Revisions to GENIUS Act Could Impact US Stablecoin Market

It can feel as though every week there’s a new stablecoin announcement from a traditional financial player.

The one thing they all have in common? For the most part, they aren’t taking place in the U.S.

But, as U.S. lawmakers circulate an updated draft agreement on  the GENIUS Act, an acronym for Guiding and Establishing National Innovation for U.S. Stablecoins of 2025 Act, that could all be about to change due to the potential emergence of domestic regulatory clarity around dollar-backed stablecoins.

Negotiations, however, remain ongoing as the GENIUS Act looks to make it to a floor vote. The previously bipartisan bill has, over the past week, generated partisan debate and lost momentum due to backlash against President Donald Trump’s involvement in digital asset ventures.

Senate Democrats are now warning that the bill, as originally drafted, could inadvertently open the floodgates to corruption, foreign threats and a new era of unregulated digital finance.

Democratic lawmakers are asking for amendments to be made around consumer protection, bankruptcy and ethics, as well as “robust financial controls” for private stablecoin issuers, such as tech companies. Meta, for example, is reportedly considering adopting stablecoins as a way to make cross-border payments.

Ultimately, whether the GENIUS Act becomes law, and in what form, could redefine the future of finance in America. The regulatory framework offers the promise of clarity and the peril of loopholes alike, as well as the challenge of reconciling innovation with oversight.

Republican lawmakers are hoping for the revised GENIUS Act to be approved by Memorial Day at the end of the month.

See also: Stablecoin Sandwiches? Here’s What CFOs Need to Know About Crypto Jargon

The Paradox of ‘Stability’ in Crypto

Stablecoins are marketed as digital assets with predictable value, typically pegged to fiat currencies like the U.S. dollar. The goal is to bridge the gap between the volatility of traditional cryptocurrencies like bitcoin and the reliability of government-backed money. Yet despite the promise of “stability,” the reality has been anything but.

Several stablecoins have experienced dramatic de-pegging events that sent shockwaves through the digital economy. In 2022, TerraUSD (UST) infamously collapsed, wiping out over $40 billion in market value and triggering a domino effect that destabilized the broader crypto ecosystem. The implosion highlighted a disturbing truth: not all stablecoins are created equal, and not all are backed by actual reserves.

Still, there’s widespread recognition in Washington that stablecoins are too big to ignore. With over $230 billion in circulation and growing integration into global payments systems, these digital tokens are quickly becoming a cornerstone of modern finance. Policymakers face the dual challenge of fostering innovation while protecting consumers and national security.

After all, crypto still has a little more “Wild West” to its operations than it does traditional and mainstream protections, as highlighted by the recent data breach and extortion attempt suffered by Coinbase, a publicly listed U.S. company. Hackers managed to get these users’ names, addresses, phone numbers and emails, as well as the last four digits of their Social Security numbers.

The news came weeks after the FBI released a report showing a rise in cryptocurrency fraud, with at least $9.3 billion in losses reported last year, a 66% jump over 2023. These losses stemmed from investment scams, extortion, sextortion and fraudulent activity involving cryptocurrency ATMs and kiosks.

Read also: Why Central Banks Are Piloting Monetary Policy Tools for Blockchain

Revisions Take Center Stage for GENIUS Act

At the heart of the Democratic amendments are provisions that fortify federal and state consumer protection laws. The updated GENIUS Act bill explicitly ensures that existing laws enforced by the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) remain applicable to stablecoin issuers, and prevents the new regulatory regime from becoming a loophole for evading securities laws.

Issuers will also face strict bans on promoting yield or interest-bearing features — a move designed to curb risks akin to those that triggered past collapses in the crypto lending space. Additionally, naming restrictions will prevent companies from using terms like “United States” or “USG” in product branding, reducing the risk of misleading consumers about government backing.

Issuers located in countries under comprehensive U.S. sanctions — or deemed money laundering risks — are barred from operating in the U.S. market, closing potential backdoors for illicit finance.

Democrats also secured tough restrictions on non-financial publicly traded companies — namely tech giants like Meta Platforms Inc. and Amazon.com Inc. — from issuing their own stablecoins unless they meet rigorous standards. The language aims to preserve the separation between commerce and banking, a long-held policy pillar that critics argue could be undermined by digital assets.