Federal Reserve Supports Stablecoin Regulation with G.E.N.I.U.S. Act

TLDR

• G.E.N.I.U.S. Act passed with bipartisan support, 68-30 vote.
• Stablecoins must maintain 1:1 reserve backing and monthly disclosures.
• Stablecoin payment volumes exceeded traditional methods in 2024.

The Federal Reserve recently released a note suggesting that stablecoins could enhance the U.S. payment system’s efficiency. The statement comes amid the ongoing implementation of the G.E.N.I.U.S. Act, which establishes a regulatory framework for these digital currencies. The act, signed by President Donald Trump on July 18, 2025, aims to provide structured oversight of payment stablecoins and their issuers.

Legislative Milestone for Stablecoins

The G.E.N.I.U.S. Act is considered the first comprehensive federal legislation to regulate payment stablecoins in the United States. This legislation received broad bipartisan support, passing the Senate with a 68-30 vote. The act mandates strict measures for stablecoin issuers, including full 1:1 reserve backing and monthly public disclosures, ensuring transparency and stability in the market.

The act does not directly allocate funding but tasks the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Treasury with the regulatory oversight. The Securities and Exchange Commission (SEC) also plays a key role, with Chairman Paul Atkins remarking, “Payment stablecoins will play a significant role in the securities industry moving forward.” Other critical voices in the industry, such as SEC Commissioner Hester Peirce, have praised the initiative.

Regulatory Oversight and Market Implications

The G.E.N.I.U.S. Act permits U.S.-regulated banks, credit unions, and licensed nonbank issuers to issue stablecoins. State-regulated entities and compliant foreign issuers are also included under this act. Payment stablecoins like USDC, USDT, and PYUSD are expected to benefit from the new regulations, potentially increasing their integration into the U.S. payments landscape.

By providing regulatory clarity, the legislation aims to foster growth and integration of stablecoin payment systems. Although no direct on-chain analytics is available, anecdotal evidence suggests that merchant payment volumes via stablecoins have surpassed traditional methods like Visa and Mastercard in 2024.

Market Opportunities and Industry Outlook

Stablecoins, including USDC, USDT, and others, may see increased use within DeFi protocols and other blockchain ecosystems. Experts predict that governance tokens for stablecoin protocols like Maker (MKR) and Frax (FXS) could be indirectly impacted by the increasing regulation and market access. Major industry players, however, like Arthur Hayes, Chengpeng Zhao (CZ), and Vitalik Buterin, have yet to issue any public statements regarding the act.

Additionally, the SEC, OCC, and NCUA plan to implement the act’s mandates over phase-in periods for current and future issuers. Stablecoin custody by registered broker-dealers is now permitted, and additional SEC rulemaking is under consideration. Institutions like PayPal and Stripe have recognized benefits in supporting stablecoin payments, highlighting the positive impact on merchant and consumer experiences.