What Is the GENIUS Act, and Why Is Its Impact Comparable to a Bitcoin Spot ETF?

Introduction

TradingKey – On May 19, 2025, the U.S. Senate voted 66-32 in favor of ending debate on the GENIUS Act, marking a major milestone in crypto regulation. The passage of this motion has sparked excitement across the crypto market, with experts comparing its impact to the approval of a Bitcoin spot ETF.  

This article provides an in-depth analysis of the GENIUS Act, covering its core provisions, background, impact on crypto markets, and broader significance.

What Is the GENIUS Act?

GENIUS stands for "Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025." It is a federal regulatory framework aimed at governing the issuance and oversight of stablecoins in the United States.  

Rather than an entirely new law, the GENIUS Act builds upon the 2023 Payment Stablecoin Clarity Act, incorporating elements from previous proposals and refining existing regulatory approaches. It is important to note that the GENIUS Act has not yet passed into law—the Senate has only initiated its formal review process.  

Core Provisions of the GENIUS Act

The GENIUS Act establishes clear definitions and regulatory requirements for stablecoins, including issuance, reserve management, consumer protection, and oversight. Key components include:  

Stablecoin Definition  

- Stablecoins are digital assets pegged to a fiat currency, but they are not classified as securities or commodities.  

Issuance Authorization  

- Only federally or state-approved entities can legally issue stablecoins within the U.S.  

Reserve Requirements  

- Stablecoin issuers must hold reserves in a 1:1 ratio, consisting of high-quality liquid assets such as U.S. dollars, U.S. Treasury bonds, or money market funds.  

Regulatory Oversight  

- Stablecoins with a market cap above $10 billion: Regulated by the Federal Reserve or the Office of the Comptroller of the Currency (OCC).  

- Stablecoins with a market cap below $10 billion: Supervised by state-level regulators.  

Consumer Protection Rules  

- Users have priority claims on issuer reserves in the event of bankruptcy.  

- Issuers must publicly disclose reserve holdings under strict transparency requirements.  

Blockchain Restrictions  

- Only public blockchains can issue stablecoins. Private and consortium blockchains will not be protected under the law.  

Issuer Limitations  

- Non-financial publicly traded companies will not be allowed to issue stablecoins.  

The GENIUS Act sets strict regulatory conditions for stablecoin issuance, ensuring that all approved stablecoins fall under U.S. federal legal protection. However, it also serves as an indirect warning that non-compliant stablecoin users will bear full personal liability for associated risks.  

Why Is the U.S. Introducing the GENIUS Act?

One of the biggest drivers behind the GENIUS Act is the requirement that stablecoin reserves be backed by U.S. dollars, Treasury bonds, or money market funds. This directly aligns with America’s economic interests, especially in two areas: strengthening the U.S. dollar's global dominance and absorbing U.S. treasury debt.

Senator Cynthia Lummis openly stated that the GENIUS Act is a crucial step toward maintaining the U.S. dollar’s leadership in global finance. Senator Bill Hagerty emphasized that the GENIUS Act boosts demand for U.S. government bonds, reinforcing the dollar’s status as the world’s reserve currency.  

Treasury Secretary Scott Bessent further warned on May 9, "Failing to advance the GENIUS Act would be a generationally missed opportunity to expand the dollar’s dominance and influence over financial innovation."

Meanwhile, crypto and AI advocate David Sacks described the GENIUS Act as not just a regulatory breakthrough but also a national economic strategy. Bo Hines, executive director of the U.S. Presidential Digital Asset Advisory Council, similarly stated, "The GENIUS Act is fundamentally about securing the future of U.S. finance."

How Will the GENIUS Act Impact Crypto Markets?

Although the GENIUS Act was introduced with American financial interests in mind, its provisions directly shape the future of stablecoins, making it a major force in the broader crypto industry.  

1. Clear Regulatory Standards  

- The Act eliminates regulatory uncertainty, reducing compliance costs and streamlining oversight.  

- It prevents overlapping regulations, which have historically slowed stablecoin adoption.  

2. Market Consolidation & Competitive Filtering  

- According to CoinMarketCap, over 232 stablecoins exist, with massive disparities in market cap. For example:  

  - USDT holds $150 billion  

  - USDN and USBD have collapsed to zero  

- The GENIUS Act will likely eliminate weaker, non-compliant stablecoins, leading to a more concentrated and competitive market.  

3. Institutional Adoption & Capital Inflows  

- A stable, well-regulated market encourages institutional participation in stablecoin issuance and investment.  

- Companies and investors may enter secondary markets, increasing stablecoin liquidity and usability.  

4. Boosting Crypto Prices Beyond Stablecoins  

- While stablecoins themselves offer little price volatility, their capital inflows benefit other cryptocurrencies.  

- Bitwise CIO Matt Hougan believes,"I see the GENIUS Act laying the foundation for sustained, long-term growth in crypto assets beyond Bitcoin."

Conclusion

The GENIUS Act represents a groundbreaking federal regulatory framework for U.S. stablecoins, defining legal issuance standards, oversight responsibilities, consumer protections, and reserve requirements.  

While its primary objective is to advance U.S. financial interests, it will significantly shape the future of crypto markets—much like the SEC’s approval of a Bitcoin spot ETF.