Will the US Finally Legalize Stablecoins? Progress of the GENIUS Act

The US is openly planning to legalize stablecoins through the GENIUS Act. The innovation of involving stablecoins with a 1:1 ratio to the USD has attracted the attention of many parties.

If the Genius Act is truly enacted according to schedule, namely in 2025, then the US has reached the next level to become the world's crypto capital.

However, the plan to determine the legality of stablecoins by the US is not without controversy, it is noted that several senators are still reluctant to pass the GENIUS Act on the grounds of national security and potential money laundering.

Progress of the GENIUS Act for Legalizing Stablecoin

In early 2025, U.S. lawmakers introduced the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) to fill a major regulatory gap in the cryptocurrency space.

This act proposes a comprehensive legal structure for issuing and managing payment stablecoins, digital assets pegged to the U.S. dollar or other secure assets. 

The law seeks to simultaneously promote innovation in financial technology and protect consumers from risks associated with unregulated digital currencies. 

It is considered a foundational step toward integrating stablecoins into the U.S. financial ecosystem, much like bank-issued digital cash.

Legislative Milestones: From Committee to Senate Floor

The GENIUS Act quickly gained momentum within Congress. On March 13, 2025, it passed the Senate Banking Committee with notable bipartisan support, 18 in favor and 6 opposed. 

This was a significant victory, especially because it included support from five Democratic senators, signaling early optimism that the bill could pass into law with cross-party agreement.

By May 2025, the bill had advanced further, with Senate Majority Leader John Thune moving to expedite its presentation on the Senate floor. 

Meanwhile, the House of Representatives has been working on a similar bill known as the STABLE Act, and both chambers are now in the process of reconciling their versions of the proposed regulations. 

If alignment is achieved, it would represent the first coordinated federal approach to stablecoin oversight.

What the GENIUS Act Regulates

At the heart of the GENIUS Act are four major pillars designed to legitimize stablecoin issuance while guarding against systemic financial risk:

1. Reserve Requirements

Issuers of stablecoins must hold 1:1 reserves in either U.S. dollars or U.S. Treasury securities. This rule ensures that every digital coin is fully backed, making it redeemable at any time for its equivalent value. 

Issuers are also required to publish monthly reports detailing their reserve holdings to ensure transparency and consumer confidence.

2. Financial Oversight and AML Compliance

The Act classifies stablecoin issuers as financial institutions under the Bank Secrecy Act, meaning they must implement rigorous anti-money laundering (AML), counter-terrorism financing (CTF), and Know Your Customer (KYC) practices. 

This is intended to block bad actors from exploiting digital currencies for illicit activities.

Read Also: Will Stablecoin Be the Key Narrative in 2025's Bull Market?

3. Consumer Protection Through Marketing Restrictions

Stablecoin projects will not be allowed to market their tokens as "government-backed" or as equivalent to legal tender. 

This clause aims to prevent misleading claims and ensure that users understand the non-sovereign nature of private stablecoins.

4. State-Federal Regulatory Coordination

The bill proposes a dual-licensing framework: smaller issuers can operate under state licenses, while larger entities (with broader market impact) must comply with federal regulations. 

This flexibility encourages innovation while maintaining appropriate oversight.

Political Hurdles: Setbacks and Controversies

While the GENIUS Act made an impressive start, its forward momentum is now challenged by emerging political tensions. In early May, nine Democratic senators who initially supported the bill withdrew their endorsements. 

Their concerns are primarily about national security risks and perceived weaknesses in the bill's AML enforcement mechanisms.

Additionally, the bill has come under fire due to a $2 billion stablecoin initiative linked to Donald Trump’s business allies. This has raised fears of conflict of interest and undue political influence over what should be a neutral financial infrastructure. 

Read Also: How to Make Money with Stablecoins

The resulting controversy has prompted some lawmakers to call for an ethics review of the bill’s sponsors and any affiliated private ventures.

Reacting to these issues, Senate Majority Leader Chuck Schumer and others have pushed for a pause in the bill’s progress, urging revisions that would strengthen the bill’s safeguards against financial abuse and political exploitation.

Between Innovation and Regulation

Despite strong early momentum, the GENIUS Act now faces a critical turning point. Its future depends on whether lawmakers can resolve the ethical and regulatory concerns raised by opposing factions. 

Still, the fact that the bill made it through the Senate Banking Committee and is now close to a floor vote reflects how seriously Washington is taking stablecoin regulation in 2025.

If the GENIUS Act is enacted, it will be the first federal law to define how stablecoins operate within the U.S. economy. 

It could create a trusted pathway for innovation, encouraging financial institutions and tech firms to issue compliant stablecoins that consumers and businesses can use with confidence. 

On the other hand, failure to pass the act, or delays caused by political infighting could further fragment the regulatory environment and send innovation offshore.

Will the US Finally Legalize Stablecoins?

The U.S. is likely to legalize stablecoins. The GENIUS Act, which has already passed the Senate Banking Committee with bipartisan support, aims to create a clear legal framework for stablecoins backed 1:1 by U.S. dollars. 

It introduces strict reserve, transparency, and anti-money laundering requirements. However, recent political opposition and ethical concerns, including Democratic pushback and controversy over Trump-linked stablecoin deals, may delay its final passage. 

Despite these challenges, the overall momentum and legislative attention suggest that stablecoin legalization is on track, just pending revisions and consensus-building.

FAQ

1. What is the GENIUS Act?

The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) is a proposed U.S. law that aims to create a comprehensive legal framework for issuing and regulating payment stablecoins, ensuring they are backed 1:1 with U.S. dollars or Treasuries and meet strict compliance standards.

2. Has the U.S. already legalized stablecoins?

Not yet. While stablecoins are currently used in the U.S., there is no federal law governing them. The GENIUS Act is the most advanced legislative effort so far, having passed the Senate Banking Committee but still awaiting a full vote and reconciliation with a House version.

3. What protections would the GENIUS Act offer?

The bill mandates full reserve backing, monthly disclosures, anti-money laundering (AML) compliance, and truth-in-advertising rules to prevent misleading claims. It aims to make stablecoins safer for consumers and less vulnerable to financial crimes.

4. Why is there political resistance to the bill?

Some lawmakers, especially Senate Democrats, have raised concerns about national security risks, AML weaknesses, and a controversial $2 billion stablecoin initiative linked to Trump-affiliated firms. These issues have stalled progress and triggered calls for revisions.

5. Will stablecoins be legalized soon in the U.S.?

Yes, likely. Despite political setbacks, both parties recognize the need for regulation. The U.S. is moving closer to legalization, but the final law may differ from the original GENIUS Act as lawmakers work to address current concerns.