After months of deliberation, the Senate Banking Committee has approved the GENIUS Act with a decisive 18-6 bipartisan vote, establishing the first comprehensive federal regulatory framework for stablecoins in the United States.
The legislation mandates that stablecoins maintain 1:1 reserves backed by high-quality liquid assets, with monthly disclosure requirements and mandatory third-party audits to ascertain compliance.
Stablecoins must maintain dollar-for-dollar reserves with quality assets, subject to monthly disclosures and independent verification.
The Act creates a dual regulatory pathway that allows issuers to choose between federal or state oversight. The Office of the Comptroller of the Currency will regulate nonbank stablecoin issuers with reserves exceeding $10 billion, while the Federal Reserve will oversee bank-issued stablecoins.
Smaller issuers below the $10 billion threshold may remain under state regulation if Treasury certifies the state's framework as adequate.
Consumer protection measures feature prominently in the legislation. These include segregation of customer assets, restrictions on using reserves for lending activities, and super priority for stablecoin holders in bankruptcy proceedings.
The GENIUS Act includes strong provisions against rehypothecation of collateral to ensure client assets remain secure and available for redemption at all times.
The Act also prohibits deceptive naming practices and requires character and fitness reviews for executives of issuing entities.
Despite strong bipartisan support, the bill faces notable opposition from several Democrats, including Senator Elizabeth Warren, who has expressed concerns about potential national security vulnerabilities and consumer protection gaps.
Some critics have questioned the timing of the legislation amid reports of a Trump-linked stablecoin project, calling for amendments to address perceived shortcomings.
The legislation classifies stablecoin issuers as financial institutions under the Bank Secrecy Act, requiring them to implement anti-money laundering programs and comply with sanctions monitoring.
FinCEN will tailor these requirements based on issuer size and complexity, with penalties established for non-compliant foreign entities.
Industry implications are significant, as regulatory clarity may attract institutional adoption while potentially favoring larger, compliant issuers.
The Act explicitly clarifies that payment stablecoins are not securities, potentially resolving a contentious regulatory question.
With this legislation, the United States positions itself as a global leader in stablecoin regulation, potentially enhancing the dollar's dominance in digital finance.
The bill, formally named the Guiding and Establishing National Innovation for U.S. Stablecoins Act, must still pass through both chambers of Congress before receiving presidential approval to become law.
