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The US stablecoin framework got one step closer to becoming a reality after the legislation passed the final hurdle in the upper house of Congress.
The Senate passed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act with bipartisan support from both the majority Republican Party and the Democrats.
The GENIUS Act’s passage is significant in that the Senate has historically been unable to pass legislation on stablecoins, in part due to scepticism from Democrats.
“Today is a bold step forward, not just for financial innovation, but for American leadership, consumer protection, and economic opportunity,” said Tim Scott, chair of the Senate Banking committee.
“With the GENIUS Act, we’re bringing clarity to a sector that’s been clouded by uncertainty and proving that bipartisan, principled leadership can still deliver real results for the American people,” he said.
“This did not happen by accident. It happened because we led, across the aisle and with purpose.”
A bipartisan act
The GENIUS Act is sponsored by Tennessee Senator Bill Hagerty and co-sponsored by Senator Cynthia Lummis, a fellow Republican, as well as Democrat Senators Kirsten Gillibrand and Angela Alsobrooks.
It establishes a first of its kind regulatory framework for payment stablecoins, with the intention of enabling more consumer protections while addressing national security issues.
Co-sponsor Gillibrand called it a “landmark moment in the bipartisan effort to regulate stablecoins”, adding that it will enable businesses and consumers to take advantage of the “next generation of financial innovation”.
“A product of months of bipartisan negotiations, the GENIUS Act will protect consumers, enable responsible innovation, and safeguard the dominance of the U.S. dollar. The bill targets illicit finance, places limitations on Big Tech, puts in place ethical guardrails, and strengthens national security,” she said.
“The GENIUS Act will position our country for the 21st century, and I will continue working to ensure it is signed into law.”
What is in the GENIUS Act?
The revised GENIUS Act, updated following bipartisan negotiations, now includes stronger consumer protections, ensuring that federal and state laws continue to apply to stablecoin users.
Foreign stablecoin issuers, meanwhile, must comply with both technological standards and a comparable regulatory regime, and will have stricter Treasury oversight.
The bill also limits stablecoin issuance by non-financial public companies unless they meet tough financial stability, privacy, and competition safeguards.
Anti-money laundering (AML) measures require stablecoin issuers to meet the same standards as traditional financial institutions.
The bill further prohibits names that misleadingly suggest US government backing or FDIC insurance, and enhances enforcement against reckless conduct.
In its current state, the bill also bolsters national security with new AML rules for decentralised finance (DeFi) and stricter reporting on illicit finance tools, targeting threats such as terrorism financing and sanctions evasion.
Divisions remain on the Senate floor
Democrat Cory Booker welcomed the passage of the bill, noting some of the ethical components, pointing out that it “expands ethics requirements on government employees, ensuring special government employees like Elon Musk cannot enrich themselves while serving in government”.
However, not all are as enthusiastic. Rhode Island senator Jack Reed, for example, called the bill “fundamentally flawed”.
“It exposes taxpayers, consumers, and the financial system to unacceptable risk, and it creates venues for criminals, terrorists, and rogue governments to finance their illicit activities,” he said during his intervention.
“Despite these dangerous flaws, we won’t have the chance to offer a single substantive amendment.”
Industry reception
Industry players have been enthusiastic about the GENIUS bill.
Although crypto has been notorious for shirking traditional regulatory frameworks, providers have also been keen to see some sort of regime in place, especially considering enforcement actions that US regulators have taken against crypto firms in recent years.
Regulatory frameworks offer certainty and institutional involvement, and the GENIUS Act should provide for that.
“The Senate’s passage of the GENIUS Act is a landmark moment for the future of U.S. financial and technological leadership. By advancing bipartisan stablecoin legislation, the Senate has taken a critical step toward providing the legal and regulatory clarity needed to foster responsible innovation and protect consumers,” said Summer Mersinger, Blockchain Association CEO.
Mersinger added that “this is a win for American developers, entrepreneurs, and millions of people who believe in the promise of blockchain technology and the strength of the U.S. dollar in the digital age”.
“We commend lawmakers on both sides of the aisle for their leadership and urge continued collaboration to build a comprehensive regulatory framework that keeps the U.S. at the forefront of global innovation.”
The Crypto Council for Innovation said that the legislation “puts rules of the road in place compared to the current status quo comprising a patchwork of state regulations and no federal regulatory regime.”
“The revised bill is a tailored, pragmatic framework built around preserving innovation while prioritizing consumer safety, financial stability, and national security,” the trade association said in a statement.
“It reflects the reality that stablecoins are already here, already in use, and already affecting global finance. The question is not whether they should exist, but whether the U.S. should lead in setting the guardrails.”
