It’s been a long journey from the entry of stablecoins into DeFi spaces to their adoption by mainstream finance industries. Regulations are always slow to respond to technological innovations. But with the proposed GENIUS Act we might be witnessing a step towards the largest banking and fintech industries, including central banks and G-SIBs, widely adopting stablecoins as a means of transferring money.
Senator Bill Hagerty introduced the GENIUS (Guiding and Establishing National Innovation) Act in February 2025, co-sponsored by senators Cynthia Lummis, Kristen Gillibrand and Tim Scott. Stablecoin proponents have long called for something that would bring these assets to the mainstream. But what does this hefty bill achieve, and how will it change the landscapes of banking and fintech?
Why are Stablecoins Becoming Mainstream?
We have written a lot about stablecoins at Disruption Banking. We’re one of the few outlets to have really investigated the ‘Sand Dollar,’ the unlikely currency which revolutionized stablecoins from the Bahamas.
Stablecoins are a cryptocurrency with a value pegged to another asset. This can be a fiat currency, another cryptocurrency, or a commodity such as gold.
Stablecoins are especially revolutionary for cross-currency transactions and remittances. They can provide instant payments with increased confidence for both parties, without currency conversion or intermediary processing fees.
In some ways, it’s helpful to think of the Euro as a sort of proto-stablecoin. A central-bank digital currency (CBDC) is a digital fiat currency which, in the same way, would provide a stable value for cross-border payments.
The Sand Dollar brought financial services to unbanked and under-banked communities, but faced regulatory problems. Improved legislative clarity for issuers of stablecoins, addressing stablecoin’s cybersecurity and criminal threats, could do the same on a global scale.
What’s in the GENIUS Act?
The GENIUS Act is intended to establish clear legislative guidelines for institutions looking to issue stablecoins. Regulatory concerns made banks and fintech firms cautious in the past, but the bill could make the adoption of stablecoins much easier and less risky.
The bill is bipartisan but led by Republicans, so the regulations would provide guidelines without a lot of federal oversight. In fact, the latest draft of the bill would see regulatory decisions being shifted to a state level for issuers under $10 billion. The goal is to provide regulations for issuers entering the market without sacrificing a financial environment that fosters innovation.
If a stablecoin doesn’t have enough in assets to back a transaction, the coin could lose its peg. So, the bill would also ensure that issuers of stablecoins meet certain reserve requirements. To ensure a 1:1 backing of the stablecoin, issuers will be required to maintain enough assets in reserve to collateralize customer transactions. The assets in the reserve must be the same assets that are backing the coin.
Additionally, the updated bill introduces anti-money laundering and counter-terrorism regulations, further destigmatizing stablecoins in mainstream finance. This would be significant as illegal misuse is one of the most common complaints launched against stablecoins, and cryptocurrencies in general.
The bottom line is that the bill aims to encourage the merging of traditional banking and fintech with stablecoins. But it aims to do so by ensuring that any new issuer has the financial and technological capacity to do so.
Criticism of the GENIUS Act
The bill is not without its critics. Elizabeth Warren, for one. Warren argues that the bill does not comprehensively cover the illicit behaviour made possible by stablecoins. For example, though the bill addresses money laundering and terrorism, Warren argues the technology can be used to evade financial sanctions. Additionally, she is unconvinced by the bill’s protection of consumer funds, which has been a problem for stablecoin issuers in the past.
Stablecoin excitement may obscure such threats. On the one hand, any new regulation will be progress towards a better payment system. But it could be more damaging in the long run to rush a bill into law that does not fully address its potential dangers.
Fintechs, Banks, and the Stablecoin ‘Gold Rush’
Banks and Fintechs are rushing to join the “Stablecoin Gold Rush.” Bank of America recently pledged to launch its own stablecoin if better legislation passes. Last month, Stripe acquired stablecoin company Bridge for $1.1 billion and added stablecoins as a method of payment. And Standard Chartered last month announced it would be launching a Hong-Kong dollar-backed token.
The GENIUS Act, then, could pass at an incredibly significant moment. But banks will face an uphill battle entering a market which is already exploding.
With Tether’s 2024 profits reaching up to $13 billion, the profit incentive for joining the stablecoin revolution is clear. Recently, the Klarna CEO joked that they would be the last large Fintech to accept crypto, which may include stablecoin: “Ok. I give up. Klarna and me will embrace crypto! […] Someone had to be last. And that’s milestone as well of some sort.”
It seems inevitable that stablecoin regulations are on the way. The US looks to position itself as the global leader. And competent and clearly defined legislation could be the spark that ignites a global race towards dominance of this emerging market.
Where do RLUSD (XRP), USDC (Circle) and USDT (Tether) Stand?
Supporters of XRP are excited that RLUSD might be bolstered by this legislation. Jeremy Hogan, a lawyer and XRP proponent, describes the legislation as the “death of USTD (Tether).”
Tether is incorporated in the British Virgin Islands, but is backed by the dollar. The new bill’s regulations will apply to dollar-backed currencies based outside of the U.S. It will force foreign companies to comply with U.S regulations, be more transparent about their assets, and fall under U.S enforcement when serving American customers.
Tether has faced many regulatory challenges over the past few years, mostly relating to the transparency of its reserves. In 2019, it was the subject of an investigation by a New York Attorney General. It came to light that Tether’s transactions were not fully collateralized by US dollars. Additionally, it used undisclosed reserves to cover up to $850 million dollars in customer funds that were lost.
In contrast, Ripple’s XRP was the subject of an SEC investigation related to federal securities laws. The GENIUS Act may support Ripple’s case. But if Tether is put under stricter regulatory scrutiny, and found to have trouble meeting the bill’s reserve requirements, it might be subject to even more punishments. In this case, coins like USDC and RLUSD could see significant gains.
So, while Tether’s dollar-backed coin already fell under US regulations, the new bill makes those regulations more comprehensive. The extended clarity for regulators dealing with stablecoin misuse would make it much easier to prosecute foreign issuers like Tether.
RLUSD and USDC also stand to gain market dominance as new entries are set to struggle. PayPal, for example, launched its own stablecoin late in the game. But its $168 million in transactions this month pales in comparison to Tether’s $131 billion over the same period.
What’s Next?
Will stablecoins be commonplace for payments by the end 2025? It’s beginning to look likely.
With the announcement of the crypto reserve, the re-introduction of the Bitcoin Act, and the introduction of the GENIUS Act, its shaping up to be a significant year for crypto.
Stablecoins will have a major influence on both consumer and business-to-business transactions, changing how money is transferred across the globe. Well-regulated stablecoins with transparent reserves could revolutionize both traditional banking and fintech.
If stablecoins become mainstream, banks and Fintechs will face a new battle over market dominance. And for once, it will be a battle in which their competition has a head start.
The bill was passed by the Senate Banking Committee on March 13, and will move to the full Senate for another vote on whether it will be made law.
Author: Sean Maguire
#GENIUSAct #Stablecoins #CryptocurrencyRegulation #DeFi #Fintech #Blockchain #DigitalPayments #Crypto
See Also:
Can XRP hit $10 in 2025? | Disruption Banking
Who are the original pioneers of the stablecoin? | Disruption Banking
Is the SEC fallout the end of the road for XRP? | Disruption Banking
Has the Trump Family discussed a new Stablecoin with Binance? | Disruption Banking
