GENIUS Act explained: What it means for crypto and digital assets
- The GENIUS Act marks the first US legislation on crypto assets, establishing a regulatory framework for USD-backed payment stablecoins
- The law paves the way for mainstream adoption of stablecoins that could help propel the entire digital assets ecosystem
- Both fintech and traditional financial companies could benefit from the regulatory clarity
After years of unclear regulations on crypto and digital assets, the US has passed its first piece of major national crypto legislation; one that could propel the entire digital asset ecosystem forward for years to come. Meet the Guiding and Establishing National Innovation for US Stablecoins Act, or the GENIUS Act.
Signed into law on July 18, 2025, the historic legislation sets up a regulatory framework for USD-backed payment stablecoins and serves as a crucial first step towards broader digital asset regulatory clarity. While stablecoins are the main focus of the legislation, you’re likely to see effects across the entire digital asset ecosystem. That could mean tailwinds for crypto assets and crypto-related companies, as well as traditional financial companies that will bring their business on chain.
I sat down with Chris Rhine, Galaxy Asset Management’s head of liquid active strategies, for more insight into how the legislation could help start a new age of financial innovation driven by blockchain technology and digital assets.
First—what’s a stablecoin?
There are some key factors in both the traditional financial system and the crypto space that make using stablecoins attractive, such as:
- Some cryptocurrencies can be volatile. Using volatile cryptocurrency as a means of exchange introduces risk to both the buyer and seller
- Moving money can be slow. Cross-border payments and money transfers can be expensive, slow, and opaque
- Lack of trust in some local currencies. In countries with volatile currencies and high inflation, local currencies can be unreliable as a means of exchange, while more stable fiat currencies are not easily accessible
That’s where stablecoins come in.
A stablecoin is a type of digital asset that is designed to maintain a stable value by being pegged to reserve assets, typically a fiat currency like the US dollar.
The goal of stablecoins is to serve as a fast, low-cost, and secure way to exchange value globally via a blockchain. They are also widely used in smart contracts and decentralized finance (DeFi) given their programmability.
Over the last couple of years, they have become a cash proxy in digital asset markets and a handy instrument for cross border payments, among other uses.
Stablecoin market cap has grown at a CAGR of 77% over the past five years, reaching more than $250 billion (Figure 1) and in 2024, stablecoin transfer volume surged to $27.6 trillion—more volume than Visa and Mastercard combined.1
What does the GENIUS Act do?
The GENIUS Act creates a clear regulatory framework for dollar-backed payment stablecoin issuers that can help stablecoin payment companies, traditional financial institutions, and consumers navigate stablecoins with more clarity.
Under the GENIUS Act, issuers will be required to back stablecoins with 1:1 reserves of cash or short-term Treasurys and disclose their reserves monthly. It also grants stablecoin holders legal protections should an issuer go insolvent and sets boundaries on who can issue stablecoins.
Also, stablecoins will not be classified as securities or commodities, and permitted payment stablecoin issuers (PPSIs) will not be classified as investment companies.2 Both non-bank and bank entities can issue stablecoins, and the regulator that provides any given issuers’ regulatory oversight is determined by a variety of factors—but the regulators are defined.
Key features of the GENIUS Act
- Reserves and transparency requirements: Stablecoin issuers must hold 1:1 reserves for any stablecoins issued, with reserves comprising of what are considered to be low-risk assets like short-term Treasurys, cash (including Federal Reserve Notes)3 or similar assets. The composition of reserves must be attested by third-party auditors and published on a monthly basis
- Non-rehypothecation: Issuers shall not use reserves to fund other investments with certain exceptions
- Non-interest bearing: Issuers are prohibited from offering yield or interest on issued stablecoins
- Anti-money laundering (AML), sanctions and know-your-customer (KYC) rules: Banks and non-bank issuers need to comply with the same AML, sanctions and KYC rules that apply to financial institutions
- Consumer protections in the event of bankruptcy: In the event of an issuer’s bankruptcy, the holders get priority claim over creditors against the stablecoin issuer
- Clarifies regulatory oversight: The legislation clarifies which regulators will oversee which PPSIs based on the type and affiliation of the issuer, including both federal and state regulators
The GENIUS Act will become effective on January 18, 2027, or the date that is 120 days after regulators issue any final regulations, whichever comes first.4 But companies are likely to start laying the groundwork now to adapt their business models and service offerings for when it officially becomes law.
“Most of the regulators are doing a 180 from where they were under the prior administration… ‘Regulation by enforcement’ is likely to disappear, and the SEC now actively works with crypto companies.”
-Chris Rhine, Head of Liquid Active Strategies, Galaxy Asset Management
Use cases of stablecoins poised to grow
Currently, using stablecoins to trade crypto and support DeFi activities are the largest use cases, representing more than 90% of stablecoin volume.5 Speed, low cost, 24/7/365 settlement, and programmability are all favorable features of stablecoins that could continue to grow under the passage of this new legislation—which means a potentially bigger addressable market beyond the crypto ecosystem. Some use cases in particular have the potential to stand out.
Cross-border payments and corporate treasury management
Currently, cross-border payments can take days to settle and involve multiple intermediaries. Stablecoins can facilitate B2B, corporate treasury activity, and consumer remittances with lower fees and faster speeds. For businesses, this means faster supplier payments and more efficient cash management, particularly across borders.
Enhanced payment processing
Traditional payment service providers could benefit from cheaper and faster payments through integrating stablecoins into existing platforms and checkout experiences to streamline global payouts and settlements.
USD access in emerging markets
Africa and Latin America have seen fast growth in stablecoin adoption due to the instability of local currencies, and in countries where banking infrastructure is lacking or local currencies are unstable, adoption may continue to accelerate.
