The United States Senate passed the Guided Establishment of National Standards for Innovative US Stablecoins Act, commonly known as the Genius Act, on June 17. This landmark legislation represents the first comprehensive federal regulatory framework for stablecoins, marking a significant milestone.
The bill has now moved to the House of Representatives, where the Financial Services Committee is preparing its own text for a conference committee. A vote could occur later this summer. If successful, the Act could be signed into law by autumn, profoundly reshaping the cryptocurrency landscape.
Its stringent reserve requirements and nationwide licensing system will determine which blockchains are favored, which projects gain importance, and which tokens are widely used—directly influencing where the next wave of liquidity flows. Below, we explore the three major impacts this legislation is likely to have on the industry if it becomes law.
1. Payment Tokens Could Vanish Almost Overnight
The Senate bill creates a new "Licensed Payment Stablecoin Issuer" license. It mandates that every token must be backed 1:1 by cash, U.S. Treasury bonds, or overnight repurchase agreements (repos). For issuers with a circulating supply exceeding $50 billion, annual audits are required.
This stands in stark contrast to the current "wild west" system, which has few substantive safeguards or reserve requirements. These new rules arrive at a time when stablecoins have become the primary medium of exchange on blockchains.
In 2024, stablecoins accounted for approximately 60% of all cryptocurrency transfer value, processing 1.5 million transactions daily. The majority of these transactions were under $10,000.
For everyday payments, stablecoins—which maintain a steady value of $1—are clearly more practical than most traditional payment tokens, whose prices can fluctuate by 5% before lunch.
Once U.S.-licensed stablecoins can legally circulate across state lines, merchants who still accept volatile tokens will struggle to justify the additional risk. In the coming years, the utility and investment value of these alternative tokens may decline significantly unless they successfully pivot.
Even if the Senate bill does not pass in its current form, the trend is evident. Long-term incentives will strongly favor dollar-pegged payment channels over volatile payment tokens.
2. New Compliance Rules Could Determine the Winners
The new regulations will not only provide legitimacy for stablecoins; if the bill becomes law, they will effectively channel these stablecoins toward blockchains that can meet auditing and risk management requirements.
Ethereum currently hosts approximately $130.3 billion in stablecoins, far surpassing any competitor. Its mature decentralized finance (DeFi) ecosystem means issuers can easily integrate with lending pools, collateral lockers, and analytical tools. Additionally, they can assemble a suite of regulatory compliance modules and best practices to meet regulatory demands.
In contrast, the XRP Ledger (XRPL) is positioning itself as a compliance-first platform for tokenized currencies, including stablecoins.
Over the past month, fully backed stablecoin tokens have launched on the XRP Ledger. Each token includes built-in features such as account freezing, blacklisting, and identity screening tools. These functionalities align closely with the Senate bill's requirements for issuers to maintain robust redemption and anti-money laundering controls.
Ethereum's compliance systems might potentially lead issuers to violate these requirements, though it is currently difficult to determine how strictly regulators will enforce this aspect.
Nonetheless, if the bill becomes law as drafted, large issuers will need real-time verification and plug-and-play Know Your Customer (KYC) mechanisms to remain broadly compliant. Ethereum offers flexibility but involves complex technical implementation, while XRP provides a simplified platform with top-down control.
Currently, both blockchains appear to have an advantage over chains focused on privacy or speed, which may require costly modifications to meet the same standards.
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3. Reserve Rules Could Unleash a Flood of Institutional Funds
By requiring that every dollar of stablecoins be backed by an equivalent reserve of cash-like assets, the Act effectively ties cryptocurrency liquidity to U.S. short-term debt.
The stablecoin market already exceeds $251 billion. If institutional adoption continues on its current trajectory, it could reach $500 billion by 2026. At that scale, stablecoin issuers would become among the largest buyers of U.S. short-term Treasury bills, using the yield to support redemptions or customer rewards.
This connection is significant for blockchains in two ways. First, the demand for more reserves means more corporate balance sheets will hold Treasury bonds while also holding native tokens to pay network fees. This will drive organic demand for tokens like Ethereum and XRP.
Second, interest income from stablecoins could fund aggressive user incentives. If issuers return a portion of the Treasury yield to holders, using stablecoins instead of credit cards could become a rational choice for some investors. This would accelerate on-chain payment volume and fee throughput.
Assuming the House retains the reserve provisions, investors should also expect increased sensitivity to monetary policy. If regulators adjust collateral eligibility or the Federal Reserve alters Treasury supply, stablecoin growth and cryptocurrency liquidity will fluctuate in tandem.
This is a notable risk, but it also signals that digital assets are gradually integrating into mainstream capital markets rather than operating independently from them.
Frequently Asked Questions
What is the Genius Act?
The Genius Act is a U.S. Senate-passed bill that establishes the first federal regulatory framework for stablecoins. It sets requirements for licensing, reserves, and compliance to ensure stability and security in the cryptocurrency market.
How might the Genius Act affect existing payment tokens?
The Act favors stablecoins backed by solid reserves, making volatile payment tokens less attractive for daily transactions. Many alternative tokens may lose utility unless they adapt quickly to new regulatory standards.
Which blockchains are best positioned under the new rules?
Ethereum and XRP Ledger are currently well-positioned due to their strong compliance features and established ecosystems. Chains focused solely on privacy or speed may need significant upgrades to meet the requirements.
Could the Genius Act change before becoming law?
Yes, the House of Representatives may modify the bill. However, the core principles of reserve backing and issuer licensing are likely to remain, shaping the industry regardless of minor changes.
How will reserve requirements impact institutional investment?
Strict reserve rules will tie stablecoin value to U.S. debt instruments, attracting institutional funds and increasing the integration of crypto assets with traditional financial markets.
What should investors watch for as the bill progresses?
Key points include final reserve ratios, audit frequency, and how regulators enforce anti-money laundering controls. These factors will determine which assets and platforms thrive under the new system.