The Intent and Implications of the U.S. Stablecoin Bill

·

In a pivotal shift for global digital finance, the U.S. Senate recently passed the Generative and National Innovation in Stablecoins Act (GENIUS Act), signaling a strategic move to dominate the rapidly evolving stablecoin market. While the bill awaits review by the House of Representatives, its core provisions reveal a clear policy direction: to consolidate U.S. leadership in digital payments through dollar-backed stablecoins.

This legislative effort reflects more than just regulatory oversight—it underscores a broader ambition to shape the future of global finance by ensuring that the U.S. maintains control over both the issuance and infrastructure of digital dollars. As other major economies like the UK, Australia, South Korea, and Argentina advance their own stablecoin frameworks, the race for digital monetary influence is intensifying.

👉 Discover how global financial leaders are positioning themselves in the stablecoin revolution.

Restricting Foreign Issuers: A Push for Domestic Control

The GENIUS Act defines “payment stablecoins” as non-security digital assets designed for transactions and redeemable at par value (e.g., $1 USD). Crucially, it mandates that issuers must be U.S.-registered entities, falling into one of three categories:

Foreign entities seeking access to the U.S. market face stringent requirements, including registration with the Office of the Comptroller of the Currency (OCC). The OCC evaluates factors such as:

Additionally, the bill promotes reciprocity: foreign regulators must allow U.S.-based issuers to operate within their borders if they wish their own firms to issue dollar stablecoins in America.

Unlike the EU’s MiCA regulation—which caps transaction volumes and restricts non-euro stablecoins—the U.S. approach imposes no limits on currency type, usage, or scale. This permissiveness is rooted in confidence: with dollar-backed stablecoins already commanding over 95% of the global market, mandating local issuance effectively ensures continued dollar dominance.

As a result, major players like Tether (issuer of USDT) are exploring new U.S.-based stablecoins, while MoonPay and OKX have established American headquarters to align with evolving compliance needs.

Dollar-Centric Reserves: Reinforcing the Petrodollar System

One of the most significant aspects of the GENIUS Act is its explicit focus on dollar-denominated reserve assets. To ensure stability and trust, issuers must maintain 1:1 backing in high-liquidity U.S. dollar assets, including:

Notably, there are no minimum thresholds for bank deposits or Treasuries—unlike MiCA, which requires up to 60% in bank deposits for significant issuers. This flexibility allows issuers to optimize yield while maintaining liquidity.

The economic implications are profound. As of early 2025:

According to Citigroup, stablecoin issuers could collectively hold over $1.2 trillion in U.S. debt by 2030, surpassing holdings of any single foreign nation. This creates a powerful feedback loop: global demand for dollar stablecoins drives capital inflows into U.S. financial markets, reinforcing the dollar’s role as the world’s primary reserve currency.

👉 See how digital dollar flows are reshaping global capital markets.

Dual-Tier Licensing Framework: Innovation Meets Oversight

The GENIUS Act introduces a two-tier regulatory model based on issuer size:

This structure preserves space for innovation among smaller issuers while ensuring systemic stability for large-scale operators. It also reflects the U.S.’s dual banking system, balancing state autonomy with federal authority.

However, compliance remains complex. Even state-regulated issuers may need:

This multi-jurisdictional burden increases costs—Circle, for example, holds dozens of state licenses—yet ensures robust anti-money laundering (AML) and consumer protection standards.

Integration with Traditional Finance: Building a Hybrid Ecosystem

Rather than treating stablecoins as disruptive threats, the GENIUS Act encourages integration with existing financial institutions. Eligible issuers include:

This openness has already spurred collaboration:

Even regional banks are exploring consortium-based stablecoins, signaling broad institutional adoption.

Yet concerns remain about large tech companies entering the space. The bill prohibits non-financial tech giants from issuing stablecoins unless they pass strict scrutiny by a proposed Stablecoin Certification Review Committee (SCRC), addressing fears around data monopolies and systemic risk.

Technical Compliance: Enforcing Accountability on Blockchain

Despite blockchain’s decentralized nature, the GENIUS Act demands centralized accountability. Issuers must have technical capabilities to:

These requirements align with FATF’s “Travel Rule,” extending AML/KYC obligations to digital asset transfers. The bill positions issuers as primary compliance enforcers, subject to civil and criminal penalties for failures.

To support enforcement, FinCEN is tasked with developing new monitoring tools for illicit activity, while the Financial Stability Oversight Council (FSOC) must assess stablecoin-related risks annually.

This approach reflects a technology-neutral philosophy: innovation is welcomed, but not at the expense of regulatory oversight.

Strategic Implications for China and Global Markets

While the GENIUS Act advances U.S. interests, it also offers strategic lessons globally—especially for China.

With over 80 countries now exploring central bank digital currencies (CBDCs) or private stablecoins, the era of digital currency competition has arrived. For China, launching an offshore RMB stablecoin via Hong Kong presents a viable pathway:

Such a strategy could accelerate RMB internationalization through digital channels, mirroring how dollar stablecoins now serve as de facto extensions of U.S. monetary power.

Frequently Asked Questions

Q: What is the main goal of the U.S. Stablecoin GENIUS Act?
A: The primary objective is to establish a clear regulatory framework that supports innovation while ensuring all stablecoin issuers are U.S.-based and use dollar-denominated reserves—thereby strengthening the dollar’s global dominance.

Q: Can foreign companies issue stablecoins in the U.S.?
A: Only if they register with the OCC, meet strict compliance standards, and operate through a U.S.-incorporated entity. Reciprocity with their home regulator is also required.

Q: Are stablecoins considered securities under this law?
A: No—the bill explicitly states that payment stablecoins are not securities or commodities, distinguishing them from other crypto assets regulated by the SEC.

Q: How does the bill address consumer protection?
A: It mandates full reserve backing, regular disclosure of reserves, and priority claims for users in case of issuer insolvency. Issuers must also implement robust AML and fraud prevention systems.

Q: Will this lead to more bank involvement in crypto?
A: Yes—the dual-tier licensing model encourages both banks and fintechs to participate, and major institutions like JPMorgan and Bank of New York Mellon are already active in the space.

Q: Could this affect global financial stability?
A: By requiring transparency, liquidity buffers, and federal oversight for large issuers, the bill aims to mitigate systemic risks while harnessing stablecoins’ potential to modernize payments.

👉 Stay ahead of the digital currency transformation—explore next-gen financial infrastructure today.