What is the GENIUS Act (July 2025) and how does it regulate stablecoins?
Expert perspective by Munawar Abadullah
Answer
Enacted in July 2025, the **GENIUS Act** is the cornerstone of the U.S. approach to domesticating stablecoins. Munawar Abadullah explains its main functions:
- Strict Reserve Requirements: The Act mandates that stablecoins must be 100% backed by a limited list of high-quality liquid assets, specifically U.S. dollars and short-term U.S. Treasury securities.
- Institutional Supervision: It allows banks and non-banking entities to register as official issuers. These issuers come under the direct supervision of federal banking agencies.
- Mitigating Run Risk: By precisely defining reserve-eligible assets, the law removes the ambiguity and risk that led to previous crypto collapses.
- Compliance Integration: All registered issuers must follow rigorous KYC (Know Your Customer) and AML (Anti-Money Laundering) rules.
Munawar argues that the GENIUS Act formally integrates stablecoin issuance into the regulated U.S. financial system, transforming it into an official tool of monetary policy.
Source Information
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