Stablecoins in the Senate: Latest on the GENIUS Act

Original: Galaxy

Translator: Chain Learning Community

Editor's Note: The article analyzes the United States Senate's proposed "2025 United States Stablecoin Innovation Act" (GENIUS Act), which aims to establish a comprehensive framework for stablecoin issuance and regulation to promote innovation, protect consumers, maintain financial system security, and reinforce the dollar's global dominance. The article details the bill's key provisions, regulatory framework, and revisions since passing the Senate Banking Committee, and discusses Democratic Party criticisms and concerns about national security, anti-money laundering, and consumer protection.

Senate Stablecoin Bill Update

Latest Developments on the GENIUS Act

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Introduction

At the time of writing, global stablecoins in circulation exceed $243 billion. Of these, $218 billion (90%) are fully collateralized and denominated in US dollars. In 2025, these stablecoins, valued at over $700 billion, circulate in more than 120 million transactions monthly. Stablecoins are widely used for cross-border payments, with transaction costs a fraction of traditional remittances. However, they currently exist in a legal gray area in the United States, with existing companies lacking sufficient regulation to truly develop in the traditional system, and traditional participants facing excessive regulatory uncertainty about using cryptocurrency rails.

Bill Updates Since Self-Tagging

Below, we provide an analysis of the changes made to the latest draft of the bill (after tagging) and the version passed by the Senate Banking Committee. We categorize the changes based on 5 categories that Gallego and Democrats have indicated they are still concerned about: 1) Anti-Money Laundering, 2) Foreign Issuers, 3) National Security, 4) Maintaining the Safety and Soundness of Our Financial System, and 5) Accountability for Non-Compliance with the Bill.

National Security

• Compliance with Lawful Orders (Section 4(a)(6))

Requires stablecoin issuers to demonstrate technical capability to comply with U.S. lawful orders (e.g., freezing, destroying, blocking tokens).

• Definition of "Lawful Orders"

Now includes clarity requirements and mandates judicial or administrative review.

• Treasury Coordination Requirement

When feasible, the Treasury must coordinate with issuers when blocking digital assets.

• Intelligence and Law Enforcement Exemptions (Section 8(e)(3))

Exempts U.S. intelligence and law enforcement actions from key restrictions.

• National Security Exemption (Section 8(e)(2))

The Treasury can waive secondary trading restrictions in consultation with the Director of National Intelligence and the State Department if national security requires.

Foreign Issuers

• Foreign Issuer Restrictions (Section 3)

Foreign issuers cannot offer stablecoins to U.S. persons unless they meet new requirements (e.g., comparable foreign regulations, U.S. reserves, registration).

• Reciprocity Mechanism (Sections 16 and 18)

The Treasury can determine foreign jurisdictions have equivalent regulatory standards, allowing issuers to participate under conditions: must register with U.S. regulators;must comply with U.S. lawful orders;must hold U.S.-custodied reserves for U.S. users.

• 90-Day Safety Harbor Revocation

A 90-day grace period allows markets to adjust before restrictions take effect if the Treasury revokes comparability status.

• Secondary Trading Prohibition (Section 8(c))

Prohibits trading non-compliant foreign stablecoins within the U.S. after designation - enforced unless the Treasury approves an exemption.

Anti-Money Laundering (AML)

• Extended AML Program Requirements (Section 4(a)(5))

Issuers must: implement AML/CIP/sanctions compliance,monitor and report suspicious activities,maintain records and conduct enhanced due diligence.

• Annual AML Certification (Section 5(i))

Officials must certify AML compliance annually; false certification triggers criminal liability and revocation risks.

• New Section on AML Innovation (Section 9)

The Treasury must research novel tools (e.g., AI, blockchain forensics) to improve AML compliance; FinCEN needs to follow up with guidance or rulemaking.

• Foreign Issuer AML Designation (Section 8(b))

The Treasury must designate a foreign issuer as non-compliant if they fail to comply with AML-related lawful orders.

Robustness and Safety of the Financial System

• Reserves and Asset Backing (Section 4(a)(1))

Strengthened 1:1 asset backing requirements; assets must be high-quality and highly liquid.

• Bankruptcy Protection (Section 11)

Determines stablecoin holders have priority claims over other creditors; mandates timely redemption if the issuer fails.

• Federal Financial Risk Assessment (Section 15)

Added requirements for FSOC to assess stablecoin-related risks in its annual financial stability report.

• State-Federal System Coordination (Section 7)

Strengthens Treasury oversight of state-regulated issuers by requiring federal certification of "substantially similar" state systems.

• Prohibition on Interest-Generating Stablecoins (Section 2(23))

Permitted stablecoin issuers cannot offer yields or interest on their stablecoins.

Accountability and Enforcement

• Civil Penalties for Domestic Violations (Section 6(c)(5))

Unauthorized issuance, up to $100,000 per day fine; knowing violations, $200,000 per day fine;post-employment accountability up to six years after leaving.

• Penalties for Foreign Issuer Violations (Section 8(c)(4))

After designation, up to $1,000,000 per day fine; Treasury can seek injunctions to stop U.S. trading.

• Judicial Review of Treasury Actions (Section 8(d))

Allows foreign issuers to appeal non-compliance designations to the D.C. Circuit Court.

• Enhanced Regulatory Authority (Section 6)

Authorizes federal regulators to revoke, remove officers, issue cease-and-desist orders, and other supervisory tools.

Each of these changes was made in the weeks following the committee's overwhelming vote (18-6, with 5 Democrats joining Republicans) to pass the bill, and many changes reflect specific requests from Senate Banking Committee members who either voted against the bill in committee or requested such changes before moving the bill to congressional review. Our analysis indicates that almost all changes make the bill more stringent for stablecoin issuers compared to the version passed by the Senate Banking Committee.

Conclusion

Overall, the latest form of the GENIUS bill represents a powerful victory that promotes innovation, protects consumers, and benefits both the crypto industry and traditional finance. It creates reasonable registration pathways while imposing strict oversight and regulatory provisions and severe penalties for non-compliance. The GENIUS bill will promote U.S. dollar usage domestically and internationally, making it easier for individuals and businesses to conduct daily transactions domestically, cross-border, or in international trade. All parties gain something important here: the crypto industry gets viable pathways while being controlled, it protects the financial system, and helps the U.S. succeed in geopolitics and the evolving global economy.