GENIUS Act Passes Senate Banking Committee: A Win for Stablecoins?

The U.S. Senate Banking Committee has taken a significant step towards regulating stablecoins with the passage of the GENIUS Act.

The bill passed with strong bipartisan support in an 18-6 vote. Thus, it’s one step closer to becoming law, which could reshape the landscape of the stablecoin industry in the U.S.

What Does the GENIUS Act Entail?

At its core, the GENIUS Act is about ensuring that stablecoins are issued in a safe, transparent, and regulated environment. The bill sets forth several key provisions designed to establish trust in the market.

• Licensing and Oversight: Stablecoin issuers with a market cap under $10 billion will be regulated at the state level. Larger issuers will be overseen by the Federal Reserve and the Office of the Comptroller of the Currency (OCC).

• Transparency and Reserve Standards: Issuers are required to back their stablecoins 1:1 with U.S. dollars or highly liquid assets. Full transparency on reserve composition must be maintained, and monthly liquidity reports are mandatory to ensure stability.

• Redemption and Consumer Protection: Issuers must be able to fulfill redemption requests quickly. Failure to comply could result in penalties or license suspensions by the Federal Reserve or OCC.

• AML/KYC Compliance: Stablecoin issuers must comply with anti-money laundering (AML) and know-your-customer (KYC) standards to reduce risks of illicit activities.

While these provisions appear to be steps in the right direction for consumer protection and market stability, some in the industry are wary of how these regulations might play out in practice.

Positive Reactions: A Step Toward Regulatory Clarity

The GENIUS Act has garnered widespread support, especially from industry leaders and lawmakers who view the bill as a win for innovation and market stability.

Circle’s Chief Strategy Officer, Dante Disparte, praised the bill as “historic,” highlighting that it sets a “principled, America-first framework for regulating payment stablecoins.” Disparte added that the bill offers the U.S. an opportunity to lead the global crypto space rather than follow behind.

Tether CEO Paolo Ardoino also welcomed the legislation, noting that it would bring much-needed clarity to the stablecoin market. He expressed excitement about the bill’s potential to enhance the competitive position of the U.S. dollar in the global economy.

Senator Tim Scott, chairman of the Senate Banking Committee, echoed this sentiment, calling the GENIUS Act a victory for innovation. Circle CEO Jeremy Allaire called today's move in Washington a major step toward clearer stablecoin regulations and enhancing the competitiveness of the dollar.

Ripple CEO Brad Garlinghouse also mentioned that a "stablecoin policy" is in the works, following the launch of Ripple's regulated stablecoin in December.

Negative Reactions: Concerns About Financial Risks

Despite the positive reactions from the industry, the GENIUS Act has also sparked significant opposition. While many Democrats have joined Republicans in backing this high-stakes bill, Senator Elizabeth Warren has been a vocal opponent due to her anti-crypto stance. She strongly opposed the GENIUS Act, mainly because it doesn't impose stricter regulations on stablecoin issuers. None of her proposed amendments, like restricting stablecoin issuance to banks, were included in the final version of the bill.

Warren argues that without these changes, the bill could “supercharge the financing of terrorism” and help countries like Iran, North Korea, and Russia evade sanctions. Her concerns highlight the potential risks of a less regulated stablecoin market, which she believes could be exploited for illicit financial activities.

In addition to that, Public Citizen, a consumer advocacy group, also raised alarms, warning that the bill could legitimize risky crypto schemes, destabilize financial markets, and open the door for large tech firms to enter the financial sector without sufficient safeguards.

The bill still has to pass through votes in both chambers of Congress before reaching President Trump to be signed into law. That said, the Senate Banking Committee’s move to advance the bill is a significant first step toward the comprehensive legislation the crypto industry has called for.