The "GENIUS Act" aims to establish the first federal regulatory framework for the U.S. stablecoin market, experiencing a dramatic turnaround from failure to bipartisan compromise.
Written by: White55, Mars Finance
I. Legislative Process: A Dramatic Turn from "Near Death" to "Resurrection"
From May to June 2025, the U.S. Senate's negotiations surrounding the "GENIUS Act" (full name: "Guidance and Establishment of the U.S. Stablecoin National Innovation Act") can be described as an epic battle intertwining politics and finance. This bill, which aims to establish the first federal regulatory framework for the $250 billion stablecoin market, underwent a thrilling comeback from "procedural death" to "bipartisan compromise," ultimately advancing to the Senate floor debate stage with a voting result of 68 to 30. However, behind this victory lies months of interest exchanges between the two parties, lobbying battles among industry giants, and the ethical controversies sparked by the Trump family's "crypto gold mine."
Timeline Review:
March 2025: Republican Senator Bill Hagerty officially proposed the initial draft of the bill, aiming to establish a "federal + state" dual regulatory system for payment stablecoins.
May 8: The bill's first procedural vote unexpectedly failed 48 to 49, with Democrats collectively turning against it citing "Trump family conflicts of interest."
May 15: The two parties held urgent consultations, launching a revised version of the bill, removing provisions targeting the Trump family's crypto business in exchange for partial Democratic support.
May 20: The amendment passed the critical "cloture vote" with a 66 to 32 result, clearing legislative hurdles.
June 11: The Senate passed the bill with an overwhelming advantage of 68 to 30, entering the final debate and amendment process.
Senate Majority Leader John Thune spoke on Wednesday in support of the vote for the "GENIUS Act." Source: U.S. Senate
The core of this series of turnarounds lies in the Republican Party's clever packaging of the bill as a strategic tool for "digital dollar hegemony," while the Democrats showed signs of wavering internally due to concerns about "regulatory vacuum leading to financial risks." Senate Majority Leader John Thune's lobbying rhetoric was highly provocative: "If the U.S. does not lead stablecoin rules, China will fill the void with the digital yuan!"
II. Core Provisions: Regulatory Blueprint and "Devil's Details"
The regulatory framework design of the "GENIUS Act" attempts to walk a tightrope between "encouraging innovation" and "preventing risks," with its core provisions summarized into the following six pillars:
Dual Regulation and Issuance Thresholds
Stablecoins with issuance scales exceeding $10 billion will be federally regulated (led by the Office of the Comptroller of the Currency, OCC), while those below $10 billion may opt for state-level regulation, provided state standards align with federal ones. This design appeases state autonomy while delineating red lines for giants, seen as a de facto protection for Circle (USDC) and Tether (USDT).
1:1 Reserves and Asset Segregation
Stablecoins are required to be fully collateralized by cash, short-term U.S. Treasury bonds, and other highly liquid assets, with reserve assets strictly segregated from operational funds. This provision directly targets the 2022 Terra collapse but allows for the inclusion of "risk assets" like money market funds in reserves, criticized as "laying mines."
Tech Giants' "Tightening Spell"
Non-financial tech companies (e.g., Meta, Google) must obtain approval from a newly established "Stablecoin Certification Review Committee" (SCRC) to issue stablecoins and meet data privacy and antitrust requirements. This provision is interpreted as a "targeted strike" against Trump ally Musk's (X platform stablecoin plan).
Consumer Protection and Bankruptcy Priority
In the event of the issuer's bankruptcy, stablecoin holders can redeem their assets preferentially, and reserves will not be included in the bankruptcy estate. However, Democrats point out that this provision is weaker than traditional bank FDIC insurance mechanisms, posing a "frozen funds" risk.
Anti-Money Laundering and Transparency
Stablecoin issuers will be subject to the Bank Secrecy Act, mandating compliance with KYC and suspicious transaction reporting obligations. However, a loophole exists: decentralized exchanges (DEX) are not bound, leaving a backdoor for illegal fund flows.
Presidential Family "Exemption Loophole"
The bill does not explicitly prohibit members of Congress or presidential relatives from participating in stablecoin businesses, allowing the USD1 stablecoin (valued at $2 billion) issued by the Trump family's World Liberty Financial (WLF) to become compliant. Democratic Senator Warren angrily stated: "This is a green light for Trump's 'crypto corruption'!"
