What is the GENIUS Act and what it may mean for consumers


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What is the GENIUS Act?

The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) is a bipartisan bill that seeks to create a regulatory framework for stablecoins in the United States. It aims to protect consumers and establish industry standards, potentially facilitating mainstream adoption of stablecoins for various financial transactions.

Key Provisions of the GENIUS Act

  • Requires stablecoin issuers to maintain sufficient reserves to ensure easy cash-out for consumers.
  • Prioritizes stablecoin holders for repayment in case of issuer bankruptcy.
  • Mandates compliance with anti-money laundering and anti-terrorism financing rules.
  • Prohibits members of Congress and senior executive branch officials from issuing stablecoins during their time in office.

Criticisms of the GENIUS Act

Critics, such as Senator Elizabeth Warren, argue that the bill is insufficient to protect consumers and could exacerbate financial risks, particularly highlighting concerns about the potential involvement of President Donald Trump's World Liberty Financial and their stablecoin, USD1. Warren expressed concern that the act could facilitate financial misconduct and a future financial crisis.

What is a Stablecoin?

A stablecoin is a cryptocurrency designed to maintain a stable value relative to an asset like the US dollar, minimizing price fluctuations and making it suitable for everyday transactions.

Current Status

While the bill passed a significant procedural vote in the Senate, its final passage remains uncertain. A vote is expected after Memorial Day.

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The wild west days of the cryptocurrency market may be coming to an end as Congress takes a step closer to passing first-of-its-kind legislation.

The GENIUS Act, officially the Guiding and Establishing National Innovation for U.S. Stablecoins Act, passed a key procedural hurdle in the Senate on May 19. The bipartisan vote limits debate on the bill and allows the Senate to move forward to final passage. The bill would create a regulatory framework for stablecoins, a type of cryptocurrency tied to the value of an asset like the U.S. dollar. 

The bill remains controversial and far from final passage. A vote likely won’t happen until after Memorial Day at the end of the month.

Still, the bill is considered a major win for the crypto industry. The industry-backed bill would help protect consumers and set industry standards that could allow stablecoins to become mainstream for digital payments and other financial instruments, advocates say.

The bill "is the type of policy proposal that could lead to frictionless payments and help millions of Americans gain greater access to the financial system,” said Austen Jensen, Retail Industry Leaders Association executive vice president of government affairs.

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The bill also “reinforces U.S. leadership in digital assets,” Sarah Milby, Blockchain Association interim chief executive and head of policy, said in a statement.

What is a stablecoin?

A stablecoin is a type of cryptocurrency designed to maintain a stable value relative to an asset, like the U.S. dollar. 

Pegging the unit to a stable asset helps minimize price fluctuations, making it more suitable for everyday transactions and as a reliable store of value. Many stablecoins are also backed by reserves of fiat currency or other assets like U.S. Treasuries.

What is the GENIUS Act?

The bill establishes rules for stablecoin issuers, including:

â—ľFirms must hold a reserve of assets underlying the stablecoin so consumers can always easily cash out their holdings.

â—ľIssuers must prioritize stablecoin holders for repayment in case of bankruptcy.

â—ľIssuers must abide by some anti-money laundering rules and anti-terrorism sanctions.

The bill also would prohibit “any member of Congress or senior executive branch official from issuing a payment stablecoin product during their time in public service.”

What do critics say about the GENIUS Act?

Critics say the bill doesn’t go far enough to protect consumers or stop President Donald Trump from lining his own pockets. World Liberty Financial, a crypto venture linked to Trump, launched USD1, a U.S. dollar-backed stablecoin.

“The GENIUS Act will accelerate Trump’s corruption by supercharging the size of the stablecoin market and the reach and profitability of USD1,” said Sen. Elizabeth Warren, D-Massachusetts, one of the bill’s most vocal critics, on the Senate floor on May 19.

USD1, launched in March, is already the fifth-largest stablecoin in the world.

“Passing this bill means that we can expect more anonymous buyers, big companies, and foreign governments to use the president’s stablecoin as both a shadowy bank account shielded from government oversight and as a way to pay off the president personally,” Warren said. “For crooks, it's a two-for-one.”

She also warned of another financial crisis ahead and said Americans “will bear the costs of a massive financial crash facilitated by the stablecoin market if Congress passes this bill.”

“This weak bill is worse than no bill at all,” Warren said.

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.

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