Senate Advances GENIUS Act for Stablecoin regulation
The U.S. Senate has made significant progress on the GENIUS Act, a bill aimed at regulating stablecoins.On May 19,the Senate voted 66 to 32 in favor of cloture,setting the stage for a full vote. This move could led to clearer rules for stablecoin issuers.
Initially introduced by Senator Bill Hagerty, the bill faced challenges.But after amendments,it gained bipartisan support. The Act aims to create a federal framework for stablecoins, ensuring they operate within legal boundaries. This is
U.S. stablecoin Regulation Advances with GENIUS Act
The GENIUS Act, a new U.S. bill,aims to regulate stablecoins and enhance financial stability. It introduces strict rules to protect users and the broader financial system.
Under the Act, stablecoin issuers must ensure their tokens are fully backed by safe assets. This means reserves must be held in U.S. currency, Treasury bills, or insured bank deposits.This setup ensures that users can redeem their tokens quickly and safely.
Marketing restrictions are also in place. Companies can’t claim FDIC insurance or promote yield-bearing stablecoins to retail investors. This prevents misleading claims and protects consumers. A temporary ban on algorithmic stablecoins is in effect until a Treasury review in 2025. Only payment stablecoins with verifiable reserves will be allowed. The Financial Stability Oversight Council (FSOC) will monitor risks from domestic and foreign stablecoins. Issuers with less than $10 billion in market cap can operate under state laws if they meet federal standards. Larger issuers will face federal oversight.
Stablecoin Regulation Faces Scrutiny
Senator Elizabeth Warren has raised concerns about the GENIUS Act, a bill aimed at regulating stablecoins. She worries that the bill may not adequately protect consumers and financial stability. The act, backed by the Trump administration, supports stablecoins like USD1. However, Warren believes that tech giants like Meta and X could exploit weak oversight.
Warren fears these companies might enter the stablecoin market with minimal regulation. This could harm consumers and destabilize the financial system. The Atlantic Council’s GeoEconomics Center has highlighted the “Tether loophole.” this loophole lets foreign issuers, such as Tether, operate in the U.S. without meeting the same standards as domestic firms. Tether, a major player in the stablecoin market, could continue operating without full reserve and audit requirements. This could create an uneven playing field.
Warren argues that, without stronger guardrails, large technology companies such as Meta or X could enter the stablecoin market under weak oversight, perhaps posing risks to consumer protection and financial stability. The Atlantic Council’s GeoEconomics Center has also flagged what it calls the “Tether loophole” in the GENIUS Act. Their analysis points out that the current language allows foreign issuers to remain active in U.S. markets simply by complying with law enforcement directives. This provision means that offshore firms like Tether,which commands a dominant share of global stablecoin circulation,may continue operating in the U.S. without adhering to the full reserve and audit standards required of domestic issuers. Critics argue that this uneven compliance structure could create a competitive imbalance and undermine the bill’s goal of reducing systemic risk.
The dual regulatory model has also come under scrutiny. The structure permits both state and federal oversight paths, which has raised concerns among policy groups. From an innovation standpoint, some voices within the decentralized finance community have pushed back against the bill’s temporary ban on algorithmic stablecoins. They argue that the restriction is too broad and punishes the wider DeFi ecosystem for the collapse of specific projects like TerraUSD.
International coordination is another unresolved issue. Although the GENIUS Act now includes reciprocity requirements for foreign issuers, critics say it lacks the kind of joint supervisory mechanisms seen in Europe’s MiCA framework. Without deeper engagement with jurisdictions like the European Union, Singapore, or Hong Kong, the Act may be limited in its ability to promote consistent global enforcement and prevent regulatory fragmentation.
