The United States has introduced the GENIUS Act, short for the Global Economic and National Infrastructure for United States Stability Act.
This proposed legislation is designed to regulate the $150B+ stablecoin market, requiring U.S.-based issuers to hold 100% reserves in cash or U.S. Treasuries, undergo regular audits, and obtain federal licences similar to traditional financial institutions.
The goal is to avoid failures like the Terra-Luna collapse and to reinforce the U.S. dollar’s dominance in global finance.
However, the bill has attracted criticism for leaving foreign stablecoin issuers in a regulatory grey area. The act also bans interest-bearing stablecoins, raising concerns about its impact on decentralised finance and innovation.
As the bill undergoes further review, how it handles foreign issuers may determine its long-term influence on the global crypto ecosystem.
What Does the GENIUS Act Actually Change?
The GENIUS Act introduces the first formal rulebook for stablecoins in the United States. Supporters argue it will bring stability, build public trust, and open the door for wider institutional involvement.
It is seen as a step toward mainstream adoption of crypto-backed digital dollars while ensuring the U.S. dollar remains a global reserve standard.
Under the act, U.S. stablecoin issuers must hold 100% reserves in either cash or U.S. Treasuries, submit to regular audits, and pass anti-money laundering checks. However, foreign stablecoin issuers like Tether remain in a regulatory grey area.
While domestic projects such as USDC face higher operational costs and tighter rules, offshore entities may continue without oversight if this gap remains unresolved.
Another major change is the ban on yield-bearing stablecoins, which some lawmakers believe could disrupt the traditional banking sector. Critics argue this move stifles innovation and limits user choice, especially within decentralised finance.
The act could also encourage traditional banks and large corporations to issue their own stablecoins. Institutions like JPMorgan and retailers such as Walmart or Amazon might soon launch products like “WallyCoin” or “Amazon Bucks.”
Despite the debate, some experts view the act as a landmark moment. Christian Catalini of MIT commented, “Every payments company now needs a stablecoin strategy—it’s mandatory.”
Is Tether at Risk Under the New Rules
The GENIUS Act does not name Tether directly, but its implications are clear. With a market cap of over $100B, Tether is under growing scrutiny and could face serious challenges complying with the new standards.
One major issue is reserves. The act requires 100% backing in cash or U.S. Treasuries. Tether, however, reports only around 85% of its reserves in such assets.
The remaining 15% is held in riskier instruments including Bitcoin, corporate debt, and loans. Should it be required to shift to full compliance, Tether may need to liquidate assets, which could trigger market volatility or a loss of trust.
Transparency is another concern. Tether’s audits are currently conducted by BDO Italia, which is not recognised by the U.S. Public Company Accounting Oversight Board.
Under GENIUS, stablecoins must publish monthly disclosures and pass anti-money laundering checks. For a company that has historically operated with limited transparency, meeting these new requirements would be a significant adjustment.
Additionally, any stablecoin with a market cap over $50B must undergo annual audits. This places Tether squarely within the scope of the most rigorous oversight. If it cannot meet these standards, it risks facing increasing pressure from regulators and the market.
Other stablecoin issuers like Circle with USDC, Paxos with PAX, and Gemini with GUSD will also be subject to the same framework. While some of these players may already be closer to compliance, the new requirements raise the bar for everyone in the industry.
Conclusion
The GENIUS Act represents a major shift in how stablecoins may be regulated in the United States. By demanding full reserves, transparency, and federal licences, the act seeks to bring credibility and safety to digital dollars.
However, its unclear stance on foreign issuers introduces a regulatory imbalance that could allow offshore players to gain an unfair advantage.
The final version of the act, particularly how it addresses foreign projects, will ultimately determine whether it creates a stable, fair, and globally relevant framework for the future of digital finance.
Editor: Lydicius