The Senate’s approval of the GENIUS Act represents a significant milestone for stablecoin legislation, marking its first successful passage through either chamber with bipartisan support. The bill aims to establish federal standards for the issuance, trading, and custody of stablecoins, passing by a vote of 68-30, including endorsements from 18 Democrats.
The Path Forward
For the legislation to become law, the House must now approve the bill. Despite some challenges, particularly in the Senate, where some critics had voiced opposition, the passage is seen as a major victory for crypto regulation.
“This clears a significant hurdle,” stated James Wester, Director of Cryptocurrency at Javelin Strategy & Research. “Critics of crypto and digital assets sit in the Senate, so it was crucial to gain this support.”
Global Impact
Roughly 97% of stablecoins are denominated in U.S. dollars, indicating that any regulations could have far-reaching effects on the global crypto market. Even European financial institutions are paying attention; France’s Société Générale, for instance, is launching a U.S.-dollar-backed stablecoin after its euro-backed version failed to gain traction.
The Regulatory Framework
The GENIUS Act introduces a federal framework for Permitted Payment Stablecoin Issuers while allowing state supervision to continue under uniform national standards. This is expected to provide clarity and reliability for financial institutions and large entities entering the market with consistent expectations.
Notably, each stablecoin token must be fully backed by U.S. dollar reserves and undergo monthly audits to maintain reserve adequacy, safeguarding investors and promoting overall stability in the industry.
All issuers will also need to comply with anti-money laundering (AML) and Know Your Customer (KYC) regulations.
Next Steps
The bill now moves to the House, which is considering its own STABLE Act. While there are still key differences between the two proposals, particularly regarding yield-bearing stablecoins and issuing entities, reconciliation efforts are underway to align the GENIUS Act with the House’s STABLE Act.
Wester believes that successful reconciliation could lead to a comprehensive regulatory framework for bank-issued, fintech-issued, and platform-issued stablecoins. “This is long overdue,” he concludes.