The U.S. cryptocurrency industry is celebrating as the GENIUS Act—a stablecoin regulatory framework—was passed in the U.S. Senate on June 17, 2025.

The bill passed with a bipartisan vote of 68 to 30, about six weeks after Senator Bill Hagerty from Tennessee introduced it to the Senate. The bill will now be submitted to the House of Representatives, where Congress must reconcile it with the House's own STABLE Act, which also aims to regulate stablecoins.

The bill includes several provisions, including rules for issuers, anti-money laundering measures, and a requirement for stablecoins to be backed by reserves of U.S. dollars and short-term government securities at a 1:1 ratio.

Legislators have stated that the bill will provide clarity and stability, but economic and legal observers have pointed out that the supportive provisions of the GENIUS Act could pose systemic risks to the U.S. monetary system.

Hagerty stated, "The bill will solidify the dollar's dominance, protect consumers, and drive demand for U.S. Treasury securities."

The GENIUS Act prioritizes U.S. Treasury securities as backing assets, which has raised concerns among some observers. Professor Yesha Yadav from Vanderbilt University and Brendan Malone, who previously worked in the Federal Reserve's payments and clearing department, published a paper on June 10 detailing their position.

According to Aaron Brogan, a lawyer focused on cryptocurrency, "The bill authorizes stablecoin issuers as wholesale buyers of U.S. debt. The 1:1 collateral rule will direct new token revenues into the Treasury market."

The two authors are concerned that, given the current state of the U.S. Treasury market, the practice of backing stablecoins is unsustainable. Yadav and Malone noted that Circle's circulating supply is $60 billion, while the trading volume in the secondary Treasury market is about $900 billion.

This means that currently, if issuers like Circle were to liquidate their assets, there would likely be enough counterparties to purchase their Treasuries.

However, if the stablecoin market continues to grow, this situation may change, the authors pointed out:

"In the past five years, stablecoins have experienced explosive growth, with issuance expanding from about $2 billion in 2019 to approximately $230 billion in outstanding debt by the first quarter of 2025."

Additionally, the Treasury market has faced liquidity issues in recent years, resulting from various factors:

These factors combined mean that if a stablecoin company experiences a run on tokens during bankruptcy, the anticipated large-scale debt flows will face fewer counterparties.

The authors noted that the lack of liquidity in the Treasury market and the possibility of stablecoin issuers going bankrupt is not hypothetical. Circle saw $2 billion of USDC withdrawn from circulation within days of its banking partner Silicon Valley Bank's collapse.

The Treasury market experienced a liquidity crunch during the COVID-19 market turmoil in March 2020, where investors could not find counterparties to trade their Treasuries, "leading to severe price distortions."

This situation occurred again in April 2025 when President Donald Trump made radical adjustments to U.S. trade policy through new tariffs: "Treasury trading experienced severe liquidity shortages and abnormal price volatility. Investors could not trade smoothly, always raising concerns about the causes of this collapse."

Yadav and Malone stated that the increasingly illiquid Treasury market and the rapidly growing stablecoin ecosystem pose mutual risks.

If a large stablecoin issuer faces a run on its stablecoins, the lack of liquidity in the Treasury market and the scarcity of counterparties may prevent the issuer from selling its securities, leading to bankruptcy.

This could also affect the credibility of the Treasury market. The authors noted, "The growth of the stablecoin industry does not seem to have adequately considered the Treasury market's ability to support this growth in practical terms."

The growing demand in the stablecoin industry may also crowd out other borrowers hoping to include Treasuries in their portfolios.

This could also change U.S. financial policy and the government's decisions on how to finance itself. Short-term debt accounts for about a quarter of the total Treasury debt. A preference for 10-year and 30-year bonds "means that policymakers can typically plan for various initiatives that require spending over decades."

According to the GENIUS Act, stablecoin issuers should prioritize backing their assets with short-term Treasuries. If the composition of current Treasury debt shifts toward short-term:

"The regulatory goals for stablecoins are likely to affect how the U.S. government finances itself and the costs associated with that."

Yadav and Malone summarized three policy implications:

The growing interconnection between Treasuries and stablecoins "highlights the policy necessity of ensuring that the advantages of both enhance each other rather than their vulnerabilities undermine the whole."

It is commendable that regulators seem to be making changes to limit these risks, but their effectiveness remains unclear.

Before the GENIUS Act can pose systemic risks to the U.S. financial system, it must first pass the House of Representatives.

The bipartisan hurdles for cryptocurrency may end with the Senate's vote. Last year, the House voted to pass a cryptocurrency bill and sent it to the Democrat-controlled Senate, but it failed to make it to the agenda.

If lawmakers are as receptive to supporting cryptocurrency legislation as they were last year, the remaining question is how to reconcile the bill with the House's STABLE Act.

According to a report from blockchain intelligence firm TRM Labs, "The two bills differ in structure and scope but both reflect a growing bipartisan consensus on stablecoins."

Key issues under discussion include "federal oversight structures, coordination with state regulators, and the regulatory treatment of algorithmic stablecoins."

Political concerns, particularly regarding the extent to which Trump may benefit from the bill, remain. Senator Elizabeth Warren stated, "This is a bill written by the industry that will greatly enhance Donald Trump's crypto corruption profitability while undermining consumer protections and weakening our defenses."

Senior Democratic member of the House Financial Services Committee Maxine Waters has been a strong critic of Trump's activities in the cryptocurrency space. Waters and other senior industry opponents may block the bill.

Swing Democrats may also be influenced by Trump's increasing involvement in the industry—many in the cryptocurrency space believe this undermines the legitimacy of the industry—and the president's declining approval ratings.

Related: Trump on the GENIUS stablecoin bill: "Get it to my desk as soon as possible, the sooner the better."

Original article: U.S. Senate Passes GENIUS Stablecoin Bill, Systemic Risk Concerns Emerge

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