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The federal GENIUS Act, passed in July 2025, is the first major piece of legislation aimed at bringing clear rules to the fast-evolving world of cryptocurrency.[1] The Act primarily focuses on how stablecoins — digital tokens designed to keep a steady value, usually tied to the U.S. dollar — can be issued and managed.
For people who buy and sell digital assets, this new legislation represents a major turning point: It attempts to balance innovation in crypto with much-needed regulation and consumer protections. Here’s a closer look at what the GENIUS Act means for stablecoins and how its effects may ripple through the larger crypto ecosystem.
Key Points
• The 2025 GENIUS Act is the first major legislation to establish clear rules for stablecoins, aiming to balance innovation with regulation and consumer protection.
• Stablecoins are cryptocurrencies designed with the goal of maintaining a stable value, often by pegging to a fiat currency, such as the U.S. dollar.
• Key provisions of the GENIUS Act include licensing requirements for issuers, 1:1 backing with highly liquid assets, transparency through public disclosures, yield restrictions, and protection from deceptive practices.
• The GENIUS Act offers broader regulatory consistency and potentially increased legitimacy of stablecoins, while it may initially lead to higher costs and fewer options.
• Unlike money deposited into an insured bank or brokerage account, cryptocurrencies are not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC).
What Is the GENIUS Act?
The GENIUS Act — formally titled the Guiding and Establishing National Innovation for U.S. Stablecoins Act — represents the first major U.S. statute to codify rules specifically for stablecoins.[2] It aims to provide a regulatory framework that allows wider use of stablecoins as a legitimate form of payment.
As a quick refresher, stablecoins are a type of cryptocurrency that has its value pegged to another asset, which is typically a traditional fiat currency like the U.S. dollar. Designed to stay close to a fixed price (typically $1), stablecoins offer a more practical way to make payments via blockchain. With most cryptocurrencies, payments can be risky since the price of the coin can fluctuate dramatically from one minute to the next.
Until now, there was no federal framework governing stablecoins, which limited their widespread use. The GENIUS Act is looking to bring this digital currency into the mainstream by establishing clear rules for how stablecoins must operate, how issuers are supervised, and what protections users can expect.
Holders of stablecoins should understand, however, that these coins do not carry the same safety net as money held in a traditional bank or brokerage account, since crypto assets are not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC).[3]
Key Provisions of the GENIUS Act
The GENIUS Act is designed to help payment companies, financial institutions, and consumers navigate the stablecoin market with greater confidence. While the legislation is long, here are some key highlights.
Stablecoin Definition and Oversight
Under the Act, a stablecoin is explicitly recognized as a “digital asset issued for payment or settlement and redeemable at a predetermined fixed amount (e.g., $1).”[4] This definition excludes algorithmic stablecoins, which are stablecoins that use complex computerized rules to keep prices stable, leaving them outside the law’s consumer protections.
The Act lays out how payment stablecoins must be issued and regulated. This includes:
• Licensing: No one may issue or sell a U.S.-pegged payment stablecoin unless they are a licensed permitted payment stablecoin issuer (PPSI). Issuers with over $10 billion in stablecoin issuance can apply federally; smaller fintechs can opt into certified state-level frameworks that meet or exceed federal rules.[2]
• Reserves: Stablecoins must be backed with highly liquid assets (such as U.S dollars and short-term U.S. treasuries) on a 1:1 basis.
• Transparency: Issuers must release periodic public disclosures and submit to routine reserve audits.
• Consumer protection: In case of insolvency or bankruptcy, stablecoin holders are given priority claims over other creditors when reserves are distributed.
• Restrictions on yields: Issuers may not offer interest or yield to stablecoin holders to prevent them from functioning like and being perceived as securities rather than payment vehicles.
• Truth in marketing: Issuers cannot make misleading marketing statements, such as claims that stablecoins are government-backed or legal tender.
• Compliance: All issuers must comply with the Bank Secrecy Act, enforce strong anti–money laundering measures, and adhere to consumer protection rules.[5]
Together, these provisions are designed to end the “Wild West” era of unregulated stablecoins and bring the market closer to the rigor of traditional banking regulation and oversight.
Impact on Cryptocurrency Markets
By establishing clear regulatory guardrails, the GENIUS Act legitimizes stablecoins and opens the door to broader adoption of digital assets. The prospect of banks and payment platforms introducing their own stablecoins could further validate cryptocurrencies and push them more toward mainstream financial use.
This growing legitimacy could potentially lead to greater market stability and even improved performance for other crypto assets such as Bitcoin and Ethereum.
That said, the long-term impact of the GENIUS Act on crypto prices and stability is impossible to predict. For now it’s important to remember that crypto as an asset class is still highly volatile and is strictly for buyers with a high tolerance for risk.
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Potential Impact on Stablecoins and Crypto Holders
With the passage of the GENIUS Act, stablecoin issuers and crypto holders will need to adapt to a new landscape. Here’s how the legal change could ripple through the markets.
For Stablecoin Issuers
• Higher compliance costs: Issuers face strict reserve, licensing, audit, and disclosure requirements. Smaller firms may struggle to keep up.
• Barrier to entry and consolidation: The costs and intricate requirements of the GENIUS Act may favor large institutions for stablecoin issuance, making it more challenging for smaller entities to compete.
• Greater legitimacy: PPSI status could attract institutional partnerships and boost user confidence.
• Regulatory consistency: The Act aligns state and federal stablecoin frameworks, ensuring fair and consistent regulation throughout the U.S.
For Crypto Holders and Users
• Improved transparency: Regular audits and federal oversight will give users more confidence that their stablecoins are truly backed.
