Why Passing the Stablecoin GENIUS Act Might Not Be So Smart
By John Cassidy, The New Yorker, June 23, 2025
Last week, amid global tensions focused on Iran and Israel, an equally significant event took place in Washington: the U.S. Senate passed the GENIUS Act, a bill designed to bring stablecoins—a form of cryptocurrency pegged to the U.S. dollar—into the mainstream financial system. Jeremy Allaire, founder and CEO of Circle, a major stablecoin platform, announced the passage on social media as a historic win for the crypto industry. However, critics warn that the legislation may jeopardize the safety and stability of the financial system, while potentially enriching controversial figures including former President Donald Trump.
What Is the GENIUS Act?
The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) aims to provide a clear regulatory framework for stablecoins, which have until now existed in a largely uncertain legal environment. Unlike volatile cryptocurrencies such as Bitcoin or Ethereum, stablecoins are designed to maintain a value equal to one dollar, making them more reliable as a medium of exchange. Major players in the industry, like Tether and Circle, have established stablecoin platforms with a combined market capitalization exceeding $250 billion.
Despite this growth, traditional banks and financial institutions have been hesitant to embrace stablecoins due to regulatory ambiguities and cryptocurrencies’ association with illicit activities. The GENIUS Act would classify stablecoins primarily as payment instruments rather than securities, setting rules for issuers under federal and state oversight. Provisions include requirements for issuers to hold reserves in safe assets like Treasury bills and bank accounts, monthly disclosure of reserve compositions, annual audited financial statements for larger issuers, adherence to anti-money laundering laws, and priority claims for stablecoin holders in bankruptcy.
Support and Opposition
Passing with support from 50 Republicans and 18 Democrats, the Senate vote reflected deep partisan divides. Proponents, including Senator Bill Hagerty of Tennessee who sponsored the bill, argue that the legislation will bolster U.S. economic competitiveness and innovation for decades. Allaire called the bill a milestone toward mainstream integration of crypto assets in the financial system.
However, opposition came from many Senate Democrats and public interest groups who see the bill as a win for the influential crypto lobby rather than a safeguard for investors and the financial system. Mark Hays, associate director at Americans for Financial Reform, warned that the GENIUS Act is just “one of many actions” leading to an uncontrolled crypto experiment. Critics liken the bill’s regulatory approach to the Commodity Futures Modernization Act of 2000, which weakened oversight and contributed to the 2007-09 financial crisis.
The Crypto Industry’s Influence and Ethical Concerns
The passage of the GENIUS Act underscores the growing political power of the crypto sector. In 2024, three super PACs funded by crypto firms spent an estimated $265 million supporting crypto-friendly candidates and defeating skeptics like Senator Sherrod Brown of Ohio. Bartlett Naylor, a financial-policy analyst for Public Citizen, highlighted how these contributions influenced political stances and instilled caution among politicians.
The legislation includes a conflict-of-interest provision barring members of Congress and senior executive officials from issuing stablecoins during their tenure. Nonetheless, the exemption of the President and Vice President from this restriction has drawn criticism, especially given the Trump family’s engagement in the stablecoin market. World Liberty Financial, a crypto startup majority-owned by the Trump family, recently launched the USD1 stablecoin, which already holds a market capitalization around $2.2 billion. Experts warn that Trump could financially benefit if stablecoins gain wider adoption under the new legal framework.
Beyond stablecoins, the Trump family has gained attention for their “$Trump” meme coin, rumored to be worth more than $300 million. Critics caution that the Trump-owned stablecoin raises risks of opaque financial dealings and potential foreign influence. A co-founder of World Liberty Financial announced a $2 billion investment involving the United Arab Emirates government and Binance, the world’s largest crypto exchange. Binance’s founder was recently convicted of money laundering in the U.S. and is reportedly seeking a presidential pardon. In May, the Securities and Exchange Commission dismissed a civil suit against Binance, sparking further scrutiny.
Two progressive senators, Jeff Merkley and Elizabeth Warren, demanded investigations into the UAE-Binance transaction and sought stronger anti-corruption clauses in the GENIUS Act. Merkley condemned the bill as effectively authorizing President Trump to monetize government access for personal gain.
Potential Benefits and Remaining Doubts
Supporters of the GENIUS Act emphasize faster, cheaper, and more interoperable payments across online platforms as a major benefit of incorporating stablecoins broadly into the financial landscape. Christian Catalini, a research scientist at MIT and co-founder of the university’s Cryptoeconomics Lab, pointed out that stablecoins on blockchain infrastructure could enable seamless transactions across different wallets and fintech services, which traditional payment networks currently restrict.
Some major non-crypto companies like Amazon, Walmart, and Meta reportedly consider issuing their own stablecoins, which, alongside expanding bank involvement, could transform payment systems and reduce fees for consumers and businesses alike.
Nevertheless, fundamental concerns about the financial stability and regulatory adequacy of the GENIUS Act remain. Critics argue that its protections are insufficient and that it could create vulnerabilities reminiscent of past regulatory failures. The intersection of crypto innovation, political influence, and financial regulation continues to spark debate over how best to ensure safety without stifling technological progress.
As the GENIUS Act moves to the House of Representatives for further consideration, stakeholders across the political and financial spectrum will closely watch how this landmark legislation shapes the future of crypto and the broader financial system.