On the morning of July 19, 2025, U.S. President Donald Trump signed the GENIUS Act at the White House, marking the first legislation in U.S. history regarding stablecoins, a digital asset pegged to the USD. This is seen as a significant milestone, bringing stablecoins into a clear legal framework and opening a new era for digital finance in the U.S.
What is the GENIUS Act?
The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) is the first law to establish a legal foundation specifically for payment stablecoins in the U.S. Key points include:
- 100% Backing: Stablecoins must be fully backed by USD or equivalent liquid assets.
- Regular Audits: Issuing organizations must maintain financial transparency through regular audits.
- Anti-Money Laundering (AML): Strict compliance with AML regulations.
- Reserve Fund Restrictions: Investments can only be made in safe assets, such as short-term U.S. government bonds.
- Flexible Licensing: Issuing organizations can be licensed at the state or federal level.
- Close Oversight: The Federal Reserve (Fed) and the Office of the Comptroller of the Currency (OCC) are responsible for oversight.
This legislation has received strong support from the cryptocurrency community. Many experts believe the GENIUS Act will:
- Legalize stablecoins in everyday financial transactions.
- Promote financial innovation and expand access to banking services.
- Stimulate on-chain economic activity, driving blockchain projects.
Opportunities and Controversies
Despite the praise, the GENIUS Act faces criticism. Some Democratic lawmakers and ethics watchdogs are concerned that this law could benefit Trump’s family, especially since he has publicly supported the World Liberty Financial project, which aims to issue the USD1 stablecoin. Trump’s push for the House to swiftly pass the GENIUS Act has raised suspicions of conflicts of interest.
New York Attorney General Letitia James sent an eight-page letter to Congress requesting comprehensive amendments to the GENIUS Act. She argues that the law lacks necessary consumer and banking system protections. Some of her notable proposals include:
- Only banks should issue stablecoins, eliminating non-bank organizations.
- Prohibit issuing organizations located outside the U.S. to avoid loopholes like the Tether case.
- Mandate digital identification for stablecoin users.
- Apply capital standards and FDIC insurance similar to banks for issuing organizations.
Related: Donald Trump Plans to Allow Pension Funds to Invest in Crypto
Vision and Challenges
Despite the controversies, the GENIUS Act passed both the House and Senate with bipartisan support, a rare achievement in today’s polarized political climate. This law paves the way for companies like Circle, Paxos, and even foreign entities to operate more legally and transparently in the U.S.
However, many questions remain unanswered:
- Will regulatory agencies have enough oversight capacity?
- Can systemic risks from stablecoins be controlled?
- How will conflicts of interest involving President Trump and stablecoin projects be resolved?
The future of stablecoins in the U.S. is clearer legally, but the road ahead remains challenging. The GENIUS Act is the first step, but for stablecoins to become a pillar of digital finance, the U.S. will need more than this.
