Stablecoins
and the
GENIUS Act

The GENIUS Act is the first attempt by U.S. federal law to regulate stablecoins, widely regarded as the safest of the many unsafe bets in crypto-land. It establishes a federal framework to ensure stablecoins are backed 1:1 by reserves in safe assets, that issuers are regulated and that their accounts are audited monthly. It’s a decent fix, but it sidesteps the remaining 90% of blockchain activity.

It’s not the first country to pass such legislation (it follows Switzerland, Japan, Singapore, UAE and the EU nations) but it is seen as the most significant because of the dollar’s dominance in the global stablecoin market. The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) was signed into law by President Donald Trump on July 18, 2025, creating a groundbreaking regulatory framework.

Stablecoins are the least risky type of cryptocurrency because they’re pegged 1:1 to the U.S. dollar or to another fiat currency (government-issued money). As a result, they’re less volatile and they are increasingly popular as an efficient and cost-effective way of moving money. That, in large part, is why the US government felt compelled to start regulating them.

The GENIUS Act has been trumpeted by the White House as “historic legislation” that will prioritize consumer protection, strengthen the U.S. dollar’s reserve currency status, bolster national security and attract untold investment and innovation. Whether it will achieve all those aims has yet to be seen. From where I’m standing, this legislation was much-needed and somewhat overdue. I must also say that it tackles only the smallest and most manageable part of a far larger problem.

The U.S. has, in passing this legislation, bitten off just about as much as it can chew. Any more, and it would certainly choke. The problem is, as we will see, that the real trouble lies in the vast swathes of crypto-world not covered by the Act.

What the GENIUS Act actually does

The GENIUS Act establishes clear rules for stablecoin issuers to make sure their stablecoin, also known as digital dollars, are as safe and reliable as cash from a bank. In theory, every stablecoin should already be backed 1:1 by government-issued money or equivalents.

But that hasn’t always been the case. Without regulation there have been a multitude of transparency issues. One common trick is for an issuer to release a momentary “snapshot” (attestation) of reserves, rather than a rigorous, ongoing audit. It can conceal a multitude of sins. Issuers also hold risky debts, trade with insufficient cash to handle mass withdrawals, and run their operations offshore.

The GENIUS Act seeks to address three main areas of concern, namely reserve backing, audits and issuer licensing.

Reserve backing. The Act requires 100% reserve backing in U.S. dollars or other clearly-defined liquid assets, such as ultra-safe, government-issued debt (short-term Treasuries, redeemable in three months). No funny money. These reserves must sit in separate accounts, well away from the company’s day-to-day operations or investments. The issuer can’t loan out, invest these reserves, or pay interest on them.

Audits. Issuers must release public, online reports every month, with a precise breakdown of all holdings. These are checked by federal regulators and by any other interested party. No more snapshots. The CEO is personally liable for the report and faces up to 20 years in federal prison if they are found to have knowingly lied.

Issuer licensing. Before the GENIUS Act, anyone could issue dollar-pegged stablecoins. When the Act comes into force, it will be limited to banks and federally or state-approved financial institutions. The Act specifically prohibits Big Tech (e.g. Google, Amazon), unlicensed startups and unregulated offshore firms from issuing stablecoin.

Why it focuses on stablecoins (not all crypto)

So why doesn’t the GENIUS Act deal with other cryptocurrencies, such as Bitcoin, Ethereum, and Tether? Because it’s going for the low-hanging fruit. And not attempting the impossible.

Stablecoin was the first cryptocurrency to make the leap from niche to real-world transactions, offering the benefits of speed and convenience, without the volatility or excessive risk. It began jostling with “real” dollars as the new go-to payment rail for businesses, payment firms, and financial institutions. So the US government felt compelled to act. Stablecoin was no longer just a speculative asset, it was becoming a day-to-day way of moving money.

There are also very good reasons why the GENIUS Act ignores the remaining 90% of crypto beyond stablecoin. That’s because it’s decentralized. There’s nobody in charge, there’s no CEO, there’s no corporate structure. It’s run by a network of thousands of computers worldwide, taking instructions from, er, nobody. Or everybody. Either way, that’s one big obstacle to regulation.

On top of that there’s a bitter turf war over which US agency would take charge, if the government did actually decide to regulate - the SEC (Securities and Exchange Commission) on behalf of investors or the CFTC (Commodity Futures Trading Commission) on behalf of traders.

Tackling stablecoins, rather than crypto in general, is an achievable win and a move that is popular both politically and economically. The Act passed in the Senate by 68-30 votes and in the House by 308-122. It also protects banks, by prohibiting stablecoin issuers from paying interest. It allows them to launch subsidiaries for stablecoins without prior approval. And safe stablecoins boost demand for the U.S. dollar globally.

The three tiers of regulation it creates

The GENIUS Act creates three ways to regulate a stablecoin issuer. That may sound a bit messy, but stablecoins don’t fit neatly into one box. They touch several different fields of finance at once: banking, payments, securities, commodities, and money transmission.

For that reason, it would be tricky to have a single rulebook for all issuers. Instead the Act decides which regulator has the clearest authority over any given issuer: a federal regulator, a state regulator, or a foreign regulator. The GENIUS Act is trying to avoid fights between the SEC and CFTC, mentioned earlier, so it categorizes issuers based not on what they do, but by who is allowed to regulate them.

