U.S Congress Passes Genius ACT- What It Means For Crypto

Key Insights

• Genius ACT passes through the U.S Congress, awaiting Trump's signature

• The Genius ACT gives legal clarity for stablecoin regulations and the crypto framework

U. S Congress Passes Genius ACT

Prior to last year's presidential election, Trump promised to make America the capital of crypto. In line with this vision, the U.S. Congress moved to pass the Genius. Thus, in a landmark move for the cryptocurrency industry, the United States Congress officially passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act, also known as the GENIUS Act.

 This historic legislation, passed as part of "Crypto Week" on Capitol Hill. Under the legislation, the United States now has the most comprehensive federal regulatory framework for stablecoins to date. Following Senate approval in June 2025, the bill cleared the House of Representatives on July 17 and is expected to be signed into law by President Trump on July 18.

With stablecoins playing an increasingly pivotal role in the digital asset ecosystem, particularly as a medium for cross-border payments, trading, and DeFi applications, GENIUS sets the stage for safer, more transparent, and better-regulated innovation in this rapidly growing sector.

As the U.S Congress passes the Genius Act, here's everything you need to know about the legislation, its impact, and why it matters for crypto users and investors.

A New Era for Stablecoins in the U.S.

Over the past 8 years, Stablecoins have experienced massive growth, yet they have operated mainly in regulatory uncertainty.

Source : Defillama

In fact, stablecoins have grown, surpassing $200 billion in Market Cap, as reported earlier by EMCryptohub.

With the passing of the GENIUS ACT, it changes this by creating a clear legal and operational framework specifically for "payment stablecoins," defined as tokens backed 1:1 by high-quality reserves, such as U.S. dollars, Treasuries, and short-term repos.

According to the report, the Genius Act will play a major role in strengthening financial stability, promoting consumer protection and most importantly, creating parity between foreign and domestic providers.

With this move, the U.S. government makes the most substantial endorsement of stablecoin technology to date, striking a balance between security, competition, and innovation.

Why Stablecoins Need a Legal Framework

While stablecoins like USDC and USDT have become indispensable for crypto trading and decentralized finance (DeFi), they've operated with minimal federal oversight. The lack of regulation has presented several challenges:

Financial Stability Risks: Without precise backing requirements, poorly managed stablecoins could trigger systemic risks during redemption crises (akin to a digital bank run).

Regulatory Arbitrage: Foreign issuers can access U.S. markets without adhering to strict anti-money laundering (AML) and sanctions laws, creating unfair advantages.

Market Uncertainty: Developers, exchanges, and institutional investors have hesitated to scale products due to unclear legal status.

GENIUS directly addresses these gaps, setting new standards that all payment stablecoin issuers must meet to operate in the U.S. market.

Key Provisions of the GENIUS Act

1. Permitted Issuers Only

Only approved U.S.-based entities or foreign entities operating under a comparable regime can issue payment stablecoins in the U.S. These entities must apply for "permitted issuer" status through one of three pathways:

A federally approved nonbank entity, a subsidiary of an insured depository institution, a state-chartered issuer regulated under an approved state regime and issuers from foreign jurisdictions must be approved by the Secretary of the Treasury and meet stringent compliance requirements.

2. Strict Reserve Requirements

Stablecoins must be fully backed 1:1 by high-quality reserve assets. At the same time, Shares in regulated money market funds. These reserves must be held with qualified custodians and cannot be reused, pledged, or hypothecated. Monthly public disclosures of reserve composition, along with a third-party audit requirement, further ensure transparency.

Importantly, Issuers are prohibited from offering yield or interest on stablecoin holdings, marketing their tokens as FDIC-insured, or tying the use of their stablecoins to other unrelated services.

Federal vs. State Oversight

GENIUS establishes a dual-path regulatory model:

Federal Path: Federally chartered entities are regulated by agencies such as the OCC, FDIC, or the Federal Reserve.

State Path: State-chartered issuers can operate if their state's rules are deemed substantially similar to federal requirements by the Stablecoin Certification Review Committee.

Large issuers with over $10 billion in outstanding stablecoins are automatically bumped into the federal regulatory regime, regardless of their original charter. This framework promotes flexibility while preventing regulatory arbitrage.

To ensure U.S players have the same advantages as foreign entities, the Genius ACT mandates that foreign issuers invest in U.S bonds, treasuries and avoid operations with sanctioned entities. According to lawmakers, this strategy is essential as it ensures that foreign entities meet the same compliance standards as their U.S. counterparts, enhancing both security and competitive fairness.

Consumer Protections and Bankruptcy Clarity

One of the most essential features of GENIUS is its emphasis on consumer protection. Under the Act, Stablecoin holders receive priority claims on reserve assets in bankruptcy. Additionally, custody providers must not commingle reserves or user funds. Finally, custodians must be licensed financial entities.

The Act prohibits unlicensed entities from offering custody unless they are merely providing hardware or software for users to manage their private keys. Equally, service provide must adhere to U.S laws and provide reports to Congress through the Financial Stability Oversight Council's (FSOC) yearly review.

Key implications include:

Most important thing to note with the Genius Act is that, with a clear legal pathway, banks and fintechs can now explore stablecoin issuance with less legal risk. Thus, it will give institutions the confidence to operate without any fear. Secondly, the use of regulated U.S. stablecoins could outcompete local currencies in developing nations, thereby extending the use of the dollar through blockchain. Through blockchain use of stablecoins, U.S dollar dominance will be secured.

Also, under such a framework, DeFi protocols that integrate GENIUS-compliant stablecoins will be seen as safer and more compliant, paving the way for regulated on-chain. Finally, Other jurisdictions may feel compelled to create similar frameworks or risk falling behind in fintech innovation.

What's Next? The CLARITY Act and Beyond

While GENIUS focuses on stablecoin issuance, the CLARITY Act, passed alongside it, covers broader digital asset market structures, including the classification of tokens, exchange registration, and the roles of the SEC and CFTC.

Together, these two bills are shaping what could become the U.S. equivalent of MiCA (Markets in Crypto-Assets Regulation) in the EU.

The success of GENIUS may also influence regulatory conversations around central bank digital currencies (CBDCs), especially as the private sector now has a sanctioned role in digital dollar creation and distribution.

Conclusion

The passage of the GENIUS Act represents a significant leap forward for crypto regulation in the U.S. It lays the groundwork for a more secure, transparent, and competitive stablecoin market while preserving American leadership in digital finance. With the CLARITY Act complementing GENIUS, the U.S. is now poised to provide a model for crypto regulation that other countries may follow.

For developers, institutions, and investors, the message is clear: the era of regulatory uncertainty for stablecoins is coming to an end, and a new chapter of legitimacy and innovation is just beginning.