmart are actively exploring use cases for stablecoins, while banks such as JPMorgan Chase and Bank of America are looking to develop their own stablecoin initiatives. However, other forms of digital money such as tokenised deposits will fall outside the regulation. For consumers, this could translate into instant and low-cost payments, potentially making stablecoins the preferred option for everyday transactions and online commerce.

The GENIUS Act also sets a strong regulatory precedent. International issuers hoping to access US markets will need to comply with its standards, effectively extending American regulatory influence into the global digital asset space. More broadly, the integration of stablecoin regulation into national financial strategy reflects a growing recognition that digital assets are no longer fringe innovations. They are fast becoming central to modern economic power, with the United States taking the lead in shaping the future of money.Breaking it downIt's clear that the mainstream adoption of stablecoins will drive blockchain usage, particularly smart contracts, and bring more people and usage to the crypto space, but critics have suggested that GENIUS creates "CBDC with a fresh coat of paint" and alleging that the Act drives stablecoin issuance to banks only.

The ban on yield being paid from stablecoin issuers to holders creates a big incentive for new entrants to the stablecoin market, as their profit source (yield on the assets backing their stablecoins) is clear and has a wide regulatory moat with only US Banks or licensed non-bank firms able to issue stablecoins, and foreign issuers must be from a country with "comparable" regulation.DeFi based stablecoins are excluded from the GENIUS Act, so those wishing to avoid CBDC-style controls or seeking yield will be pushed outside the regulated US system.

First published at Bits of Blocks and reproduced with permission.