The U.S. Senate passes the GENIUS Act: stablecoin regulatory framework takes shape.

Compilation: Vernacular Blockchain

On May 19, 2025, the U.S. Senate passed the motion to proceed to the final debate on Bill S.1582, paving the way for the final vote on the "2025 Guidance and Establishment of the National Innovation for U.S. Stablecoin Act" (, referred to as the GENIUS Act ). This legislation represents a significant effort by Congress to establish a clear, unified, and practical regulatory framework for the issuance and regulation of "payment stablecoins" within the U.S. crypto asset ecosystem.

This milestone marks the most comprehensive attempt by the U.S. federal government to date to establish a national regulatory framework for stablecoins. The bill aims to balance innovation with regulation, providing clear guidance for market participants and addressing the growing influence of digital assets in the global financial system. Below is a breakdown of the key provisions of the bill and their significance.

What is a "payment stablecoin"?

The GENIUS Act defines "payment stablecoins" as the following digital assets:

• The purpose of issuance is for payment or settlement;
• Can be exchanged at a fixed face value (e.g., 1 dollar).

Unlike algorithmic or highly volatile cryptocurrencies, these stablecoins must be backed by qualified reserve assets at a 1:1 ratio to ensure redemption stability and minimize systemic risks.

Reserve Requirements: Strictly Restricted Asset List

The entity issuing payment stablecoins must hold reserve assets equivalent to 100% of the issued amount, but not all assets meet the requirements.

The bill limits qualified reserve assets to:

• US currency and cash;
• Insured deposits at banks or credit unions;
• Short-term US Treasury Bonds;
• Treasury-supported repurchase and reverse repurchase agreements;
• Money market funds limited to government bonds;
• Central bank reserves;
• Other government-issued instruments approved by regulatory authorities.

Reserve assets can only be used for redemption, as collateral for repurchase operations, or for other activities approved by regulatory authorities. The goal is to eliminate speculative behavior and prohibit the use of client funds to pursue profits.

This legislation clearly states: the purpose of payment stablecoins is to maintain stability, not to generate profit. The separation of commercial risk and currency stability is the foundation of the GENIUS framework.

Reporting and Transparency: Disclosure Obligations

The issuer must publicly disclose:

• Exchange program;
• The composition of reserve assets and the total amount of stablecoins in circulation;
• Regular certification reviewed by a public accounting firm;
• Issuers with an annual circulation exceeding 50 billion USD must submit an annual audited financial report.

These transparency requirements aim to restore trust in an industry that has long been plagued by opaque and questionable stockpiling practices. The $50 billion audit threshold reflects a tiered approach to regulation – with greater scrutiny of large players.

Anti-Money Laundering, Compliance, and Executive Integrity

All issuers must comply with the Bank Secrecy Act (BSA), and the Financial Crimes Enforcement Network (FinCEN) is required to develop new anti-money laundering (AML) rules for digital asset activities.

FinCEN also needs:

• Develop new tools to detect illegal crypto activities;
• Review compliance plan;
• The issuer is required to formally prove that it has an effective anti-money laundering and sanctions framework.

In addition, individuals who have been convicted of specific financial crimes are not allowed to serve as executives or board members of stablecoin issuers.

The emphasis on the integrity of executives reflects the lessons learned from past failures in traditional finance and the cryptocurrency sector, where incompetent or unethical leadership has led to significant losses.

Who can issue stablecoins? Dual-track system

According to the GENIUS Act, stablecoins can be issued by the following institutions:

• Bank or credit union (through subsidiaries);
• Non-bank entities, including technology companies and fintech startups.

All issuers must register with the relevant federal agency. If the agency does not respond within 120 days, the application will be automatically approved—this pro-innovation feature is designed to prevent bureaucratic deadlock.

Non-bank issuers with a circulation of less than $10 billion may choose state-level regulation, provided that the Secretary of the Treasury, the Chairman of the Federal Reserve, and the Chairman of the Federal Deposit Insurance Corporation ( FDIC ) believe that the state's regulatory framework is "substantially comparable" to federal standards. This provision reserves space for smaller, startup companies to experiment with state-level regulation.

Federal Regulation and Law Enforcement

Choosing federal regulation or issuers with a circulation exceeding 10 billion USD will be supervised by the following agencies:

• Its main federal banking regulatory agency (if it is a bank);
• Office of the Comptroller of the Currency (OCC), targeting non-bank issuers.

These regulatory agencies will review the issuer's:

• Financial health status;
• Risks related to institutions and systemic stability;
• Risk Management Protocol.

Federal regulators can conduct inspections and require reports. If violations occur, they have the authority to suspend issuance or take other enforcement actions.

State-level regulation: Providing a flexible framework for startups

Non-bank issuers with a circulation lower than 10 billion US dollars may adhere to state-level regulation, provided that the state's regulatory system meets federal equivalency standards.

Once the issuer's circulation exceeds $10 billion, it must transition to the federal regulatory system unless exempted. States may delegate enforcement authority to the Federal Reserve, and in "special emergency situations," the Federal Reserve or OCC may intervene directly.

This combination of flexibility and upgrade mechanisms balances innovation with the integrity of national finance.

Foreign Issuers: Three-Year Transition Period

The bill sets a three-year transition period for stablecoins issued by foreign entities. Within the three years of the bill's enactment, only compliant domestic entities in the United States may issue or sell stablecoins.

Foreign stablecoins can only continue to operate under the following circumstances:

• Issued by jurisdictions deemed "equivalent" by U.S. regulators;
• Register at OCC;
• Supported by sufficient U.S. reserve assets;
• Has transaction freeze function and enforceable legal obligations.

This part clearly reflects concerns about the dominance of the US dollar, financial sovereignty, and national security, while laying the groundwork for future bilateral agreements between the US and major jurisdictions such as the EU, the UK, Singapore, or Japan.

Custody, Tokenized Deposits, and Bankruptcy Protection

The GENIUS Act establishes rules for stablecoin custodians:

• Custodians can be banks, credit unions, brokerage firms, or other regulated entities;
• Customer funds must not be mixed with proprietary funds;
• Allow the use of Blockchain infrastructure and issue tokenized deposits.

It is worth noting that stablecoin holders have a priority position over other creditors in bankruptcy proceedings. This legal clarity marks a turning point in user protection and the definition of responsibilities.

Stablecoins are not securities or commodities

The bill clearly states:

• Paying with stablecoins is not a security;
• is not a commodity;
• It is also not a tool insured by FDIC.

By doing so, the GENIUS Act avoids regulatory overlap with the Securities and Exchange Commission ( SEC ) and the Commodity Futures Trading Commission ( CFTC ), preserving their jurisdiction over other categories of crypto assets.

The True Meaning of the GENIUS Act

The GENIUS Act is not perfect. Critics argue that it favors large institutions and consolidates federal power. Others believe that it may stifle innovation due to compliance burdens or conflicts between federal and state agencies.

But from a broader context, the GENIUS Act marks three key shifts in U.S. policy:

1. Controlled Digital Dollarization: This bill legalizes USD-backed stablecoins as a permanent part of the financial ecosystem—provided they adhere to strict regulations.
2. Clear regulatory clarity on a large scale: Stablecoin issuers can operate for the first time under a clear, written framework and have enforceable expectations.
3. Strategic response to global cryptocurrencies: This law positions US stablecoins as reliable and interoperable payment channels in a multipolar financial world.

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Whether the GENIUS Act becomes the gold standard or just a stepping stone, its passage reflects the maturing regulatory attitude towards cryptocurrencies in the United States. **

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