Introduction
In 2025, with the US stablecoin market still lacking a comprehensive federal regulatory framework, the GENIUS Stablecoin Act has emerged as a major milestone in the crypto world. The bill aims to transform stablecoins from a mere financial instrument to a cornerstone of the global digital dollar strategy. Its aim is to establish a clear basis for stablecoin regulation in the US and build the legal infrastructure to ensure crypto compliance. In the following report, we will examine in detail how this legislation came to be, how it fills a gap in existing US regulations, and its potential impact on the DeFi ecosystem.
The Main Purpose and Starting Point of the GENIUS Act
The GENIUS Stablecoin Act was introduced to the Senate Banking Committee in February 2025 and passed the committee in March 2025 with cross-party support (18 votes to 6). The main motivation behind the bill is that stablecoins are now secured by clear regulation at the federal level, whereas previously they were only subject to state-based money transfer laws. By 2025, the stablecoin market had reached a volume of approximately $232 billion, and regulators saw the need for stablecoin regulation in the US in the face of this growth. Moreover, the collapse of the Terra/Luna ecosystem in 2022 demonstrated the importance of the “full reserve” principle. This bill distances algorithmic stablecoin models by requiring reserves to be held in liquid assets such as cash or prime Treasury bills. It also proposes a system with oversight by the Treasury Department and the Federal Reserve.
2025 Stablecoin Regulatory Outlook in the US
As of 2025, stablecoins in the US still lacked a clear definition under securities or bank deposit laws. There were two main proposals to fill this gap: The STABLE Act in the House of Representatives in 2024 and the GENIUS Act in the Senate. While the STABLE Act envisioned bank-like regulation of payment-oriented stablecoins, the GENIUS Act took a broader view, combining technical, legal and international harmonization aspects. GENIUS includes clear provisions for both financial institutions and crypto companies and strengthens the crypto compliance US law perspective. In this way, issuers will be able to bring their AML/KYC processes to the federal level under the Bank Secrecy Act and reduce state-federal licensing conflicts.
Main Provisions of the Bill Scope and Compatibility
Issuer Identification and Licensing
The bill is designed to allow stablecoin issuers to issue coins backed by only 100 percent reserves. Each stablecoin unit would have to be backed by liquid assets such as cash or first-class Treasury bills. In addition, non-bank financial institutions will first be licensed by the state in which they are located and will begin the process to be licensed at the federal level within two years. Thus, licensing conflicts between state and federal authorities will be minimized. Issuers will operate in accordance with the regulatory framework set by the Treasury Department, which will allow them to gain direct access to the Federal Reserve and open accounts at the central bank. Therefore, the digital dollar infrastructure will be shaped under the control of the regulator and the effectiveness of supervision will be ensured in this way.
Legal Status and AML/KYC Obligations
The bill excludes stablecoins from securities status, bringing them under the Bank Secrecy Act (BSA). Issuers will have to carry out user identification (KYC) and transaction monitoring (KYT) processes in accordance with federal standards, and fulfill the transparency obligation by regularly sharing monthly reserve reports with the public. In addition, additional control mechanisms are established by introducing an annual independent audit requirement for issuers with a market capitalization exceeding $50 billion.
Prohibitions and Restrictions
The bill aims to prevent the recurrence of past cases such as the UST by strictly preventing unsecured or algorithm-only stablecoin models. It also bans the issuance of stablecoins that promise returns on the grounds that such models may pose deposit-like risks. However, the authorization of large technology companies to issue stablecoins is restricted by additional capital requirements and intensive supervision.
Impact on DeFi and Crypto Companies
Increased Trust in DeFi Protocols
The enactment of the GENIUS Act will reduce the uncertainties surrounding stablecoins, which in turn will expand the use of stablecoins in DeFi protocols. The full reserve requirement will improve the collateral quality of stablecoins used in liquidity pools and reduce the risk of default in protocols.
Credit, Lending and Yield Models
The ban on interest-bearing stablecoins will require existing DeFi lending and borrowing protocols to develop different collateral structures or token mechanisms instead of yield-seeking models. In addition, the costs of compliance obligations at the federal level will create a risk of market withdrawal for small-scale DeFi startups, while providing a competitive advantage to institutional and larger players.
Global Benchmark MiCA and Digital Dollar
The European Union’s Markets in Crypto Assets Regulation (MiCA) came into force on June 29, 2023, imposing reserve transparency, licensing and supervision obligations on stablecoin issuers. MiCA is implemented under the supervision of the European Securities and Markets Authority (ESMA) and targets stablecoins issued by the private sector, while excluding central bank projects such as the digital euro.
In the US, the Guaranteed Electronic National User Security Infrastructure Bill (GENIUS Stablecoin Act) is similarly based on a full reserve requirement. However, GENIUS offers a more comprehensive approach, combining technical infrastructure, regulatory clarity and a vision for the digital dollar. The bill aims to implement a new issuer licensing system that will operate under the oversight of the U.S. Treasury Department and the Federal Reserve.
GENIUS removes stablecoins from securities status, bringing them under the Bank Secrecy Act (BSA) and imposing anti-money laundering (AML) and know-your-customer (KYC) obligations on issuers. While MiCA’s main priority is consumer protection and market integrity, the GENIUS Act is geared towards maintaining currency supremacy in global competition through a digital version of the US dollar.
In this respect, while both regulations provide stability and transparency, the US approach serves more directly to strengthen the strategic digital currency infrastructure in the global system.
Conclusion
The GENIUS Stablecoin Act is the most detailed attempt to regulate the stablecoin ecosystem in the US by 2025. The bill aims to close the stablecoin regulatory gap in the US in 2025, embodying the crypto compliance US law approach. Once enacted, it will strengthen the dollar in the global circulation of stablecoins and consolidate US leadership in the digital asset market, which means both opportunities and compliance obligations for DeFi and crypto companies.
Disclaimer
This content has been prepared by the Darkex Research Team for informational purposes only. It does not constitute investment advice. All risks and responsibilities arising from your investment decisions are solely your own.
