Bitcoin has hit a new all-time high (ATH) at around $111,500 and altcoins are also starting to enjoy greens with the total cryptocurrency market cap at just above $3.63 trillion, though still below its $3.9 trillion peak from this past December.
Amidst these massive gains came the big news of the GENIUS Act, the first comprehensive regulatory framework for stablecoins, advancing to the next stage, having cleared a key hurdle in the Senate this week.
The bill arrives at a time when the stablecoins ecosystem is experiencing tremendous growth, accounting for the majority of on-chain volume, and whose effects can even be seen beyond crypto, in the US Treasury market.
So, against this backdrop, let’s find out what the GENIUS Act is all about and how it is going to affect major players and the broad cryptocurrency industry.
What is the GENIUS Act? Regulating Stablecoins in the US
While it has been more than a decade since stablecoins were first introduced, during which their adoption has grown significantly, these fiat-backed digital assets remained outside the purview of regulations, until now.
In the European Union (EU), regulators introduced the ‘Stablecoins Regime’ of the Markets in Crypto-Assets Regulation (MiCA) last summer. Hong Kong, Japan, Singapore, and the UAE have also implemented their own regulatory frameworks for these fiat-backed coins. And now, the US is also bringing clarity and federal oversight to the thriving stablecoin sector with the GENIUS Act.
The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act was introduced earlier this year and has since been revised to introduce measures to protect customers and national security.
The bill is sponsored by Sen. Bill Hagerty (R-TN) along with Sen. Cynthia Lummis (R-WY), and Banking Committee Chairman Tim Scott (R-SC). Democrats Sen. Kirsten Gillibrand (D-NY) and Sen. Angela Alsobrooks (D-MD) have also co-sponsored the bill.
The GENIUS Act establishes a regulatory framework for payment stablecoins, introducing clear rules and compliance expectations for stablecoin issuers and platforms that list them to safeguard users and the broader financial system.
According to the Act, only those legally authorized can issue stablecoins. A “permitted payment stablecoin issuer” has been defined as a State-qualified payment stablecoin issuer, a subsidiary of an insured depository institution, or a federally qualified nonbank that’s been approved for the same.
The list of requirements set for the stablecoin issuer includes maintaining reserves backing the coin on a 1:1 basis, with reserves comprising Federal Reserve notes, demand deposits, and Treasury bills.
The stablecoin issuer is required to publicly disclose its redemption policy, establish procedures for redemption, and publish its reserve composition every month. Issuers with a market cap surpassing $50 billion must also have annual financial audits.
The bill prohibits the rehypothecation of the reserves backing the stablecoin.
Stablecoin issuers must also maintain appropriate operational, compliance, and information technology risk management standards. This includes Bank Secrecy Act and sanctions compliance, AML programs, customer identification, enhanced due diligence, transaction monitoring and recordkeeping, and suspicious activity reporting.
In addition to these, stablecoin issuers need to demonstrate their ability to freeze tokens.
For registration purposes, a federally qualified nonbank payment stablecoin issuer must be regulated and supervised exclusively by the Comptroller, with an option for a stablecoin issuer with a market cap under $10 billion to opt for regulation under a State-level regulatory regime, provided it is “substantially similar” to that of the federal regime.
Notably, the bill bans yield-bearing stablecoins and restricts large technology firms from acting as issuers.
The bill also prohibits members of Congress and senior executive special government employees from offering stablecoins while in public service.
Foreign Issuers to Face a New Reality
The rules outlined in the GENIUS Act apply to foreign issuers as well, and those not in compliance may be restricted from U.S. markets. The Treasury Secretary is also empowered to delist non-compliant foreign issuers.
This could be a problem for the largest stablecoin, Tether, which is regulated and headquartered in El Salvador. Some believe this can give Circle, which issues USDC, and Ripple, which is behind RLUSD, an advantage over USDT.
The strict compliance measures of the GENIUS Act mean that, for Tether to continue serving US customers, it would have to either become fully compliant or open a local subsidiary that is compliant.
Tether CEO Paolo Ardoino isn’t much concerned, though. In an interview with Fortune, he noted that dollar-backed USDT is a strategic asset that can help the U.S. preserve the greenback’s dominance.
“We are actually the last stronghold for U.S. dollar hegemony out there.”
– Ardoino
Tether, however, has already been edged out in the EU, where stablecoin issuers have to comply with MiCA regulatory requirements to offer their products and services in EU member states.
In a separate interview, Ardoino said that Tether has no plans to apply for its US dollar-pegged stablecoin to be compliant under MiCA. Calling the MiCA license “very dangerous” for stablecoins, the CEO said his decision not to apply for the MiCA license was to protect its over 400 million users.
Since MiCA regulations went into effect, many crypto exchanges have delisted USDT.
