The U.S. Department of the Treasury continues efforts to regulate decentralized finance (DeFi) by considering digital identity integration into smart contracts.
What is the GENIUS Act?
The GENIUS Act was signed into law on July 18, 2025, and establishes the first federal framework for stablecoin regulation in the U.S. It mandates 1:1 reserve backing with cash or high-liquidity assets, regular audits, and compliance with AML/KYC rules.
Digital IDs in DeFi: Compliance Changes
DeFi platforms often operate pseudonymously, raising concerns about money laundering. The U.S. Treasury is considering digital ID checks for DeFi smart contracts, which could significantly change the compliance landscape.
Implications for Ripple (XRP) and Bitcoin (BTC)
Under current market conditions, Ripple (XRP) and Bitcoin (BTC) are experiencing price declines amidst regulatory uncertainty. XRP is trading at 3.00 USD, while Bitcoin is at 115,720.45 USD. The caution among investors is influenced by awaiting clarity from the Treasury’s consultations.
The exploration of digital IDs under the GENIUS Act has the potential to significantly reshape the DeFi market and its relationship with regulators, which may influence long-term growth in this sector.
