Guardrails for the digital dollar: The GENIUS Act explained

29 May 2025 | Americas | Articles

Efforts to regulate cryptocurrencies and stablecoins have been percolating in Washington for several years, with sporadic bipartisan interest but no major legislation reaching the finish line. With the final enactment expected later this year, the moment the ink dries on the GENIUS act will mean compliance stops being a talking point and becomes a daily imperative.

In 2021, the President’s Working Group on Financial Markets under Treasury Secretary Janet Yellen warned that stablecoins (digital tokens pegged to assets like the U.S. dollar) lacked adequate oversight and urged Congress to act, but initial proposals stalled. By 2022–2023, lawmakers like Sen. Cynthia Lummis (R-WY) and Sen. Kirsten Gillibrand (D-NY) introduced broad crypto bills, and the House Financial Services Committee under Rep. Patrick McHenry drafted a stablecoin bill, yet deep political divides (and concerns raised by regulators like the SEC) kept these measures from becoming law. These earlier debates highlighted key sticking points including federal vs. state oversight, the role of tech companies in issuing money, and how to protect consumers; ultimately setting the stage for the current legislation.

In 2025, President Donald Trump’s return to the White House signaled a sharp pivot in crypto policy. Trump campaigned on making America “the crypto capital of the world,” and in his first 100 days issued executive orders to promote digital assets and block any central bank digital currency. He appointed crypto-friendly figures to key roles, notably former SEC Commissioner Paul Atkins as the new SEC Chair. Under Atkins’ leadership, the SEC pledged to end the prior “regulation-by-enforcement” stance and instead develop “a rational regulatory framework” with clear rules of the road for digital assets. The SEC even indicted that properly structured stablecoins (fully reserved and used for payments) are not securities, aligning with the view that stablecoins should be regulated more like banking products.

At the same time, President Trump’s own involvement in crypto became an unusual backdrop to the debate. In the past year, Trump and his family have reportedly launched a slew of crypto ventures from memecoins, to a crypto exchange, and even a new stablecoin called “USD1”. This raised conflict-of-interest alarms among some lawmakers, particularly Democrats. Nonetheless, key Senate Republicans (and some Democrats) pressed ahead in early 2025 with a bipartisan stablecoin bill, aiming to finally establish guardrails for a ~$245+ billion market that, until now, has operated in a regulatory gray zone. That bill, the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025, dubbed the GENIUS Act, is now closer to becoming law than any U.S. crypto legislation in history.

Purpose and scope of the GENIUS stablecoin bill

The GENIUS Act’s primary purpose is to create the first federal regulatory framework for payment stablecoins. Stablecoins, especially dollar-pegged ones like Tether’s USDT and Circle’s USDC, have grown into essential plumbing for the crypto economy but largely lack dedicated federal oversight. By establishing clear rules, Congress seeks to bring this sector out of its legal grey area and under prudential supervision akin to banks or money market funds.

Lawmakers behind GENIUS emphasize several goals:

• Protect consumers and investors: Past blow-ups like TerraUSD showed how fast people can lose money when reserves are flimsy or disclosures are poor. The GENIUS Act aims to bolster trust in stablecoins by ensuring they are fully backed and redeemable on demand, with robust disclosure and oversight requirements. In the words of the sponsors, GENIUS is fundamentally a consumer protection bill, imposing “reasonable federal safeguards” to make sure stablecoin holders can have confidence that a token labeled a “USD stablecoin” is as good as its name.
• Guard against financial stability and national security risks: A poorly regulated stablecoin market could threaten the broader financial system or facilitate illicit finance. GENIUS’s purpose is therefore also to mitigate these risks, by preventing “run” dynamics (through 100% reserves and liquidity rules), prioritizing stability in reserve asset management, and mandating anti-money-laundering controls. It bans risky reserve practices and fractional backing that contributed to past crashes, and it compels stablecoin issuers (including foreign ones) to comply with U.S. AML / sanctions laws or face prohibition in U.S. markets.
• Preserve U.S. dollar dominance: A strategic, and arguably geopolitical, motivation underlies the GENIUS Act. Proponents argue that if the U.S. provides clear rules for dollar-backed stablecoins, it will strengthen the global role of the dollar in the digital age. Stablecoins make dollars accessible globally on blockchain rails, and a safe U.S.-regulated stablecoin could become a preferred medium of exchange in crypto markets worldwide. Sen. Bill Hagerty (R-TN) and others have touted that a well-crafted stablecoin framework will “increase demand for Treasury assets” and solidify the dollar’s reserve currency status, all while ensuring the technology flourishes under U.S. oversight.
• Provide regulatory clarity to industry: Years of regulatory uncertainty, exacerbated by the prior SEC leadership’s case-by-case enforcement approach, have left legitimate crypto companies clamoring for clear laws. The stablecoin bill endeavors to delineate which authorities will regulate stablecoin issuers and under what conditions. It’s important to note that stablecoins are explicitly defined as not being securities or commodities in this framework, removing them from SEC and CFTC jurisdiction when they meet the Act’s criteria. This ends the patchwork of state money transmitter licenses and ad hoc guidance. This newfound clarity is therefore expected to unlock greater institutional participation in the stablecoin space as both banks and licensed fintech companies would have a defined pathway to issue tokens with confidence.

Bottom line: GENIUS aims to fold stablecoins under one federal umbrella: protecting users, shielding the financial system, and anchoring digital-dollar innovation in the United States.

Legislative status and next steps

The GENIUS Act has achieved a significant milestone in the U.S. Senate, passing a cloture vote of 66-32 on May 19, 2025, which allows the bill to move forward to full debate. Notably, 16 Democrats joined 50 Republicans to advance the bill, reflecting a bipartisan breakthrough after weeks of negotiations. This vote came after an initial setback on May 8, when all Senate Democrats, and two Republicans, blocked a prior version of the bill amid concerns about Trump-related conflicts and other issues.

Following cloture, the Senate held an additional procedural vote on May 21 to formally bring the bill to the floor; that motion to proceed passed 69-31. The expectation is that the Senate will consider final amendments and then hold a vote on final passage after the Memorial Day recess. Sen. Cynthia Lummis indicated Memorial Day (May 26) was a “fair target” for Senate passage, but given the short timeframe, this could slip into early June. In any case, Senate leadership from both parties appear eager to get the bill passed in the near term, representing a rare bipartisan effort in financial regulation, and arguably the closest Congress has come to enacting meaningful crypto legislation so far.

Once the GENIUS Act clears the Senate, attention will shift to the House of Representatives. The House has its own stablecoin bill in play: the “Stablecoin Transparency and Accountability for a Better Ledger Economy Act of 2025,” abbreviated the STABLE Act. In parallel to the Senate’s work, the House Financial Services Committee approved the STABLE Act in a 32-17 vote, with bipartisan support, in early 2025. The House bill is broadly similar in aiming to regulate payment stablecoins. The next steps could play out in a couple of ways:

1. The House could take up the Senate-passed GENIUS Act and vote on it directly. If the Senate bill has strong bipartisan backing, House leaders (particularly if aligned with the Senate’s approach) might fast-track it. This would require House approval (a simple majority) and then it would go straight to the President’s desk.
2. Alternatively, the House may pass its STABLE Act and then reconcile it with the GENIUS Act in a conference committee. Given that both chambers are moving stablecoin legislation, a conference to merge them is plausible. Any compromise bill would then need to be voted on again by both the House and Senate.

Either way, the timeline for final enactment is likely this year (2025). If the Senate indeed passes GENIUS in early June, the House could act over the summer. Industry lobbyists are pushing for a unified bill to be sent to the President before year-end, anticipating that a Republican-controlled House and a narrowly divided Senate can agree on common ground. President Trump is expected to sign the legislation if it reaches him, as his Administration has been strongly pro-stablecoin, and it aligns with his public pledge to support crypto innovation.

How can Bovill Newgate help you turn GENIUS into an edge for your firm?

Our US Regulatory and Compliance Team lives at the intersection of crypto innovation and SEC rulemaking. We translate fresh statues into clear action plans, so you can launch, advise, and transact with confidence while others scramble to interpret the fine print.

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