Ardoino has also criticized the EU’s regulatory framework for stablecoins, pushing companies to keep up to 60% of their reserves in uninsured bank deposits. “The bank insurance in Europe is only 100,000 euros,” he said. “If you have 1 billion euros, that’s like spitting on a fire.”
As for the US, it remains to be seen just how Tether responds to the new rules, but first, the bill must become the law.
Bipartisan Vote Clears the Way, What’s Next?
This week, the GENIUS Act cleared a key procedural vote in the Senate. With a 66-32 vote, the Senate helped the bill advance to the next stage.
While initially facing some opposition from Democrats, the bill ultimately received support from 16 party members, which allowed it to be passed. Once it is approved by both chambers of Congress, the bill will proceed to President Donald Trump for his signature, and then it will become law.
According to Sen. Gillibrand, the bipartisan bill “will provide regulatory clarity to this important industry, keep innovation on shore, add robust consumer protection, and reaffirm the dominance of the U.S. dollar.”
Calling it a milestone for the crypto industry that can drive innovation, Chainalysis CEO Jonathan Levin said:
“This legislation provides an opportunity to deliver long-needed regulatory clarity while reinforcing the United States’ competitive edge in blockchain innovation.”
The GENIUS Act, according to him, strikes the right balance of giving issuers confidence to build at scale while empowering regulators to manage risk.
The bill has been heralded as a groundbreaking effort to legalize stablecoins while protecting customers. By formalizing a key crypto segment, it is expected to ignite a massive wave of support for stablecoins and the entire industry.
“This sets the stage for these assets to go mainstream. You’ll see entry by many issuers. Consumers will all have more choices. This will bring more competition and innovation in payments.”
– Christian Catalini, founder of the MIT Cryptoeconomics Lab
According to him, the new rules remove the responsibility of making a distinction between good and bad actors in the stablecoin sector from consumers and drive quality competition between firms. “It becomes a game of who can deliver better use-cases and features to consumers and businesses the fastest,” Catalini said. “This opens the floodgates.”
The GENIUS Act isn’t just a crypto breakthrough, though, but rather a national economic strategy, according to the Crypto and AI Czar David Sacks.
As a new, cheaper, smoother, and more efficient payment system, stablecoins present “new payment rails for the U.S. economy,” and “extend the dominance of the dollar online,” he said.
The Rise of Stablecoins, From Niche Tools to Financial Powerhouses
Once a niche cryptocurrency product, stablecoin has today become an essential financial instrument in emerging as well as developed markets.
Designed to maintain the stability of fiat currencies, stablecoins offer a hedge against the volatility of crypto. Besides being used for crypto trading, stablecoins are also used to make cross-border payments and gain global access to USD.
A presentation from the German investment bank, Deutsche, revealed that stablecoins recorded $28 trillion in transfer volume in 2024, exceeding the transfers made with major card providers like Mastercard and Visa.
“They now power over two-thirds of crypto-trading,” said Marion Laboure, managing director of thematic research at Deutsche Bank, and analyst Camilla Siazon.
As a result, the total stablecoin market capitalization now sits above $248 billion, according to CoinGecko. The market has about doubled in the past two years.
Just about five years ago, in March 2020, the stablecoin market cap was sitting at a mere $5.5 billion when the massive global crash hit the crypto sector as well.
Since then, the stablecoin sector has skyrocketed with Tether’s USDT leading the market. With a market cap of $152 billion, USDT accounts for 61.26% of the stablecoin market. Notably, USDT manages more in daily volume than Bitcoin, at times more than the combined volume of Bitcoin and Ethereum.
The stablecoin has been so beneficial for Tether that it has made it one of the most profitable digital asset companies. Tether reported its yearly net profits exceeding $13 billion in 2024.
The 2nd largest USDC has a market cap of just over $61 billion, making up almost 24.6% of the stablecoin market share.
USDC issuer Circle is reportedly having informal talks to sell itself to Coinbase, the largest crypto exchange in the U.S., or Ripple, a crypto payments company behind XRP. Circle is seeking at least $5 billion, which is the valuation the company has also targeted for its Initial Public Offering (IPO).
Collectively, USDT and USDC make up 85.8% of the stablecoin market. These giants are followed by USDS ($7 bln), Etherna USDe ($5 bln), and DAI ($3.7 bln). PayPal (PYPL -0.28%) USD (PYUSD) is worth about $900 million, while Ripple USD (RLUSD) is a mere $310 million.
Stablecoins as a Tool for U.S. Hegemony
The massive growth stablecoins have seen all these years is the testament of their importance in not just the crypto sector but worldwide.
A survey conducted in Emerging Markets by Castle Island Ventures last year found that 47% of participants use stablecoins with the objective of ‘saving in dollars.’ In Brazil, Indonesia, Turkey, Nigeria, and India, stablecoins are also used for payments and efficient currency conversion.
