The Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) took a major step toward becoming law after passing the Senate Banking Committee in a bipartisan 18-6 vote. Sponsored by Senator Bill Hagerty (R-Tenn.), the bill establishes a comprehensive regulatory framework for payment stablecoins, marking a significant shift in U.S. cryptocurrency policy. The bill’s advancement reflects growing momentum for stablecoin regulation but has also intensified divisions within the financial industry and political establishment.
Bipartisan Push for Clarity in Stablecoin Regulation
Introduced on February 4, 2025, the GENIUS Act aims to provide long-overdue regulatory clarity for stablecoin issuers and investors. Stablecoins, cryptocurrency tokens pegged to the value of a fiat currency like the U.S. dollar, are already widely used in both the crypto economy and traditional financial markets. Despite their increasing adoption, stablecoins have operated in a murky regulatory environment, leading to uncertainty for both businesses and consumers.
Senator Hagerty emphasized the importance of regulatory clarity in his opening remarks at the Senate Banking Committee markup:
As the world modernizes its payment systems, the U.S. cannot be left behind,” Hagerty said. “Stablecoins can play a pivotal role in spurring that modernization. Whether it’s improving transaction efficiency, freeing up working capital, or driving U.S. Treasury demand, the benefits of a clear regulatory framework for stablecoins are immense.”
The GENIUS Act establishes licensing and regulatory requirements for stablecoin issuers at both the federal and state levels. It permits state oversight of stablecoin issuers with a market capitalization under $10 billion, while larger issuers will be regulated by the Federal Reserve and the Office of the Comptroller of the Currency (OCC).
Key Provisions of the GENIUS Act:
1. Licensing and Oversight:
- Stablecoin issuers with a market cap below $10 billion will be regulated at the state level.
- Issuers exceeding $10 billion will face direct oversight from the Federal Reserve and OCC.
2. Transparency and Reserve Standards:
- Issuers must provide monthly liquidity reports.
- Full transparency on reserve composition is required to maintain trust and stability.
- Stablecoins must be backed by reserves held in U.S. dollars or highly liquid assets on a 1:1 basis.
3. Redemption and Consumer Protection:
- Issuers must meet redemption requests promptly.
- The Federal Reserve and OCC have the authority to suspend licenses or impose penalties for non-compliance.
4. AML/KYC Compliance:
- Issuers must comply with anti-money laundering (AML) and know-your-customer (KYC) standards to prevent misuse for illicit activities.
Committee Composition and Oversight
The Senate Banking Committee, formally known as the Committee on Banking, Housing, and Urban Affairs, is responsible for overseeing federal monetary policy, financial institutions, and international economic policy. Its jurisdiction includes banks, deposit insurance, the Federal Reserve, housing, and export controls.
The current composition of the committee includes 13 Republicans and 10 Democrats.
The bipartisan passage of the GENIUS Act reflects rare political consensus on crypto legislation, especially in the current hyper-partisan political climate. Notably, five Democratic senators—Rochester (D-Del.), Alsobrooks (D-Md.), Kim (D-N.J.), Gallego (D-Ariz.), and Warner (D-Va.) —joined all 13 Republicans in supporting the bill. This year, the committee also plans to address market frameworks for digital assets.
Industry Backing and Political Alignments
The bill’s bipartisan nature reflects broad support among industry participants and policymakers. Circle’s Chief Strategy Officer, Dante Disparte, praised the bill’s passage as “historic and bipartisan progress on creating a principled, America-first framework for regulating payment stablecoins,” and explaining further that “the GENIUS Act provides a pathway for the U.S. to lead rather than be led.” Circle is the issuer of the USDC stablecoin.
Consumer Advocate Pushback and Conflict of Interest Concerns
Despite industry enthusiasm, consumer protection groups have raised alarms about the GENIUS Act’s potential to legitimize risky crypto schemes. Public Citizen, a prominent consumer advocacy group, warned that the bill could destabilize financial markets and erode consumer protections.
In a letter to the committee, Bartlett Naylor, Public Citizen’s financial policy advocate, cautioned:
If the GENIUS Act becomes law, price manipulations, coin failures, and use of cryptocurrencies in illicit finance will increase. The committee should reject this ill-conceived, incomplete, and threatening legislation.
