What Is the GENIUS Act? A Guide to U.S. Stablecoin Law
Stablecoins
The GENIUS Act, signed into law on July 18, 2025, establishes the first comprehensive federal regulatory framework for dollar-backed stablecoins in the United States. This legislation mandates strict requirements for stablecoin issuers, specifically defining authorized entities, mandatory reserve backing, and standardized redemption procedures for token holders. By clarifying the oversight roles of federal regulators, the act aims to provide legal certainty for the digital asset industry and mitigate systemic risks associated with private stablecoin issuance. This development is a critical milestone for the RWA market, as stablecoins serve as the primary liquidity layer for tokenized assets and on-chain financial instruments. The formalization of these rules reduces regulatory ambiguity, potentially encouraging institutional participation and broader adoption of blockchain-based financial products. By setting clear standards for reserve transparency and issuer accountability, the act aligns stablecoins more closely with traditional financial regulations. Ultimately, the GENIUS Act provides the foundational infrastructure necessary for stablecoins to function as a reliable, regulated medium of exchange within the evolving digital economy.
Key points
- ▸GENIUS Act signed July 18, 2025, creates federal stablecoin regulatory framework.
- ▸Legislation mandates specific reserve backing and redemption protocols for all issuers.
- ▸New law clarifies federal regulatory oversight for dollar-backed payment stablecoins.
- ▸Framework aims to reduce systemic risk and increase institutional digital asset adoption.
Background
Stablecoins are digital assets designed to maintain a stable value, typically pegged to a fiat currency like the U.S. dollar. They function by holding reserves of high-quality liquid assets, such as cash or government securities, to ensure that tokens can be redeemed at a 1:1 ratio. These assets act as the bridge between traditional finance and blockchain ecosystems, facilitating efficient on-chain settlements.
Relevance
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