On July 18, President Donald Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act, known as the GENIUS Act, into law. The legislation aims to create a regulatory framework for stablecoins, cryptocurrencies designed to maintain a constant value pegged to the U.S. dollar. Critics warn that despite intended safeguards, the act could amplify risks and lead to a major financial crisis.
The GENIUS Act, signed on July 18, purports to establish regulations for stablecoins, which promise stability by pegging their value to real-world currencies like the U.S. dollar. Set to take effect by January 2027, the law requires issuers selling to Americans to back deposits with liquid assets such as U.S. dollars or short-term Treasuries and provide monthly public disclosures of reserve compositions. It passed Congress decisively, with a Senate vote of 68–30 and a House vote of 308–122.
Stablecoins differ from volatile cryptocurrencies like Bitcoin by aiming for the security and liquidity of bank deposits within digital systems. However, their history includes significant failures, such as Terra's collapse in May 2022, which erased nearly $60 billion in investor assets. Nobel Prize-winning economist Jean Tirole noted, “Stablecoins, like money-market funds, project security but can collapse under pressure.” The current stablecoin market stands at $280 billion to $315 billion, but analysts at Citigroup project it could reach $4 trillion by 2030 under the new framework.
The act allows issuers to invest in Treasuries with maturities up to 93 days, exposing them to interest-rate risks. For instance, when three-month Treasury yields rose from less than 0.1 percent in January 2022 to about 5.4 percent by mid-summer 2023, holders of such assets faced potential losses. Without deposit insurance—unlike traditional banks—stablecoin issuers risk bank-run-like scenarios at digital speeds. Tether, with $135 billion in U.S. Treasury holdings, faced $10 billion in redemptions over two weeks in May 2022 amid doubts over its reserves.
Proponents argue stablecoins enable faster, cheaper cross-border transfers than traditional banking. Yet a 2023 Federal Deposit Insurance Corporation survey found only 3.3 percent of U.S. crypto-owning households use them for payments and 2 percent for purchases. Security issues persist, with nearly $3 billion in cryptocurrency stolen in the first half of 2025 alone, per Chainalysis. In 2024, a Texas pharmaceutical CEO lost about $1 million in stablecoins due to a transfer error, leading to an ongoing lawsuit against issuer Circle.
The legislation coincides with crypto's growing ties to the broader economy, including over $1 billion in pre-tax profits to President Trump and his family in the past year. On October 10, 2025, Trump's tariff threats against China triggered the industry's largest one-day value loss, highlighting vulnerabilities. Critics, including Senator Elizabeth Warren, express concerns over lax oversight and potential taxpayer bailouts, drawing parallels to the 2008 financial crisis.