What is the GENIUS Act (July 2025) and how does it regulate stablecoins?

Direct Response

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.

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