The GENIUS Act Lays a New Strategic Groundwork for the U.S. Dollar in the Digital Era

On Monday (May 19), the U.S. Senate voted 66 in favor and 22 against to advance the GENIUS Act.
Despite encountering skepticism from some Democratic lawmakers in recent weeks—especially over concerns about potential conflicts of interest tied to President Donald Trump’s involvement in cryptocurrency—the bill ultimately received support from 16 Democrats, including Senators Cory Booker of New Jersey and Adam Schiff of California.

What exactly is the GENIUS Act, and what are its key highlights?
The GENIUS Act focuses on the issuance and circulation of stablecoins. The legislation establishes several regulatory requirements for stablecoin issuers, including mandates for full asset reserves backing issued tokens, prioritizing user repayment in the event of bankruptcy, and compliance with anti-money laundering (AML) and counter-terrorism sanctions regulations to prevent the illicit use of crypto assets.

Issuance and Regulatory Requirements

Licensed Issuer System: Only banks, credit unions, or non-bank institutions with federal or state licenses are permitted to issue payment stablecoins.
100% Reserve Requirement: All stablecoins must be backed 1:1 by cash, short-term U.S. Treasuries, or other highly liquid assets.
Transparency and Auditing: Issuers must disclose reserve compositions monthly and undergo annual audits by registered accountants—especially mandatory for issuers with market caps exceeding $50 billion.

AML and National Security Compliance

Financial Institution Classification: Stablecoin issuers are designated as financial institutions under the Bank Secrecy Act and must establish AML and sanctions compliance systems, including risk assessments, transaction monitoring, and suspicious activity reporting.
Record-Keeping: Issuers must maintain records of stablecoin transactions for regulatory review.

Restrictions on Foreign Issuers and Big Tech

Foreign Issuer Compliance: Overseas stablecoin issuers must adhere to the same standards as U.S.-based issuers or risk being banned from offering services on U.S. platforms.
Big Tech Restrictions: Large tech companies (e.g., Meta, Amazon) must meet stringent financial risk management, user data privacy, and fair business conduct standards to issue stablecoins.

Consumer Protection and Bankruptcy Priority

Bankruptcy Priority Repayment: In the event of issuer insolvency, stablecoin holders will be prioritized in repayment.
Ban on Government Officials Issuing Stablecoins: Members of Congress and senior executive officials are prohibited from issuing stablecoins while in office to prevent conflicts of interest.

What Opportunities and Challenges Do Stablecoin Issuers Face?

For established issuers like Circle (USDC) and Tether (USDT), the GENIUS Act presents both opportunities and challenges.

On one hand, complying with strict reserve and disclosure requirements may boost consumer confidence and attract more institutional adoption. On the other hand, issuers that fail to meet the new standards may be forced to restructure their asset portfolios.

For example, if an issuer’s current reserve holdings don’t align with the law’s stipulations, they may need to convert non-compliant assets into U.S. Treasuries or other approved instruments. While this transition could be costly and time-consuming, it ultimately enhances transparency in the long run.

Betting on "Stability"? The GENIUS Act as a Tool to Reinforce Dollar Hegemony

The GENIUS Act is not just a regulatory framework for the stablecoin sector—it is also part of the U.S.’s strategic effort to solidify the dollar’s global dominance through regulation. By promoting compliant stablecoins, anchoring them to U.S. dollar reserves, and restricting non-compliant foreign issuers, the bill aims to reshape the competitive edge and monetary leadership of the "digital dollar."

Dollar-Pegged Stablecoins Fuel "Digital Dollar" Expansion Abroad

The compliant stablecoins promoted under the Act are predominantly pegged to the U.S. dollar. This means that every compliant stablecoin in circulation effectively represents a digital export of the dollar, expanding its influence globally.

Attracting Global Capital to U.S. Treasuries

The GENIUS Act mandates high-quality, low-risk reserves (e.g., U.S. Treasuries) for compliant stablecoins. Institutions like JPMorgan forecast that stablecoin issuers will become major buyers of U.S. debt, bolstering global demand for dollar assets and reinforcing its role as the world’s reserve currency.

Regulating Foreign Stablecoins to Maintain Dollar Leadership

Restrictions on foreign issuers like Tether—such as requiring U.S.-compliant subsidiaries or exiting the market—can prevent non-U.S. entities from competing for dominance in the dollar-denominated digital currency space.

Cheers and Criticisms: Is the GENIUS Act Truly Worth the Hype?

Supporters of the GENIUS Act argue that this legislation is the first serious attempt to establish a systemic regulatory framework for a critical component of the crypto sector—stablecoins. They believe it will not only safeguard consumers but also pave the way for traditional financial institutions to enter the space, thereby driving digital currency market growth.

Christian Catalini, founder of the MIT Cryptoeconomics Lab, remarked,
“This is like opening the floodgates—you’ll see more issuers enter the market, giving consumers more options, which will drive competition and innovation in the payments space.”

Catalini also believes the new rules will reduce the burden on consumers to differentiate between good and bad projects, shifting the focus to product quality as the main driver of competition among issuers.

“The next race will be about who can provide the most functional and practical stablecoin products for consumers and businesses.”

However, critics argue that the bill is too favorable to industry interests, with regulatory standards being too lenient to sufficiently protect consumers or curb illicit transactions involving stablecoins.

Senator Elizabeth Warren (D-MA) bluntly stated during her Monday Senate speech:
“While we urgently need a strong stablecoin regulatory bill, this toothless version is worse than no law at all.”

In March, a Trump-backed crypto firm called World Liberty Financial issued a stablecoin named “USD1.” Earlier this month, Abu Dhabi-based investment firm MGX injected $2 billion into Binance, a deal that could indirectly benefit Trump-affiliated companies.

Although the GENIUS Act explicitly prohibits sitting members of Congress or senior federal officials from issuing payment stablecoins while in office to prevent conflicts of interest, Warren argued the bill “falls far short” in guarding against projects like Trump’s from exploiting regulatory loopholes.

“This law might even offer more opportunities for Trump token buyers—like tariff exemptions, pardons, or government appointments.”

Looking Ahead: The Future of Stablecoin Regulation

Stablecoins, as crypto assets pegged to fiat currencies like the U.S. dollar, aim to offer price stability and are viewed as foundational infrastructure for advancing digital payments and fintech solutions.

Unlike highly volatile cryptocurrencies, stablecoins are designed for practical use in daily transactions and payments. However, in the absence of clear regulations, risks still exist—especially during mass selloffs when users may struggle to redeem their holdings.

Going forward, global regulators and crypto industry players will closely monitor the implementation of the GENIUS Act post-legislation. Smooth execution could accelerate adoption, while delays or inconsistent enforcement may inject new uncertainty. As other countries begin developing their own stablecoin regulatory frameworks, the GENIUS Act is poised to become an important reference for international best practices. Global coordination and cross-border harmonization could pave the way for a more integrated financial system, supporting the healthy development of digital assets.