Update on Senate's Stablecoin Bill

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Introduction

At the time of writing, there are more than $243bn of stablecoins in circulation worldwide. Of those, $218bn (90%) are fully-collateralized and dollar-denominated. In 2025, more than $700bn worth of these stablecoins move in more than 120m transactions every month. Stablecoins are widely used for cross-border payments, costing a fraction per transaction than traditional remittances. But today, they exist mostly within a legal gray area in the United States, with existing firms not regulated enough to truly grow inside the traditional system, and traditional players left with too much regulatory uncertainty to use crypto rails.

The Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (“GENIUS Act”) is the Senate’s stablecoin authorization and regulation bill and it aims to bring clarity and certainty to that gray area. It was introduced by Sen. Bill Hagerty (R-TN) and is co-sponsored by Sen. Tim Scott (R-SC), Sen. Kirsten Gillibrand (D-NY), Sen. Cynthia Lummis (R-WY), and Sen. Angela Alsobrooks (D-MD).

The bill would establish a powerful oversight and regulatory regime for stablecoins and issuers in the United States, creating pathways for innovation and enhancing the dollar’s distribution and reserve status worldwide. Stablecoins issued under the framework would be highly regulated by federal standards, whether they are overseen by federal banking regulators, U.S. states, or foreign issuers. The Senate Banking Committee voted the bill out of committee in March with an 18-6 vote that included 5 Democrats.

On Thursday, May 1, an updated draft was released that includes several substantive updates enhancing language on national security, financial system safety, and regulatory accountability. On Saturday, May 3, 9 Democrats published a statement saying they would oppose cloture on the floor if additional enhancements were not made relating to five areas.

This note provides an overview of the GENIUS Act, explains the regulatory framework it would create, and highlights the key differences between the newest version and the version passed by the Senate Banking Committee.

What's in the GENIUS Act

The GENIUS Act creates a holistic framework to regulate stablecoin issuers located in the United States or whose stablecoins circulate or trade within the United States. Currently, stablecoin issuers are typically registered as money service businesses (MSB) with Treasury’s FinCEN and/or possess certain state licenses, but outside of some state regimes, there are no nationwide, comprehensive regulatory oversight regimes that govern collateral handling, AML/CFT compliance, create and redeem mechanisms, supervision, consumer safety, bankruptcy remoteness, or much else. Essentially, dollar-backed stablecoins have almost no regulation today in the United States.

The framework established by the latest version of the GENIUS Act, as circulated on Thursday, May 1, is described in the table below.

Explanation of GENIUS Act Provisions

Broadly speaking, the bill creates a highly regulated framework for stablecoin issuance in the United States that:

• Protects consumers by requiring bank-like regulating of issuers regardless of whether they themselves are banks. It has strict short-duration collateral requirements that make stablecoin reserves comparable to the stability of money market funds. And holders of stablecoins have first priority in the case of issuer insolvency, with reserve assets considered “bankruptcy remote” in the case of any insolvency proceedings.

• Protects the safety and soundness of the financial system by placing the Office of the Comptroller of the Currency (OCC) in the primary regulatory oversight seat for stablecoin issuers. Whether banks or non-banks, stablecoin issuers must either register with the OCC or with a state whose own oversight is deemed comparable to the federal minimum standard. The liquidity of the collateral reserves, and their full reserve backing, ensures that stablecoins are comparable to money market funds.

• Allows innovation to flourish. Stablecoins have enormous utility given the transparency, speed, and efficiency of public blockchains and represent a beachhead for the use of such blockchains to settle financial transactions. They are widely used around the world by individuals to businesses and nation states alike, and represent a significant enhancement over current financial rails for dollar movement. The bill gives U.S. “digital asset service providers” – essentially U.S. trading firms and exchanges – a 3-year grace period to allow for trading in existing but non-registered stablecoins, allowing the industry and market to transition to the new regime without disruption.

• Solidifies and extends dollar dominance. While the dollar’s influence faces headwinds due to international trade and geopolitical developments, in cyberspace the dollar knows no rival. More than 99% of currently circulating stablecoins are dollar-denominated. Bringing stablecoins into the regulatory purview of the world’s most advanced and trustworthy capital market regulatory regime will grow their usage and help export dollars around the world.

• Supports United State debt issuance. By requiring full reserves comprised almost entirely of U.S. Treasuries, growth in stablecoins means growth in the borrowing power of the United States government.

Criticism from Democrats

9 Democrats have signaled they will vote against cloture on the GENIUS Act, including 6 members of the Senate Banking Committee, 5 of whom previously voted to advance the bill out of committee.

The 9 Democrats wrote in a Saturday night statement: “However, the bill as it currently stands still has numerous issues that must be addressed, including adding stronger provisions on anti-money laundering, foreign issuers, national security, preserving the safety and soundness of our financial system, and accountability for those who don’t meet the act’s requirements. While we are eager to continue working with our colleagues to address these issues, we would be unable to vote for cloture should the current version of the bill come to the floor.”

Politico covered the statement with the headline “Democrats reverse course to oppose Senate crypto bill,” though Sen. Gallego denied the reversal, saying “this isn’t some reversal out of nowhere by the Dems” and that “the bill that was introduced for floor consideration back-pedaled on a lot of progress we made and did not include other improvements we sought.”

