The U.S. Senate passed a bill that establishes a regulatory framework for stablecoins in the United States.
The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act passed in the Senate this week by a vote of 68 to 30.
Payment stablecoins are a product already offered in the U.S. with little regulatory oversight. However, this bill establishes a federal framework to regulate payment stablecoins that includes, among other things, robust reserve requirements to ensure payment stablecoins are not de-pegged and transparency into the reserves backing payment stablecoins.
In addition, the framework calls for 100 percent reserve backing of stablecoins with U.S. dollars and short-term Treasuries, or similarly liquid assets as determined by the primary regulator. In addition, it requires monthly public disclosure of reserve composition and annual audited financial statements for issuers with more than $50 billion in market capitalization.
Further, it prohibits any representation that payment stablecoins are backed by the full faith and credit of the U.S., guaranteed by the U.S. government, or covered by FDIC insurance. It makes it unlawful to mislead consumers about government backing or the insurance status of payment stablecoins. It also ensures that a payment stablecoin cannot be marketed in a way that a reasonable person would perceive the stablecoin to be legal tender, issued by the U.S., or guaranteed or approved by the U.S. government. Additionally, it makes it illegal to market a digital asset as a payment stablecoin unless the digital asset is compliant with the provisions of the GENIUS Act.
“Today is a bold step forward – not just for financial innovation, but for American leadership, consumer protection, and economic opportunity. 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. This did not happen by accident. It happened because we led – across the aisle and with purpose. I’m especially grateful to Senator Hagerty for his leadership, as well as the hard work of many of my colleagues to get this across the finish line,” Sen. Tim Scott (R-SC), who cosponsored the bill.
Sen. Bill Hagerty (R-TN) is the lead sponsor, with Scott, along with Sens. Kirsten Gillibrand (D-NY), Cynthia Lummis (R-WY), and Angela Alsobrooks (D-MD) as cosponsors.
In addition, the framework includes diversification requirements for reserve assets; interest rate risk management standards; and capital, liquidity, and risk management requirements. It also prohibits riskier reserve assets like corporate debt or equities.
Further, the GENIUS Act ensures that state regulators have stablecoin frameworks that are “substantially similar” to the federal framework. Larger state-regulated issuers must either be overseen by a primary federal payment stablecoin regulator in addition to their state regulator, seek a waiver to be exempt from federal oversight, or halt new issuance once they surpass the $10 billion threshold.
The bill is supported by the Blockchain Association, calling it an historic milestone as the first standalone, pro-cryptocurrency legislation to come out of the Senate.
“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,” Summer Mersinger, Blockchain Association CEO, said. “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.”
Following the Senate passage, the legislation now moves to the House of Representatives for consideration.