What the Act gets right

So far, so good. Under the new legislation, stablecoin is evolving from a “trust-me” product into a supervised financial instrument, with 100% reserve backing in liquid assets. The Wild West is being tamed. And blockchain is being recognized for its real potential. Not as a speculative plaything but as a foundational infrastructure for the internet of the future.

Blockchain is the platform on which stablecoin and all other cryptocurrencies are built. The GENIUS Act recognizes something important and fundamental here - that blockchain isn’t here to replace the dollar, it’s here to extend it, creating a fast and frictionless method of moving them, and of doing so without middlemen.

The Act sets clear and rigorous standards, enforcing transparency and institutional trust on an industry that has for too long operated in its own gray zone. Here’s how, to my mind, it succeeds:

Reserve transparency is the easiest win. The Act requires issuers to back stablecoins with approved reserve assets, rather than empty promises. That matters because the biggest risk to stablecoin is a run - a sudden wave of redemptions if holders lose confidence.

Issuer accountability puts regulators in charge of inspecting those reserves, making sure every digital dollar really is backed by a paper dollar, checking that monthly reports are accurate, closing every back door to fraud or hidden risk, and holding the issuer responsible if anything goes wrong.

Federal preemption, or the fact that federal law overrides state law. Yes, the smaller issuers will be overseen by state, rather than federal regulators, but they won’t be able to shop around for a “soft state” because all states will have to meet the same baseline standards.

What the Act misses: the Integrity Web framing

It is a move in the right direction, but it’s one small step. At best, the GENIUS Act will regulate a limited slice of crypto activity - a slice that is less chaotic, less risky and less prone to fraud.

What it leaves unregulated is the overwhelming majority of crypto activity, worth untold trillions of dollars every year. That’s where the worst excesses happen - the scams, the frauds, the Ponzi schemes, the collapses, the bankruptcies, and the investors left penniless by exchange blowups or outright theft.

It’s where regulation is most needed. And where it is hardest to apply. You can’t jail the CEO of a cryptocurrency, you can’t raid their headquarters or seize their accounts. They don’t exist.

“The GENIUS Act is a partial fix for one small corner of the market. The Integrity Web is an attempt to embed verification and trust into the rest of it.”

I’m convinced there’s a better way, and I’m convinced that technology in the area I know best - cryptography - is that better way. A new incarnation of the internet, something I’m calling the Integrity Web (until a catchier title comes along), will, I believe, wrest control from the entities into whose hands we currently put our trust, our data and our money.

The Integrity Web will build trust through mathematical certainty, through cryptographic proofs, through the ability of the “prover” to convince even the most skeptical “verifier” that a million-digit sum has been correctly added.

The blockchain ledger itself, the record of transactions that is constantly checked and re-checked by thousands of computers, isn’t the problem. It’s the gap between what a blockchain can prove and what humans still have to trust that’s the problem. Has the exchange where I trade my crypto secretly pocketed my assets? Is it solvent? I know that transactions on the blockchain must be honest but is it possible that some shenanigans have taken place off-chain?

Meme coins vs stablecoins: the regulatory distinction

The GENIUS Act deliberately sidesteps something called meme coins. They’re the wild child of cryptocurrency, pegged not to the US dollar, but to the latest joke or viral trend. Crazy, volatile and anything but a stable coin.

Which is exactly why they’re not covered by the Act. It would be like herding cats, attempting to impose order on something that is inherently chaotic and that will always resist direction.

The value of Dogecoin, the most famous of all meme coins, is literally pegged to fresh air. It spikes and crashes in response to X posts by Elon Musk or other celebrity endorsements, but is still going, 13 years after it was launched. The GENIUS Act doesn’t cover meme coins, because it’s about regulation, not froth.

Meme coins, together with the hype-driven speculation around more sensible cryptocurrencies, are a messy but inevitable consequence of building blockchains as a durable infrastructure for the future. It’s a trade-off: speculation sparks a surge in transactions that generates revenue to fund infrastructure projects. Think back to the bursting of the 1990s internet bubble. Crazy dot-com stocks pumped trading volume and IPO cash, allowing Amazon to build AWS (the cloud powerhouse that runs today’s web).

What happens next

The GENIUS Act was signed into law in July 2025. It is unlikely to take effect until January 2027, giving regulators time to prepare.

But it is already having an impact. Within five months the total money in stablecoins had jumped 49% to $306 billion¹ as banks raced to launch their own stablecoins and everyday users saw how attractive the lower fees were, especially on cross-border transfers.

The GENIUS Act passed with very solid bipartisan support and although tweaks have been proposed there’s nothing currently that is likely to result in significant amendments. It provoked sharp reaction from the EU, which has taken steps to protect its own regular currencies from USDT and USDC, the main U.S. stablecoins.

The main EU regulator (MiCA, Markets in Crypto-Assets) has imposed a €200 million limit² per stablecoin issuer, to prevent EU residents ditching their own currency and flocking in favor of U.S. stablecoins. It also insists that the coins sold in Europe are backed by euro. Hong Kong and Singapore have focused on strict rules for their own local-currency stablecoins, but have not targeted US ones.

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