U.S. GENIUS Act Establishes Federal Stablecoin Framework, Excludes Bitcoin from Payment Role

The U.S. Senate passed the GENIUS Act on July 18, 2025, following a 60-40 cloture vote, breaking a political gridlock and creating the nation's first comprehensive federal structure for payment stablecoins. This legislation shifts regulatory oversight of compliant stablecoins from the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to banking regulators, requiring stablecoin issuers—limited to banks, OCC-approved nonbanks, and state-approved entities—to maintain 100% fiat-backed reserves in short-term Treasuries and currencies, undergo independent audits, and adhere to anti-money laundering, liquidity, and capital requirements.

Bitcoin is explicitly excluded from the payment framework due to its volatility, reinforcing its classification as a speculative commodity under CFTC oversight and emphasizing its store-of-value role over transactional use. The regulatory clarity has driven significant institutional engagement, with companies like Visa, Mastercard, and PayPal expanding stablecoin programs, contributing to a total stablecoin capitalization of $290 billion and annual transactions surpassing $35 trillion by August 2025, according to CoinMarketCap.

However, the Act introduces risks, including potential liquidity stress and run risks estimated at up to 4% annually, higher than insured bank deposits, due to intense competition and collateralization demands. Enforcement gaps and cross-border oversight challenges persist, as stablecoins are no longer under SEC and CFTC authority, necessitating coordination between state and banking regulators to prevent fraud.

In a collaborative shift, U.S. crypto firms and government bodies, including initiatives highlighted by President Trump's statement—"We will make the U.S. the crypto capital of the world and ensure that regulations are written by people who love your industry, not hate your industry"—are co-creating regulations to foster innovation and market stability. This has led to increased institutional partnerships, such as the Coinbase-JPMorganChase integration, reversing past fragmented regulatory approaches and boosting confidence in the crypto market.