The GENIUS Act: How America's First Stablecoin Law Reshapes Finance

The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), signed into law on July 18, 2025, represents the most significant piece of cryptocurrency legislation in U.S. history. As the first comprehensive federal law regulating stablecoins, it mandates 100% reserve backing, strict AML compliance, and monthly public disclosures. Now, as federal regulators work to issue implementing regulations by July 2026, the law is already reshaping how banks, fintech companies, and DeFi protocols approach digital money.

Key Provisions

The GENIUS Act requires stablecoin issuers to maintain 100% reserve backing with liquid assets like U.S. dollars or short-term treasuries. Issuers must implement strict AML and sanctions compliance, provide monthly public disclosures of reserve composition, and maintain the technical capability to freeze or seize tokens when legally required. The law also prohibits interest payments directly to stablecoin holders.

The CLARITY Act Stalls

While the GENIUS Act focuses on stablecoins, the broader CLARITY Act — which divides crypto jurisdiction between the SEC and CFTC and creates registration pathways for platforms — has stalled in the Senate. The Banking Committee postponed a markup amid over 100 proposed amendments, with the most controversial seeking to ban exchanges from paying interest on customers' stablecoin holdings.

"If lawmakers fail to resolve the stablecoin yield dispute now, the issue could be pushed past the 2026 midterm elections, meaning a new Congress and potentially years before comprehensive crypto legislation resurfaces." — Bloomberg Law

Global Regulatory Convergence

The GENIUS Act has catalyzed global regulatory action. Brazil's Central Bank authorization regime commenced on February 2, 2026, requiring firms to comply with AML/CFT and minimum capital requirements. In the EU, MiCA is increasingly operational, with focus on governance, reserve management, and conduct. The UAE's ADGM has proposed an expanded framework for fiat-referenced tokens extending regulation beyond issuance to custody and intermediation.

DeFi Impact

Despite regulatory fragmentation, Ethereum continues to benefit as most regulated stablecoins settle on its network, even when execution happens on Layer 2s. DeFi lending has evolved away from reflexive leverage cycles toward structured on-chain credit markets. Coinbase projects total stablecoin market cap could reach $1.2 trillion by end of 2028, cementing stablecoins as the number one use case in the crypto ecosystem. The banking industry warns that stablecoin growth could displace deposits, particularly if issuers can indirectly pay interest through affiliates.