Asset settlement
With stablecoins now regulated and required to be collateralized by cash-like instruments, banks and financial institutions can feel more confident about using stablecoins for accelerating trade settlement for both traditional and tokenized securities.
GENIUS Act’s implications for the digital asset ecosystem
The GENIUS Act’s passing will impact fintech and traditional financial services. While blockchain technology is meant to disintermediate traditional finance companies, big banks and large payment networks are already innovating with stablecoins to stay competitive. Overall, the legitimizing of stablecoins could boost tokenization efforts and be a catalyst for both incumbents and challengers that support tokenization technologies and tokenized products. There are some particular types of companies that stand out.
GENIUS Act impact on blockchain-based payment tech stack providers
There are four layers of the stablecoin payment stack: issuers, settlement layers, on/off ramps (or the companies that connect stablecoins on blockchain to fiat rails and handle backend process), and customer facing applications. They all stand to benefit from the greater adoption of stablecoins that could be sparked from the passing of the GENIUS Act because of their instrumental and critical role in the enablement, trading, and facilitation of stablecoins.
- Stablecoin issuers (e.g., Circle Internet Group, Inc., Tether) may benefit from increased demand as stablecoins gain trust from the mainstream and become more widely used for payment transactions. But they may also face increased competition from established banks for stablecoin market share and revenue sharing pressure from crypto trading platforms
- The settlement layer platforms (e.g., Solana, Ethereum and Layer 2 blockchains) that settle stablecoin transactions may see an increase in demand for blockspace, which could drive increasing value of corresponding tokens. The outperformance of ether over bitcoin following the passing of the GENIUS Act is partially driven by this market dynamic (Figure 2).
- Companies providing on/off ramp services and customer facing applications (e.g., Coinbase, Stripe) may see higher growth as more traditional finance companies and retailers look to integrate stablecoins into their infrastructure and provide stablecoin-based transaction options
“Some of the largest platforms out there are online e-commerce platforms. We expect them to announce their acceptance of stablecoin as payments for goods and services. This will continue to be a trend and is very good for the crypto ecosystem in the long term.”
-Chris Rhine, Head of Liquid Active Strategies, Galaxy Asset Management
GENIUS Act impact on banks and payment services
It may sound counterintuitive, but banks—especially the larger ones—could stand to be beneficiaries from the passing of the GENIUS Act.
With a regulatory framework for stablecoins in place, banks and payment networks can integrate stablecoins into their platforms for real-time, low-cost transactions. Legitimizing stablecoin usage through the GENIUS Act will pressure traditional finance companies to adopt blockchain-based solutions, particularly in the area of custody, payment processing, cross-border money movement, and asset tokenization.
Traditional banks stand to benefit from the GENIUS Act passing because it provides a clear, regulated pathway to participate in the growing stablecoin market and overall digital asset ecosystem. They’re now positioned to not only be custodians of stablecoin reserves, but even become the primary stablecoin issuers to attract customers and improve operation efficiency.
“Some banks are going to take advantage of this opportunity and participate in the substantial stablecoin market growth that they have been missing out on due to regulation ambiguity. We're going to see a lot of activity from the banks, and they're going to make sure that deposits stay on their banking platform as opposed to flowing off to these fintech platforms.”
-Chris Rhine, Head of Liquid Active Strategies, Galaxy Asset Management
They may offer faster and more liquid cash management solutions with stablecoins. And, as tokenized finance matures and becomes more mainstream, banks have the know-how to offer services for those assets, too. That said, the US still lacks regulatory clarity about digital assets in general. Once that changes, perhaps by way of adoption of a digital asset market structure bill such as the Digital Asset Market Clarity Act (CLARITY Act), large banks and asset managers may look to bring more assets onto blockchains as well. The benefits though would mostly accrue to the larger banks, as they have the tech infrastructure to keep up with the advancements.
“If you can tokenize traditional assets, you create a whole new layer of collateral to lend against. The banks aren't going to want to be left out. Creating a platform where you can accept tokenized deposits or tokenized collateral: I think that's something that just about every banking platform is going to end up doing.”
- Chris Rhine, Head of Liquid Active Strategies, Galaxy Asset Management
Despite more competition from stablecoin-based payment companies, certain large payment networks have also been embracing blockchain technology, such as crypto-linked payment cards and stablecoin settlement infrastructure, to enhance their payment services and expand into new markets.
How investors can position for the post-GENIUS Act market
The GENIUS Act represents an important first step towards the broader use of tokenized assets by legitimizing stablecoins. The CLARITY Act, still working its way through Congress, could bolster the digital assets industry even further by putting guardrails around the ecosystem. Regulatory clarity is expected to drive a wave of new entrants and innovation in financial services, accelerating integration of digital assets into traditional financial systems.
The blockchain innovation leaderboard and beneficiaries in the next decade may look different from what they are today as we are still in the early development of digital assets. Financial incumbents that can quickly adopt the new technology to enhance their core services, like trading, capital markets, and payments, may capture significant economic benefits in the future of finance.
The successful IPO of Circle—the world’s second largest stablecoin issuer—reflects strong investor demand for stablecoin-related investment opportunities. Extreme performance of crypto-related companies outside of bitcoin miners reflects a scarcity value of investing in the broader digital asset ecosystem for the near term.
However, as more companies provide blockchain-based financial solutions and products in the next few years, early winners in the crypto space will face significant competition from traditional financial companies and new entrants, and their high valuations may be under pressure.
“There is a scarcity value of good crypto companies that aren't crypto miners. And it's why we've seen extreme performance in a handful of crypto-related companies. But ultimately companies that have sky-high valuations will see relative outperformance slow.”
-Chris Rhine, Head of Liquid Active Strategies, Galaxy Asset Management