The crypto industry scored a major victory with the passage of the GENIUS Act — the first law in the United States to regulate cryptocurrency. The act primarily focuses on stablecoins, which are digital currencies pegged to assets like U.S. dollar or gold. After passing both the Senate and House in bipartisan votes, the bill was signed into law by President Donald Trump on July 18, 2025.
The GENIUS Act, Explained
The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act is the first U.S. legislation that regulates cryptocurrencies. It aims to offer more clarity and confidence around the use of stablecoins, potentially encouraging wider adoption and industry growth.
This shift in U.S. policy reflects Trump’s embrace of the crypto industry as a whole, and builds on the more crypto-friendly environment he has established in the first months of his second term. But not everyone is thrilled about this new law. Here’s a look at what exactly the GENIUS Act does and what it means for the future of stablecoins and cryptocurrencies in general.
What Is the GENIUS Act?
An acronym for Guiding and Establishing National Innovation for U.S. Stablecoins, the GENIUS Act is the first piece of U.S. legislation that aims to regulate cryptocurrencies — in this case, stablecoins. Stablecoins are usually pegged 1:1 to the value of another asset, protecting them from the volatility seen in other cryptocurrencies like Bitcoin. But stablecoins aren’t immune to the usual risks of crypto investing. That’s why the GENIUS Act provides more guardrails for the currency by doing the following:
- Establishing rules for stablecoin issuers like segregation of reserves, monthly audits and minimum liquid capital requirements.
- Creating anti-money laundering and anti-terrorism processes.
- Allowing stablecoins to be issued only to permitted parties.
- Granting the Department of Treasury, Federal Reserve, Office of the Comptroller of the Currency and FDIC greater regulatory power.
- Prioritizing stablecoin owners when a custodian or issuer files for bankruptcy.
The overall idea is to make stablecoins an even more reliable currency to invest in, spurring the growth of the crypto economy.
What Does the GENIUS Act Mean for the Crypto Industry?
The GENIUS Act promises to bring federal oversight to stablecoins, which could have a major impact on the broader crypto industry. By setting clear rules and consumer protections, the law aims to instill confidence in a sector that has seen a lot of instability — particularly in the last few years.
In 2022, crypto suffered a damaging blow in the wake of the FTX collapse and subsequent imprisonment of its founder Sam Bankman-Fried, with investors losing billions of dollars at the time. That same year, the stablecoin, terra, collapsed when the mechanisms used to maintain its value failed. These events shook consumer faith in cryptocurrencies and discredited the entire industry, triggering a crypto winter.
But crypto is heating up once again, and the GENIUS Act could stoke the flames of a full-blown comeback. Official regulations would offer more direction around how stablecoins can be used, and provide protective measures to defend investors. It could provide the safety net investors, financial institutions and businesses need to treat stablecoins like a more trustworthy and legitimate currency. This, in turn, would encourage wider adoption of stablecoins — and, by extension, broader acceptance of crypto as a whole.
What Does the Genius Act Mean for the Banking Industry?
In addition to requiring stablecoin issuers to fully back their tokens with cash or short-term Treasury bonds, undergo audits and follow anti-money-laundering rules, the GENIUS Act also bars them from paying users any interest. However, the law does not stop crypto exchanges from offering customers rewards for their stablecoin holdings, which look a lot like interest. Coinbase customers can earn about 4 percent annually if they hold a stablecoin called USDC on the platform — about what you might expect from a high-yield savings account at a traditional bank. Kraken promotes a 5.5 percent reward on customers’ USDC holdings.
The banking industry says this is a major regulatory loophole, warning it could drive deposits out of traditional banks and into crypto exchanges. This, in turn, could have major knock-on effects for the entire U.S. economy, according to research from the Federal Reserve Bank of Kansas City.
“Funds flowing into stablecoins have to flow out of another source. If stablecoins are purchased out of checking accounts, for example, then these purchases represent a shift of funds from banks (as deposits) to issuers (as stablecoins),” Stefan Jacewitz, assistant vice president for the Kansas City Fed, wrote. “This potential flow of funds from bank deposits into stablecoins could increase Treasury demand but also could reduce the supply of loans in the economy.”
