Everything You Need to Know About the US Genius Act
On February 4th, 2025, the United States Senate introduced what is known as the GENIUS Act. It passed committee vote and will hit the Senate floor for a full vote sometime this month.
But what is this act exactly? And what will it mean for Tether, which has long been skirting the rules that other stablecoins abide by? Keep reading to learn more.
What is in the GENIUS Act?
The GENIUS Act is sometimes referred to as the US Stablecoin Act, and it is a set of laws that would govern the future of stablecoins operating within the United States. The GENIUS Act was written to protect Americans from scam stablecoins and actors in the area who may not always be operating in white areas.
The GENIUS Act would specify once and for all who can issue stablecoins, how said stablecoins must be backed, and other regulations to protect consumers. This bill is unique as it proposes different restrictions for different sized stablecoin issuers. This means that emerging projects would experience more leniency than established ones ensuring creative growth remains unstifled.
Projects with less than a $10 million market cap will remain under state regulations, which will grant a certain level of flexibility not found in the federal laws. Projects that surpass the $10 million market cap, however (Tether and USDC, just to name a few), would fall under federal regulations.
This was specifically designed to ensure that large stablecoin projects, which have the ability to influence the market both positively and negatively, are meeting a stringent set of restrictions.
These stringent restrictions include submitting liquidity reports regularly, and having 100% backing held in liquid assets—ensuring that the stablecoins will actually live up to their name and remain stable. Stablecoin projects must also demonstrate full liquidity and the ability to cash out nearly all customer accounts on demand. Stablecoin issuers must additionally operate under KYC and AML laws and ensure their stablecoins aren’t being used for illicit activities.
Any stablecoin issuers found not to meet these regulations will find their license to operate within the United States suspended, and they may even face legal consequences.
Will The GENIUS Act Pass?
We don’t have a crystal ball; thus, we cannot predict with absolute certainty whether or not this bill will pass. On the one hand, the pro-cryptocurrency stance in the United States right now does give this bill a fighting chance. But on the other hand, it has already faced steep opposition, and it hasn’t been voted on yet.
The main opposition comes from Elizabeth Warren who states the bill, as is, could create problems in the United States economy and could risk national security. She is most worried that the Act doesn’t include fraud protection as many traditional banking projects do. She also thinks the bill doesn’t do enough to prevent individuals from using stablecoins for illicit activities.
We also expect Tether, one of the major stablecoins, to lobby against the passing of the regulation. Why? Well Tether currently does not meet the requirements to retain their license if this bill is passed. USDC, on the other hand, is in favor of the bill, as they likely known it would dethrone Tether and boost their project instead.
Why Won’t Tether Survive Under the GENIUS Act?
We have long advised against using Tether, mostly because it is the most unstable stablecoin on the market—and thus it goes against everything stablecoins are supposed to stand for.
In addition, they refuse to be transparent about their backing and only maintain a 75% backing to the US dollar. This is abhorrent in the stablecoin space, and what is worse, they refuse to disclose the exact other assets that make up the other 25% backing, though they have mentioned that they use items such as US treasury bills and Bitcoin to make up the deficit. This means there is a large possibility that every 1 Tether on the market is only backed by a maximum of 75% of its value at any given moment.
Not only that, but Tether is based in El Salvador, which if you have been keeping up with our blog, faces other political issues currently.
Is the GENIUS Act Good for Crypto?
In our opinion, the GENIUS Act is a good step forward for stablecoins. Although it doesn’t prevent money laundering or illicit activities as much as the US government would want, we approve any regulation that would force transparency from Tether, which has long been a suspicious actor.
That being said, we generally prefer cryptocurrency, as a whole, to remain entirely unregulated. Of course, stablecoins are already a gray area as they are typically backed by fiat currency. So, in our eyes, if the government wants to regulate these currencies which are already not for the same purpose as cryptocurrency, go right ahead.
We are also against scams and cons of every sort. We wish that everyone in the world would just do the right thing, but obviously, that isn’t possible. Therefore, if the GENIUS Act is going to be the one to do that, we are all for it.
What is Next for the GENIUS Act?
Sometime this week, the GENIUS Act will be presented to Congress. If it passes, it will head to Trump’s desk. While we have no idea what will happen in Congress, we do believe that if this regulation makes it to Trump’s desk, he will sign it.
This estimation is based solely on Trump's overall positive stance on cryptocurrency. He could treat this bill differently, of course.
All in all, though we aren’t 100% for the GENIUS Act, we do believe that it could be a good thing for stablecoins as a whole. We don’t think it is the government overreaching, and we do believe it will force more transparency in the stablecoin world. Whether or not this will allow Tether to continue its shady dealings, we aren’t sure, but we know Ripple and USDC are all for the bill being passed.