III. Controversy Swirl: Trump's "Crypto Gold Mine" and Bipartisan Rift
The biggest resistance to the bill's advancement does not stem from policy details but from the Trump family's deep involvement in the crypto industry and the resulting conflicts of interest. Three major points of contention have pushed the political game to a climax:
"Legalization Arbitrage" of USD1 Stablecoin
The USD1 issued by WLF has injected $2 billion into Binance through an Abu Dhabi investment company, allowing the Trump family to earn over $80 million annually from transaction fees. More critically, once the bill passes, USD1 will automatically gain federal recognition, potentially skyrocketing its market value to the tens of billions.
"Pay-to-Meet" Ethical Crisis
Trump has offered "presidential dinner" qualifications to holders by selling meme coins (like TRUMP Coin), which Democrats accuse of "securitizing national power." Senator Jeff Merkley bluntly stated: "This is the most naked quid pro quo in history!"
"Revolving Door" of Legislative and Executive Power
One of the bill's core drafters, Republican Senator Hagerty, has been exposed for having political donation ties with WLF. Democrats attempted to push an amendment to prohibit public officials from participating in stablecoin businesses but were collectively blocked by Republicans.
Although the two parties reached a compromise on May 15, removing provisions directly targeting Trump, Warren and others still launched a "final struggle" in the Senate, demanding transparency on the funding flows between the Trump family and WLF. This moral battle is, in fact, a prelude to the 2026 midterm elections.
IV. Market Turbulence: Compliance Dividends and the "Oligopoly Era"
If the "GENIUS Act" is ultimately implemented, it will trigger a structural reshuffle in the stablecoin market:
Top Players "Win by Lying Down"
USDC (Circle) and USDT (Tether), having already established compliant reserves (80% in short-term U.S. Treasury bonds), will directly obtain federal licenses, further squeezing out smaller issuers. Goldman Sachs predicts their market share may rise from 94% to 98%.
Traditional Finance "Cross-Border Harvesting"
Institutions like JPMorgan and Wells Fargo have applied for "limited purpose stablecoin licenses," planning to encroach on cryptocurrency exchange shares through on-chain payment services. The provision in the bill allowing insurance companies to issue stablecoins further opens the floodgates for traditional giants.
U.S. Treasury Crisis: "Antidote or Poison?"
The bill requires stablecoin reserves to be primarily in U.S. Treasury bonds, which may temporarily alleviate liquidity crises in Treasury bonds, but in the long term could exacerbate "maturity mismatch"—investors favoring short-term bonds may lead to a decline in long-term Treasury demand, worsening fiscal deficits.
Global Regulatory "Domino Effect"
The EU, UK, and Singapore have indicated they will adjust policies in reference to the "GENIUS Act," forming a "U.S. Dollar Stablecoin Alliance." The renminbi and yen stablecoins may be squeezed out of the cross-border payment market, reshaping the global monetary landscape.
V. Future Battles: House Negotiations and Trump's "Final Judgment"
Although the Senate has given the green light, the bill still needs to pass through three hurdles:
House "Simplified Passage"
The Republican Party controls the House with a 220:215 majority, requiring only a simple majority (218 votes) to pass. However, the House version of the "STABLE Act" has key differences from the Senate version: the former requires regulatory authority to be entirely federal and prohibits tech companies from issuing stablecoins. Coordination between the two chambers may drag on until the August recess.
Presidential "Interest Balancing"
Although Trump publicly supports the bill, his family's interests are deeply intertwined with the legislative details. If Democrats push an "anti-corruption amendment" in the House, it could trigger a presidential veto, leading to legislative failure.
Judicial Challenge "Gray Rhino"
The U.S. Constitution's "Emoluments Clause" prohibits the president from profiting from foreign governments, and since 20% of USD1 users are located in sanctioned countries (Iran, North Korea), this may provoke Supreme Court intervention.
VI. Conclusion: "Dollar Hegemony 2.0" in the Crypto Era
The ultimate ambition of the "GENIUS Act" is not merely to regulate the market but to embed dollar hegemony into the DNA of blockchain. By tying U.S. Treasury bonds to stablecoins, the U.S. is building a "digital dollar empire"—every on-chain transaction globally is, in effect, reinforcing the dollar's reserve status. However, the risks of this gamble are equally enormous: if DeFi (decentralized finance) bypasses compliant stablecoins or if China accelerates the internationalization of the digital yuan, the bill could become a "house of cards."
The games of politicians, the lobbying of interest groups, and the waves of technological revolution—at this historical crossroads, the ultimate fate of the GENIUS Act will determine who dominates the financial order of the next decade.
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