Updates to the Bill Since Markup

Below, we provide analysis of the changes that were made in the latest draft of the bill (post markup) versus the version of the bill that passed the Senate Banking Committee. We categorize our analysis of the changes based on the 5 categories that Gallego and the Democrats say they still have concerns about: 1) anti-money laundering, 2) foreign issuers, 3) national security, 4) preserving the safety and soundness of our financial system, and 5) accountability for noncompliance with the bill.

National Security

• Lawful Order Compliance (Section 4(a)(6))

  • Requires stablecoin issuers to demonstrate technical capability to comply with U.S. lawful orders (e.g., freezing, burning, blocking tokens).

• Definition of “Lawful Order”

  • Now includes specificity requirements and mandates judicial or administrative review.

• Treasury Coordination Requirement

  • Treasury must coordinate with issuers when blocking digital assets, where practicable.

• Exemptions for Intelligence and Law Enforcement (Section 8(e)(3))

  • Exempts U.S. intelligence and law enforcement operations from compliance with key restrictions.

• National Security Waiver (Section 8(e)(2))

  • Treasury may waive secondary trading restrictions if required for national security, in consultation with DNI and State Department.

Foreign Issuers

• Foreign Issuer Limitations (Section 3)

  • Foreign issuers may not offer stablecoins to U.S. persons unless they meet new requirements (e.g., comparable foreign regulation, U.S. reserves, registration).

• Reciprocity Mechanism (Sections 16 & 18)

  • Treasury may determine that foreign jurisdictions have equivalent regulatory standards, enabling issuer participation under conditions:

    • Must register with U.S. regulators.

    • Must comply with U.S. lawful orders.

    • Must hold U.S.-custodied reserves for U.S. users.

• 90-Day Safe Harbor for Revocations

  • If Treasury rescinds comparability status, a 90-day grace period allows markets to adjust before restrictions take effect.

• Ban on Secondary Trading (Section 8(c))

  • Prohibits trading of noncompliant foreign stablecoins within the U.S. after designation—enforced unless Treasury grants waiver.

Anti-Money Laundering (AML)

• Expanded AML Program Requirements (Section 4(a)(5))

  • Issuers must:

    • Implement AML/CIP/sanctions compliance,

    • Monitor and report suspicious activity,

    • Retain records and conduct enhanced due diligence.

• Annual AML Certification (Section 5(i))

  • Officers must certify AML compliance annually; false certification triggers criminal liability and revocation risk.

• New Section on AML Innovation (Section 9)

  • Treasury must study novel tools (e.g., AI, blockchain forensics) to improve AML compliance; FinCEN required to follow up with guidance or rulemaking.

• Foreign Issuer AML Designations (Section 8(b))

  • Treasury must designate foreign issuers as noncompliant if they fail to comply with AML-related lawful orders.

Soundness and Safety of the Financial System

• Reserve and Asset Backing (Section 4(a)(1))

  • Reinforces 1:1 asset backing requirement; assets must be high-quality and highly liquid.

• Insolvency Protections (Section 11)

  • Establishes that stablecoin holders have priority claims over other creditors; mandates timely redemption in event of issuer failure.

• Federal Assessment of Financial Risk (Section 15)

  • Adds requirement for FSOC to assess stablecoin-related risks in its annual financial stability report.

• State-Federal Regime Coordination (Section 7)

  • Enhances Treasury oversight of state-regulated issuers by requiring federal certification of “substantially similar” state regimes.

• Ban on yield-bearing stablecoins (Section 2(23))

  • Permitted stablecoin issuers are prohibited from offering yield or interest on their stablecoins.

Accountability and Enforcement

• Civil Penalties for Domestic Violations (Section 6(c)(5))

  • Up to $100,000/day for unauthorized issuance.

  • $200,000/day for knowing violations.

  • Post-employment accountability up to six years after departure.

• Penalties for Foreign Issuer Violations (Section 8(c)(4))

  • Up to $1,000,000/day for violations after designation.

  • Treasury may seek injunctions to halt U.S. trading.

• Judicial Review of Treasury Actions (Section 8(d))

  • Allows foreign issuers to appeal noncompliance designations to the D.C. Circuit Court.

• Regulator Powers Enhanced (Section 6)

  • Authorizes revocation, removal of officers, issuance of cease-and-desist orders, and other supervisory tools for federal regulators.

Each of the changes above were made in the weeks after the committee voted to advance the bill by overwhelming majority (18-6 with 5 Democrats joining Republicans to pass), and many of the changes reflect specific requests voiced by Senate Banking Committee members who either voted against the bill in committee or who requested such changes be made before the bill moved to the floor. Our analysis suggests that nearly all the changes make the bill stricter on stablecoin issuers when compared to the version the Senate Banking Committee voted on.

Conclusion

Overall, the GENIUS Act in its latest form represents a powerful, innovation promoting, consumer protecting, win for the crypto industry and traditional finance alike. It creates reasonable pathways for registration while also imposing strict oversight and supervisory provisions, as well as stiff penalties for non-compliance. Passing the GENIUS Act will promote the U.S. dollar both at home and abroad, make it easier for individuals and businesses to transact day-to-day at home, across borders, or in international trade. All the interested parties got something important here: the crypto industry both gets a viable pathway while also being reigned in, it protects the financial system, and it helps America succeed geopolitically and in the shifting global economy.