On July 18, 2025, US President Donald Trump signed the GENIUS Act, establishing federal regulations for stablecoins. This law requires that all stablecoins in the U.S. be fully backed by U.S. dollars or similar liquid assets.
Dollar Backing Requirements for Stablecoins
The GENIUS Act, supported by a bipartisan coalition, requires stablecoin issuers, such as USDT and USDC, to maintain full U.S. dollar backing. This measure aims to enhance market confidence and transparency and introduces annual audits for issuers with market caps over $50 billion. The compliance demands may lead to increased operational costs for issuers, necessitating significant adjustments in the sector.
Historical Context and Potential Consequences
The GENIUS Act marks the first federal regulation targeting stablecoins in the U.S., creating a legal framework comparable to New York’s historic BitLicense requirements. This development has drawn analysts' attention, who suggest that the law may lead to a substantial reassessment of DeFi protocols reliant on stablecoin liquidity. Historically, such changes result in a reshuffling of investment strategies and spur innovation under new regulatory parameters.
Market Reaction to the New Law
CoinMarketCap analysts report that Tether USDt (USDT) remains stable at $1.00 with a market cap of $161 billion and a 24-hour trading volume increase of 18.86%. This demonstrates market adaptability to the new regulatory conditions. Eleanor Terrett of ChainCatcher noted anticipated reactions from the crypto market, stating the legislation's transformative effect on digital asset regulation.
The GENIUS Act represents a significant step in the regulation of stablecoins in the U.S., establishing requirements aimed at increasing investor confidence and transparency in the market. The implications of this law may have a considerable impact on investment strategies and the development of DeFi protocols.