Moreover, the survey found that demand for stablecoins will only grow from here, with 57% of users reporting increased stablecoin usage and 72% expecting their usage to increase further.
This adoption in regions where there’s limited access to dollar banking “puts them in a position to actually shape the future of the global financial system, in terms of both fortifying dollar hegemony and shifting economic controls outside the traditional banking system,” wrote Matthew Kimmell, a digital asset analyst at CoinShares.
So, by legalizing stablecoins, the bill will help the US government ensure that the US dollar remains the world’s reserve currency.
US Treasury Secretary Scott Bessent is of the same view and shared these sentiments during the White House Crypto Summit in March, when he noted that the US would use stablecoins to ensure the USD hegemony in payments and protect its role as the primary reserve currency for the global economy.
“As President Trump has directed, we are going to keep the US [dollar] the dominant reserve currency in the world, and we will use stablecoins to do that.”
– Bessent
Federal Reserve Governor Christopher Waller is also in support of using stablecoins to bolster the dollar by enhancing payment rails and overcoming capital controls in foreign countries.
A New Lifeline for the U.S. Treasury Market
While the GENIUS Act’s latest iteration bans the payment of stablecoin interest, a presentation to the Treasury Borrowing Advisory Committee (TBAC) looked into the potential for stablecoins to offer interest.
The meeting’s minutes mention a “robust discussion” about the potential implications of stablecoins that yield interest versus those that don’t. The presentation also ventured into the scope of stablecoins’ growth, resulting in net new demand for Treasury securities.
With no interest, stablecoin investment in Treasuries is estimated to expand to $1 trillion by 2028, which could be a bit higher if interest were to be offered, with no forecast provided, per the TBAC report. The figures were based on Standard Chartered research, which estimates stablecoin growth of $2 trillion by 2028.
Investment bank Citigroup (C +0%) also estimates that the US regulatory framework for stablecoins can help create significant new demand for US Treasurys.
Currently, stablecoin issuers collectively hold about 0.5% of the $35 trillion US debt, a small but growing amount, which comes against the backdrop of shrinking foreign ownership, from 34% to 23% over the past decade. USD-based stablecoins, as a whole, stand in 14th place as sovereign holders.
In particular, Circle reports over $22 billion in T-bill holdings as of Feb. 2025. Tether is currently holding around $120 billion in US Treasuries to back its USDT supply.
These numbers could see even bigger growth once the stablecoin legislation gets approved. Trump’s crypto and AI advisor, Sacks, told CNBC:
“We already have over $200 billion in stablecoins — it’s just unregulated. If we provide the legal clarity and legal framework for this, I think we could create trillions of dollars of demand for our Treasuries practically overnight, very quickly.”
Stablecoin Could Provide a Potential $2 Trillion Boost
Right now, US Treasuries are actually in need of new demand. As seen this week during the $16 billion sale of 20-year bonds, there’s a reluctance among investors to buy US assets. This pushed the yields on the bonds above 5.1%. Yield on 30-year Treasury bonds has also steadied above 5%.
The “lackluster” auction has created concern about the drying appetite for the U.S. Treasury while the supply of new debt increases. This occurred amidst Moody’s downgrade of the U.S. credit rating, which Bridgewater Associates founder Ray Dalio said poses a greater threat to U.S. Treasurys than recognized, as the risk of printing money to pay debt isn’t even considered here.
Mark Haefele, UBS Global Wealth Management’s chief investment officer, wrote the following in a note this week:
“While the selling of U.S. Treasuries in the immediate aftermath of the Moody’s downgrade was relatively modest, Treasury yields have climbed steadily since the end of April as budget negotiations have come to the fore.”
Here, stablecoins can help address the problem. It has been found that the US debt purchases made by stablecoin companies to back their coins actually have an impact on the Treasury market.
Researchers of the Department of Economics, Kyung Hee University, released a paper called “Macro-Financial Impact of Stablecoin’s Demand for Treasuries,” which found that large USDT minting events follow “statistically significant increases in the price of short-term Treasuries.”
While effects persist beyond the intraday window, the impact reverts gradually over subsequent days. Together, it provides “micro-level evidence that stablecoin issuance generates transitory but systematic demand shocks in the Treasury market,” noted the paper.
So, the stablecoin legislation should help stablecoins’ wider usage, which in turn, will lead to increased demand for US Treasurys.
This demand for government debt from the digital asset sector could potentially reach $2 trillion over the next several years.
“Digital assets are an important source of innovation that can drive usage of the US dollar around the world… There is speculation that there may be up to $2 trillion of demand over the next few years for US government securities from digital assets.”
– US Treasury Secretary Bessent
Overall, the GENUIS Act marks a critical moment in the crypto industry. With this legislative clarity, we can see a big wave of institutional adoption and competitive innovation across the board, finally pushing crypto deeper into the mainstream!