Overview of the GENIUS Act

The GENIUS Act, formally known as the Guiding and Establishing National Innovation for US Stablecoins Act, is a U.S. federal law signed by President Donald Trump on July 18, 2025. It establishes the first comprehensive federal framework for the regulation, issuance, and oversight of stablecoins—cryptocurrencies designed to maintain a stable value, typically pegged 1:1 to the U.S. dollar (USD) or other high-quality assets like short-term U.S. Treasuries. Stablecoins differ from volatile cryptocurrencies like Bitcoin by aiming for price stability, making them suitable for payments, remittances, and as a bridge between traditional finance and digital assets.

The Act addresses long-standing regulatory uncertainty in the crypto space, particularly around stablecoins, which have grown rapidly (e.g., major ones like USDT and USDC hold billions in reserves). It was motivated by the need to foster innovation while protecting consumers, preventing systemic risks (e.g., from events like the 2022 TerraUSD collapse), and reinforcing U.S. financial leadership amid global competition, such as from China’s digital yuan. U.S. Treasury Secretary Scott Bessent described it as a “seminal moment for digital assets and dollar supremacy,” highlighting stablecoins as an “internet-native payment rail” that is fast, frictionless, and free of middlemen.

The law includes an 18-month transition period (or 120 days after final regulations are issued, whichever comes first) for existing issuers to comply. It is seen as the “lowest-hanging fruit” in broader U.S. crypto legislation, with bipartisan support from banks, fintechs, and payment providers.

Key Provisions

The GENIUS Act creates a dual regulatory model (federal and state) based on issuer size, with strict prudential standards to ensure stability and consumer protection. Below is a table summarizing the main provisions:

These rules aim to mitigate risks like overleveraging or commingling of funds, aligning with best practices in custody and fiduciary accountability.

Importance to the USD as the Global Reserve Currency

The USD has been the world’s dominant reserve currency since World War II, held by central banks for stability, trade, and reserves (comprising ~58% of global foreign exchange reserves as of Q2 2024). This status allows the U.S. to borrow cheaply, impose sanctions effectively, and benefit from seigniorage (revenue from issuing currency). However, challenges like de-dollarization efforts (e.g., by BRICS nations using non-USD currencies for trade) and geopolitical tensions have raised concerns about erosion.

The GENIUS Act bolsters USD supremacy by integrating it into the digital economy via stablecoins. Key ways it does this:

• Mandated USD Backing: Stablecoins must be pegged to USD or equivalent assets, creating “dollar rails” for global payments, remittances, and trade—especially in emerging markets with unstable local currencies. This expands access to the “dollar economy” for billions, countering alternatives like China’s digital yuan.
• Regulatory Clarity for Growth: By providing a clear framework, the Act enables stablecoins to scale into a multitrillion-dollar industry, making USD-pegged assets the default for crypto transactions worldwide. Vice President J.D. Vance emphasized this during a 2025 Bitcoin conference speech, arguing it would strengthen the U.S. economy and dollar dominance.
• Countering De-Dollarization: Amid rising use of nontraditional currencies (e.g., renminbi in reserves) and sanctions backlash, the Act positions stablecoins as a tool to entrench USD in digital finance, reducing reliance on adversaries’ systems. Experts note this could preserve U.S. advantages like lower borrowing costs and sanction power.

Overall, it transforms stablecoins into a “revolution in digital finance” that buttresses USD’s role, potentially reversing modest declines in its global share (from 70% in 2000 to 59% today).

Importance to Demand for US Treasuries

U.S. Treasuries are the safest global assets, with foreign holdings at ~30% of the market (~$8 trillion), providing the U.S. with low-interest borrowing and ~$80 billion in annual savings. The GENIUS Act directly boosts demand by requiring stablecoin reserves to include short-term Treasuries (alongside USD cash or Fed deposits). This creates structural, ongoing demand as stablecoin issuance grows:

• Reserve Requirements Drive Purchases: Issuers must hold 1:1 backing in eligible assets, turning them into major Treasury buyers. Sponsors project stablecoin issuers could become the largest holders by 2030, surpassing foreign central banks.
• Economic Benefits: Increased demand lowers yields, eases U.S. debt financing amid rising deficits, and enhances liquidity/stability for Treasuries. Secretary Bessent noted this would “lead to a surge in demand for US Treasuries.”
• Global Implications: In a fragmented world, this counters declining foreign official demand (e.g., from China/Russia diversifying into gold) by tying crypto growth to U.S. debt.

Critics argue it prioritizes corporate interests, but proponents see it as advancing “monetary modernization” and U.S. primacy.

Practical Implications for Financial Advisors

• Client Discussions: Use the GENIUS Act to frame stablecoins as a bridge between traditional and digital finance. For conservative clients, compare stablecoins to money market funds or CDs, emphasizing their 1:1 USD backing and regulatory oversight. For tech-savvy clients, highlight use cases like DeFi yields or cross-border payments.
• Due Diligence Checklist:
  • Verify issuer compliance with GENIUS Act standards (e.g., monthly reserve disclosures, OCC/FRB oversight).
  • Assess reserve composition (e.g., % in Treasuries vs. cash) for stability.
  • Avoid non-compliant or foreign stablecoins lacking U.S. oversight.
• Tax and Reporting Considerations: Stablecoin transactions may trigger tax events (e.g., capital gains if used in DeFi or traded). Advisors should consult IRS guidance (updated post-2025) and ensure clients track cost basis for stablecoin holdings.
• Monitoring Tools: Use platforms like CoinGecko or Chainalysis for real-time stablecoin data. Subscribe to Treasury or OCC updates for regulatory changes affecting issuers.

With this industry constantly evolving, we will stay up to date with these developments, and we encourage you to do the same for your clients. Younger investors may be more interested in digital currencies, while older clients might be more cautious. It is essential to stay informed about developing policies and changes.

If you have any questions regarding this topic, please reach out to mallory@trademarkcapital.com!

Thank you for reading,

The Trademark Capital® Team

This material is intended for informational purposes only and should not be construed as legal, accounting, tax, investment, or other professional advice. Trademark Capital’s investment strategies are built using quantitative, proprietary algorithms that are designed to identify and react to changing market conditions. However, investors should be aware that no investment strategy or risk management technique can guarantee returns or eliminate risk in any given market environment. As with all investments, Trademark Capital Management’s investment strategies are subject to risk and may lose money. The investment strategies presented are not appropriate for every investor and individual clients should review with their financial advisors the terms and conditions and risk involved with specific products or services. Due to our active risk management, our managed portfolios may underperform during bull markets. Past performance is no guarantee of future results.