In fact, a report put out by the Treasury Department projects that consumers could shift up to $6.6 trillion out of bank deposits and into stablecoins, partially as a result of the GENIUS Act — a move the American Bankers Association warns could shrink banks’ lending capacity and drive up borrowing costs for consumers and businesses over time.
The crypto industry sees things differently. A study backed by Coinbase that looked specifically at community banks predicted a modest decrease of about 6 percent on banks’ deposits. Dante Disparte, chief strategy officer and head of global policy at Circle (the issuer of USDC) says stablecoins could actually boost dollar deposits, adding that the prohibition of interest for issuers is enough to “protect” banks. Even if stablecoin rewards do put the squeeze on banks, many crypto advocates see it as a good thing — an incentive for banks to offer better rates to their customers.
Some banks are even stepping into the crypto space themselves. Citigroup and Bank of America have hinted that they will launch their own stablecoins, and PNC Bank entered a strategic partnership with Coinbase days after the GENIUS Act was signed into law. So did JPMorgan Chase, allowing customers to directly link their bank accounts to their crypto wallets as soon as next year. JPMorgan is also testing a “deposit token” system that runs on similar technology as stablecoins without having to shore up the token’s reserves at a 1:1 ratio, which is also a requirement for stablecoins under the GENIUS Act.
The Response to the GENIUS Act So Far
While the GENIUS Act seems like a clear win for the crypto industry and its supporters, it has also evoked claims of corruption from critics.
Praise for the Bill as a Crypto Milestone
Republicans stood in unanimous support of the GENIUS Act, and 18 of the 45 Senate Democrats voted across the aisle to push the bill through. It passed in the House with the support of 206 Republicans and 102 Democrats. Notably, Republican Senator and Chairman of the Senate Banking Committee Tim Scott called the passage of the bill a “bold step forward” by “bringing clarity to a sector that’s been clouded by uncertainty.”
Not surprisingly, crypto companies have applauded the act as well, with leaders from Coinbase, Gemini and Ripple all sharing their approval. This comes on the heels of crypto advocates spending millions to influence U.S. elections. According to Follow the Crypto, crypto-focused PACs raised more than $197 million to elect pro-crypto politicians into office. It seems their efforts are paying off.
Criticism of the Bill as a Tool for Corruption
On the other hand, critics have warned that the GENIUS Act has some shortcomings. For instance, Democratic Senator Elizabeth Warren says it doesn’t go far enough in protecting consumers from financial risks and opens the door for further government corruption. Other Senators like Jack Reed have echoed these sentiments.
House Democrats expressed similar concerns. California Rep. Maxine Waters has said that by passing the bill, “Congress will be telling the world that Congress is OK with corruption, OK with foreign companies buying influence.”
These concerns are valid, given that President Trump raked in $57.4 million in income in 2024 from his family-backed crypto venture World Liberty Financial. While the GENIUS Act prevents “any member of Congress or senior executive branch official from issuing a payment stablecoin product during their time in public service,” it doesn’t impact Trump’s prior investment in World Liberty Financial.
Though the act is presented as a building block for crypto regulation, potential loopholes raise questions around who the bill really benefits — everyday consumers or crypto leaders and their political allies.
Frequently Asked Questions
What does the GENIUS Act stand for?
The GENIUS Act is an acronym that’s short for Guiding and Establishing National Innovation for U.S. Stablecoins.
Did the GENIUS Act pass?
Yes, the GENIUS Act has passed both the U.S. Senate and House of Representatives. President Trump signed it into law on July 18, 2025.
What are stablecoins?
Stablecoins are a type of cryptocurrency designed to keep a steady — or “stable” — value by tying their price to traditional assets like the U.S. dollar or gold. While most cryptocurrencies are highly volatile, stablecoins aim to bring some consistency to the industry. They’re often used for trading and transferring money quickly and securely.
