Genius Act: Regulatory Framework for Stablecoins in the U.S.

Genius Act: Regulatory Framework for Stablecoins in the U.S.

The Genius Act is one of the most significant pieces of legislation in the recent history of digital assets in the United States. This law, which establishes a clear regulatory framework for stablecoins, was signed in July 2025 and represents a monumental step in digital asset policy, with a focus on transparency and consumer protection.

What is the Genius Act?

The Genius Act is defined as the first comprehensive federal legislation in the U.S. regulating payment stablecoins. According to the regulations, a payment stablecoin is a digital asset specifically designed for payments or settlements, and its issuer has the obligation to redeem it to a fixed and stable monetary value.

Key Elements of the Genius Act

• Reserve Support and Transparency: Stablecoin issuers must maintain reserves that back each unit in circulation at a one-to-one ratio. These reserves must be composed of highly liquid assets, such as U.S. dollars or Treasuries.
• Licensing and Supervision: The legislation limits the issuance of stablecoins to designated entities, including insured financial institutions and certain non-bank issuers. Unauthorized entities are prohibited from issuing stablecoins.
• Redemption and Consumer Protection: Clear and guaranteed redemption rights must be offered in a one-to-one ratio, complying with comprehensive disclosure requirements.
• Restrictions on Technologies and Performance: Big tech must establish separate legal entities to issue stablecoins, while direct remuneration to stablecoin holders is prohibited to prevent stablecoins from being considered investment securities.

Importance of the Genius Act

This regulatory framework is crucial since before the Genius Act, stablecoin issuers operated under fragmented regulation that generated insecurities for both users and financial institutions. Now, there is a defined set of definitions and requirements that aim to increase confidence in the use of stablecoin as a legitimate form of participation in the U.S. financial system.

Global Impact of the Genius Act

Not only does the legislation have implications domestically, but it also marks a new boom in the way stablecoins are regulated globally. Unlike similar regulations in Hong Kong and Singapore, the Genius Act has the potential to significantly influence how digital assets are perceived and used around the world, thanks to the position of the U.S. dollar in the international financial system.

Future Legislative Alignments

As the development of the regulatory framework progresses, the Genius Act is expected to operate in conjunction with other legislation, such as the Digital Asset Market Clarity Act. This will allow for a more structured and clear environment for the growth and evolution of digital assets.

In conclusion, the Genius Act lays the groundwork for a future where stablecoins can be an integral part of the U.S. financial infrastructure, fostering innovation while ensuring consumer safety.

For more information, visit the original source: TON Foundation.