Prime Highlights

• The U.S. Senate enacts the GENIUS Act to control stablecoins with a view to increasing financial transparency and consumer protection.
• Critics contend that the Act will most likely inadvertently replicate previous financial mayhem to the detriment of a global financial crisis.

Key Facts

• The GENIUS Act requires 1:1 reserve backing for every U.S. dollar-backed stablecoin.
• The bill was endorsed by sweeping bipartisan majorities in the form of 68–30 votes in the U.S. Senate.

Key Background

The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) is the United States’ initial serious step towards comprehensive federal regulation of stablecoins. Signed into law in June 2025 by the Senate, the bill establishes a regulatory regime that mandates stablecoin issuers to maintain full one-to-one reserve backing in high-quality liquid assets, including U.S. Treasury bills. It also calls for frequent independent audit, solid consumer protection, and anti-money laundering reporting. The bill is intended to foster healthy innovation within the digital financial market while ensuring national competitiveness coupled with security.

The GENIUS Act recognizes the increasing importance of stablecoins, which facilitate more than 60% of all global cryptocurrency transactions. The co-sponsors believe that the bill has the potential to stabilize the market, facilitate safe utilization of digital assets for international trade, and provide an affordable substitute for international remittances and payments. It also seeks to create a dual-licensing system under which federally chartered banks and qualified nonbank institutions will be permitted to issue supervised stablecoins under open supervision.

To the extent it does so, the Act has provoked economists and economic historians into a fit of rage. Economists are concerned that the legislation opens the door to 19th-century “wildcat banking” period problems where many institutions created competing currencies that would otherwise result in unabated suspicion and economic disarray. It is concerned that banks or large corporations are able to over-borrow themselves by creating electronic money with inadequate transparency or risk protection—possibly leading to system financial instability when redemptions fail to occur in times of stress markets.

One of the furores is exempting the U.S. President and the Vice President from restrictions on keeping stablecoins—something to be concerned about from an ethical standpoint off the back of crypto holdings publicized by political dynasties. The bill now proceeds to the House of Representatives for enactment into law. In the event of its passage, it could change the face of finance—either as a paradigm of digital finance regulation or as a trigger of unforeseen economic ramifications.