The U.S. Senate has introduced a Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which seeks to provide guardrails and  regulatory oversight for the development of stablecoins. 

“We believe the United States should be the premier destination for digital assets,” Treasury Secretary Scott Bessent testified at a House Financial Services Committee hearing today. “Digital assets are an important source of innovation that can drive usage of the U.S. dollar around the world with stablecoin legislation.”

We believe the United States should be the premier destination for digital assets.

Digital assets are an important source of innovation that can drive usage of the U.S. dollar around the world with stablecoin legislation. pic.twitter.com/ZqWVMrjYaD

— Treasury Secretary Scott Bessent (@SecScottBessent) May 7, 2025

“Regulation is good because it clarifies things,” Stephane Lintner, chief executive of treasury bills management company Jiko, told Bank Automation News. In the crypto and stablecoin realm, addressing liquidity, AML and the leverage underneath the assets is important, which on first glance of the bill has addressed.

Under the proposed regulation: 

• A payment stablecoin is defined as a digital asset pegged to a fixed monetary value, intended for use in payments or settlements. Only entities authorized as “permitted payment stablecoin issuers” (PPSI) would be allowed to issue such stablecoins in the United States. A PPSI is a U.S. depository institution that has been approved by state or federal regulators to issue stablecoins. 

• PPSIs with more than $10 billion in stablecoins would be subject to federal oversight, either by the Federal Reserve for depository institutions or the Office of the Comptroller of the Currency for nonbank entities. Smaller issuers could operate under state regulation, provided their frameworks are “substantially similar” to federal standards. 

• Stablecoin issuers maintain diversified reserves, excluding riskier assets like corporate debt or equities. 

• In the event of insolvency, holders of payment stablecoins would be granted priority to get money back over other creditors. 

The proposed stablecoin bill creates a major change in crypto infrastructure regulation, which will draw both traditional banking institutions like JPMorgan and Citi and payment networks like Visa and Mastercard, Patrick Gruhn, former European FTX head and current chief executive of crypto company Perpetuals.com.

“Traditional banks have a strategic advantage because they understand compliance requirements and reserve management,” Gruhn said. “The bill establishes essential clarity, which will drive innovation, build institutional trust and expand U.S. adoption of crypto and stablecoins by eliminating legal uncertainty.”

The GENIUS proposal mandates prohibit stablecoin issuers from using deceptive names like “United States Government” in the name of the stablecoin and requires them to adhere to the Bank Secrecy Act by implementing anti-money laundering infrastructure for digital assets. 

The bill mandates that stablecoins be fully backed on a 1:1 basis with U.S. dollars or other approved high-quality liquid assets such as Treasury bills and repurchase agreements. 

The bill establishes regulatory standards similar to the United Kingdom’s digital asset framework, focusing on oversight and prudential standards to create market harmony across borders, Gruhn said.

It faces a strong possibility of congressional advancement because of the worldwide competition to establish crypto policies, the increasing understanding of stablecoins as financial instruments and rising bipartisan support for digital asset regulation, he added.

Support for the bill has been mixed and a procedural vote on it is scheduled for May 8.

The bill was proposed by Sen. Bill Hagerty, R.-Tenn., and is co-sponsored by Sens. Tim Scott, R-S.C., and Kirsten Gillibrand, D-N.Y.