U.S. legislative proposal, Genius 2.0, aims to impose controlling measures on digital currencies known as stablecoins
U.S. Senate Reviews New Bipartisan Draft of GENIUS Act for Stablecoin Regulation
The U.S. Senate is currently reviewing a new bipartisan draft of the Growing Economic and Innovative Opportunities for Stablecoins (GENIUS) Act. This legislation aims to establish a comprehensive regulatory framework for stablecoins, digital currencies that are designed to maintain a stable value.
According to the draft, stablecoin issuers will be treated as financial institutions under the Bank Secrecy Act. They will be required to implement mechanisms to freeze suspicious transactions and suspend transfers in case of illegal activities. The stablecoins will also be backed 1:1 by high-quality liquid assets such as cash or U.S. Treasury bonds.
The law introduces ethical norms for stablecoin issuers, including the prohibition of making misleading claims about governmental backing and the obligation to maintain full transparency in their operations. Smaller stablecoin issuers can operate under state regulations, as long as they meet minimum federal standards.
Issuers of stablecoins with a market capitalization above $10 billion will be directly regulated by the Federal Reserve and the Office of the Comptroller of the Currency (OCC). They must comply with strict anti-money laundering (AML) and know your customer (KYC) standards. The law prohibits issuers from making misleading claims about government guarantees or FDIC backing.
The bill includes specific provisions for the treatment of stablecoin issuer insolvencies. It also regulates marketing to avoid consumer confusion. The potential approval of the new GENIUS Act is key to shaping the future of digital finance in the country and maintaining U.S. leadership in the global crypto ecosystem.
The new draft regulates the issuance of stablecoins, restricting the authority to specific federally or state-approved entities. This marks a tightening compared to earlier versions, as it excludes uninsured national banks and certain non-U.S. bank federal branches. The Act explicitly preserves existing eligibility for entities to obtain Federal Reserve master accounts, maintaining continuity with the current monetary infrastructure.
To balance financial innovation with consumer protection, national security, and U.S. monetary sovereignty, the GENIUS Act:
- Creates a comprehensive federal regulatory framework, harmonizing previously fragmented regulatory oversight and clarifying boundaries between federal and state authorities, promoting transparency through audits and reporting mandates.
- Prohibits large technology firms from issuing their own stablecoins, requiring them instead to partner with regulated banks or fintech firms, which limits systemic risks and enhances security while allowing innovation to leverage existing financial expertise.
- Addresses risks such as fraud, value instability, and illicit use by requiring issuers to adhere to clear legal and operational standards to maintain the stablecoin's peg and foster trust in U.S. digital assets.
- Seeks to preserve U.S. financial leadership and the global dominance of the U.S. dollar by establishing an early and robust legislative framework ahead of other countries, encouraging stablecoin innovation under U.S. jurisdiction and protecting national monetary sovereignty.
- Specifies rulemaking and phased implementation to be conducted by key federal agencies, including the Federal Reserve, OCC, SEC, and FinCEN during 2026 and 2027, supporting a gradual and well-coordinated regulatory rollout to minimize disruptions while ensuring compliance and consumer protection.
The investment in cryptoassets is not fully regulated and may not be suitable for retail investors due to its high volatility and the risk of losing the entire amount invested. The new GENIUS Act draft could be discussed as early as next week.
- The GENIUS Act aims to maintain the U.S. leadership in tech-finance by establishing a comprehensive regulatory framework, encompassing policy-and-legislation related to stablecoin issuance and security measures.
- In accordance with the draft, investments in digital assets like stablecoins continue to carry risks, such as volatility and potential losses, due to the lack of full regulation and suitability only for experienced investors.
- As part of this reconnaissance, the GENIUS Act introduces new provisions surrounding finance, politics, and technology, by prohibiting large technology firms from issuing their own stablecoins, while simultaneously mandating strict anti-money laundering (AML) and know your customer (KYC) standards to ensure a stable and secure financial environment.