Naylor warned that the bill’s failure to extend the Bank Holding Company Act restrictions to stablecoin issuers would open the door for big tech firms like Amazon, Walmart, and Meta to enter the banking sector without sufficient safeguards:
“The GENIUS Act invites major commercial firms such as Amazon, Walmart, Twitter/X, and/or Facebook/Meta to enter the banking sector because it lacks provisions under the Bank Holding Company Act that would prohibit non-financial firms from entering the banking business.”
Adding to the controversy, reports have surfaced that the Trump family has been in talks to purchase a stake in Binance U.S., the world’s largest crypto exchange, despite its history of legal troubles. Binance’s founder, Changpeng Zhao (CZ), recently served a four-month prison sentence for facilitating money laundering. Although Zhao denied the reports, the potential Trump-Binance deal has raised significant ethical concerns.
Further complicating matters, Trump’s Commerce Secretary, Howard Lutnick (CEO of Cantor Fitzgerald), has deep ties to Tether, the world’s largest stablecoin issuer. Lutnick’s firm is Tether’s primary banker and holds billions in U.S. Treasury securities as reserves for Tether. While his deep knowledge and experience in the crypto industry is unquestioned, his equally deep ties to Tether raise real concerns about potential or actual conflicts of interest, especially given Tether’s essential role in decentralized finance ecosystem.
Nonetheless, stablecoin legislation would likely force Tether to comply with transparent reserve requirements in order to compete in the United States with compliant-focused stablecoins like Circle’s USDC.
Bicameral Alignment?
In the House of Representatives, competing stablecoin bills reflect divergent regulatory approaches, but Rep. French Hill (R-Ark.) has introduced a discussion draft that closely mirrors Hagerty’s GENIUS Act. Hill, who chairs the House Financial Services Subcommittee on Digital Assets, has championed a framework that establishes a balance between federal and state oversight for stablecoin issuers. Under Hill’s bill, smaller stablecoin issuers with a market capitalization under $10 billion would be regulated at the state level, while larger issuers would fall under the direct supervision of the Federal Reserve and the OCC. This state-federal split reflects a pragmatic approach designed to maintain market flexibility while ensuring sufficient regulatory oversight at the federal level.
Hill’s bill mandates that stablecoin issuers maintain 1:1 reserves in U.S. dollars or highly liquid assets, ensuring that each digital dollar is fully backed and redeemable on demand. By mirroring key elements of the GENIUS Act, Hill’s proposal seeks to create a unified federal framework that provides regulatory clarity for the stablecoin market without stifling innovation. Hill has emphasized that bipartisan cooperation will be essential to crafting effective, “fit-for-purpose” regulation that promotes consumer protection while fostering the growth of the domestic digital asset industry.
In contrast to Hill’s market-driven approach, Rep. Maxine Waters (D-Calif.) has introduced a more centralized and enforcement-heavy stablecoin bill. Waters’ proposal would require all stablecoin issuers—regardless of size—to be regulated at the federal level, eliminating the option for state-level oversight. Her bill explicitly prohibits “big tech” firms, such as Meta, Amazon, and X, from issuing stablecoins, citing concerns over corporate concentration and systemic risk. It also tightens regulatory controls on offshore companies to prevent them from evading U.S. financial regulations. Furthermore, the bill introduces strict eligibility requirements for ownership of stablecoin issuers, barring individuals with past convictions for financial crimes, including fraud and money laundering, from owning more than 5% of a stablecoin company.
Waters has framed her bill as a necessary consumer protection measure designed to prevent the kind of market instability and fraud that plagued the crypto industry in the past. While Hill’s bill emphasizes market innovation and flexibility, Waters’ bill focuses on regulatory rigor and systemic risk management.
Hill’s alignment with the GENIUS Act seems to reflect a strategic effort to harmonize House and Senate proposals, increasing the chances of securing a bipartisan agreement on stablecoin regulation. Both Hill and Hagerty have presented their bills as essential to maintaining U.S. leadership in the digital asset space and countering the growing influence of China’s digital yuan and the European Union’s comprehensive cryptocurrency framework. The alignment between Hill’s and Hagerty’s approaches signals alignment with Trump’s promise to position the United States as the global leader in stablecoin innovation and regulation.
Path Forward and Political Stakes
The GENIUS Act’s passage in the Senate Banking Committee marks a pivotal moment in U.S. crypto policy, but its path to becoming law uncertain. The bill will require at least 60 votes to advance in the Senate, making bipartisan cooperation essential.