• Stronger consumer protections: Priority in bankruptcy and clear redemption policies reduce the chance that funds will be lost in a stablecoin collapse.
• Regulatory complexity and delays: The new rules will require significant adjustments from issuers and may lead to initial delays in their operations. Some stablecoins not fully in compliance may need to change structure.
• Possible higher costs or fewer options initially: Higher operating expenses could be passed on to users via transaction fees. Also, smaller or less well-funded issuers might find the regulatory burden heavy and some could exit or consolidate, reducing competition.
The GENIUS Act and Bitcoin
While the act doesn’t directly regulate Bitcoin itself, its passage aims to increase stability and confidence in the broader digital asset market. This could potentially increase mainstream adoption and interest in cryptocurrencies, including Bitcoin. For those who regularly buy, hold, and sell Bitcoin, this can be seen as a positive development.
At the same time, however, the Act’s emphasis on centralization and compliance marks a shift away from the decentralized ethos that drew many to Bitcoin and other cryptocurrencies. As a result, many crypto users view the GENIUS Act (and other crypto legislation that may follow) with cautious optimism.
Policy Outlook on the GENIUS Act
While the GENIUS Act is now law, it won’t be implemented immediately. It is scheduled to take effect 18 months after the enactment of the GENIUS act or 120 days after federal regulators issue the implementing rules, whichever comes first.
As we move through 2025, federal agencies — including the Office of the Comptroller of the Currency, the Treasury Department, and the Federal Reserve —- will be engaged in rulemaking and formulating guidance to implement the bill’s provisions, a process that could take many months.
In the meantime, we may see even more federal crypto legislation coming out of Washington. The Digital Asset Market Clarity (CLARITY) Act, for example, is currently moving through Congress. This proposed law aims to clarify the roles of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in regulating the crypto market. If passed, it would set standards for the wider crypto industry.
What the GENIUS Act Means for Everyday Crypto Users
For people who use stablecoins as a gateway to crypto or as a digital cash equivalent, the GENIUS Act brings both benefits and new rules to be aware of.
First, the law puts certain safeguards in place for stablecoin users. Issuers can no longer claim their tokens are legal tender or backed by the U.S. government, helping protect users from misleading ads. If a stablecoin company goes bankrupt, holders also get priority in getting their money back ahead of other creditors.
But there are limits to the law. For example, the Act does not guarantee instant redemption of stablecoins or provide deposit insurance, as mentioned above, leaving some risks for everyday users.
Crypto users also need to prepare for tighter compliance. Stablecoin issuers must now follow strict anti-money laundering laws, which means users will face stronger identity checks when buying, selling, or redeeming tokens. Everyday crypto users may also see changes in stablecoins availability, as some stablecoins could disappear, while new federally licensed ones take their place.
The Takeaway
The GENIUS Act is the first significant U.S. crypto regulation. It aims to reshape stablecoins by defining how they must be backed, disclosed, licensed, and protected. For issuers, it introduces heavier compliance but also credibility and access to broader markets. For users, it offers greater safety and transparency, but also imposes new rules that could remove some offerings from the market.
Overall, the GENIUS Act represents a turning point for crypto regulation. By setting a clear national standard for stablecoins, it paves the way for additional legislation and signals that the U.S. government may be ready and willing to integrate digital assets into the financial mainstream in the coming years.
Soon, SoFi members will be able to buy, sell, and hold cryptocurrencies, such as Bitcoin, Ethereum, and more, and manage them all seamlessly alongside their other finances. This, however, is just the first of an expanding list of crypto services SoFi aims to provide, giving members more control and more ways to manage their money.
FAQ
What is the main goal of the GENIUS Act for cryptocurrency?
The primary objective of the GENIUS Act is to create the first clear and enforceable federal framework for stablecoin regulation in the U.S. It aims to protect consumers, promote transparency, manage financial stability risks, help prevent fraud and illicit activity, and bolster U.S. dollar dominance in digital payments.
Is the GENIUS Act a law yet?
Yes, the GENIUS Act was signed into law on July 18, 2025, after passing both the Senate and the House. It is set to take effect 18 months after the enactment of the GENIUS act or 120 days after federal regulators issue the implementing rules, whichever comes first.
How does the GENIUS Act define and regulate stablecoins?
Under the GENIUS Act, a “payment stablecoin” must be redeemable at a stable value and backed 1:1 by liquid, low-risk reserves such as U.S. dollars or short-term Treasuries. Issuers must publicly disclose reserve composition monthly, maintain segregation from their own assets, and comply with strict consumer-protection rules. In the event of insolvency, holders’ claims get priority over other creditors. The act also states that payment stablecoins are not considered securities or commodities.[6]
Will the GENIUS Act impact the price of Bitcoin?
The Act focuses narrowly on stablecoins, so any direct effect on Bitcoin’s price is uncertain. Some market participants expect improved regulatory clarity could increase institutional confidence in crypto broadly, which might buoy demand for Bitcoin and other major coins. However, because Bitcoin is not a stablecoin, its price dynamics remain driven by supply, demand, macro factors, and sentiment rather than these reserve-backing rules.
About the author
Julia Califano
Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.
Article Sources
- WhiteHouse.gov. Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law.
- Congress.gov. S.1582 – GENIUS Act.
- FDIC. Deposit Insurance.
- Congress.gov. Stablecoin Legislation: An Overview of S. 1582, GENIUS Act of 2025.
- World Economic Forum. The GENIUS Act is designed to regulate stablecoins in the US, but how will it work?.
- Congress.gov. PUBLIC LAW 119–27—JULY 18, 2025.
Photo credit: iStock/Ihor Lukianenko
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