U.S. Senate Passes GENIUS Act

YESTERDAY, Tuesday, June 17, 2025, the United States Senate officially passed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act of 2025 with a bipartisan supermajority vote of 68-30. The GENIUS Act aims to establish a federal framework for the issuance and regulation of payment stablecoins in the U.S.. It sets requirements for reserve backing, transparency, consumer protection, and compliance with anti-money laundering laws, while also creating pathways for federal and state-level stablecoin issuers. 

The passage of GENIUS is a victory for America, and a monumental step towards developing appropriate regulation for digital assets in the U.S. Clear, thoughtful stablecoin policy is critical in securing the U.S.’s role as a global financial leader, and it would not be possible without the admirable, unrelenting bipartisan leadership of Senators Bill Hagerty (R-TN), Cynthia Lummis (R-WY), Tim Scott (R-SC), Kirsten Gillibrand (D-NY), and Angela Alsobrooks (D-MD). 

GENIUS is significant for DeFi in that it recognizes decentralized blockchain networks as base layer infrastructure in a dollar-backed global financial system, protects peer-to-peer transactions in stablecoins, and explicitly treats DeFi differently than centralized intermediaries, securing affirmative language for the future of DeFi infrastructure. Stablecoins are a critical feature of onchain financial markets. Whether used in swapping tokens on decentralized trading protocols; providing DeFi liquidity, remittances, spending; or transacting peer-to-peer, stablecoins play a critical role in onchain digital asset markets. 

Read more below to explore how the recently passed GENIUS Act addresses stablecoin regulation and oversight, and what this means for DeFi innovation in the U.S. 

The Guiding and Establishing National Innovation in U.S. Stablecoins Act

The GENIUS Act, bipartisan legislation led by Senator Hagerty and co-sponsored by Senate Banking Committee (SBC) Chairman Scott, along with Senators Gillibrand, Lummis, and Alsobrooks, establishes a regulatory framework for “payment stablecoins” in the United States. On March 13, 2025, SBC held a markup and voted to advance the legislation with a vote of 18–6, receiving support from all Republican members and six Committee Democrats.

After overcoming a series of Senate procedural milestones, such as cloture on motions to proceed (requiring 60 votes to succeed) and consideration of various extraneous amendments, the legislation was advanced to the Senate floor for final passage. On Tuesday, June 17, 2025, the Senate officially passed the legislation with a resounding bipartisan supermajority of 68 Senators. Despite the fact that the bill only needed a simple majority to pass (i.e., 50 votes), the Senate’s bipartisan supermajority vote is an indicator of the broad bipartisan coalition of support for innovative digital financial infrastructure built on decentralized blockchain rails. 

OVERVIEW OF GENIUS

The GENIUS Act establishes regulatory guardrails and oversight for the issuance and trading of  stablecoins in the U.S. As DEF’s DeFi Dictionary defines it, stablecoins are digital assets that are designed to maintain a stable value by pegging its price to fiat currency or another asset with relatively low volatility, typically on a one-to-one basis. Payment stablecoins, the specific assets regulated by GENIUS, are blockchain-based digital assets designed to offer price stability by being pegged through fiat-collateralization, and by being backed by reserves of currency or short-term treasury instruments; popular examples of payment stablecoins include Circle’s USD Coin (USDC), Tether (USDT), and Paxos (USGD). 

GENIUS DEFINITION OF STABLECOIN

Under Section 2 of GENIUS, the term “payment stablecoin” refers to a digital asset that “is designed to be used as a means of payment or settlement” and whose issuer “is obligated to convert, redeem, or repurchase for a fixed amount of monetary value, not including a digital asset denominated in a fixed amount of monetary value;” and “represents [it] will maintain or creates the reasonable expectation that it will maintain a stable value relative to the value of a fixed amount of monetary value.” Monetary value is defined as a “national currency or deposit” that is “denominated in a national currency” (as defined under Section 3 of the Federal Deposit Insurance Act). Therefore, the scope of payment stablecoin is limited to centralized tokens relative to monetary value, such as those centralized stablecoins backed by treasury instruments or the U.S. dollar. 

Importantly, this definition protects decentralized stablecoins from the scope of regulatory requirements suited for centralized intermediaries, a positive development for decentralized stablecoins. 

IN THE DETAILS OF GENIUS 

• REGULATION OF ISSUANCE AND TRADING: GENIUS prohibits the issuance of a payment stablecoin in the U.S. by any person that is not a permitted payment stablecoin issuer. For those that choose to issue a payment stablecoin in the U.S., they must comply with the extensive requirements set out in Section 4 of the bill. GENIUS stipulates that it shall be unlawful for any “digital asset service provider” (DASP)(more on this term below) to offer or sell a payment stablecoin to a person in the United States unless the payment stablecoin was issued by a permitted payment stablecoin issuer. Foreign payment stablecoin issuers’ payment stablecoins may still be traded by DASPs in the U.S. as long as they come into compliance with “lawful orders” under Section 8 (i.e. complying with freeze, seize, and block authority and relevant anti-money laundering and economic sanctions) pursuant to Section 18. 

• ISSUER REGISTRATION AND REQUIREMENTS: Under GENIUS, permitted payment stablecoins issued in the U.S. are regulated under the federal or state framework outlined by GENIUS, which includes robust reserve requirements, registration as "financial institutions" under the Bank Secrecy Act (BSA), and compliance with consumer protections.

• RESERVE AND BACKING REQUIREMENTS: The bill imposes strong federal prudential standards on permitted payment stablecoin issuers, including requirements for fully backed reserves, timely disclosures and certifications, capital and liquidity requirements, and a strict prohibition on rehypothecation. Under Section 4 of GENIUS, all stablecoins issued under the framework must be backed 1:1 by cash, have insured bank deposits, or short-term U.S. Treasuries, and there are strict prohibitions against lending or rehypothecating reserves backing the payment stablecoin. Stablecoin issuers would also be required to maintain transparent public disclosures, undergo third-party audits, and ensure that customer funds remain separate from company assets.

• FEDERAL/STATE FRAMEWORK: Under the bill, stablecoin issuers can choose between a federal or state regulatory regime. Issuers with over $10 billion in circulation or those opting into the federal regime would be supervised by their relevant federal regulator, such as the Office of the Comptroller of the Currency (OCC) for nonbanks, and subject to reporting, examinations, and enforcement actions. State-level issuers under the $10 billion threshold would be overseen by state regulators, though the Fed or OCC could intervene in exceptional cases. Foreign stablecoin issuers would need to meet U.S. standards, register with the OCC, and hold U.S.-based reserves to operate domestically, while the Treasury is authorized to establish reciprocal agreements or waive certain requirements. For a foreign stablecoin issuer, operating domestically means to offer, sell, or otherwise make its stablecoin available to individuals located in the U.S., either directly or through intermediaries like DASPs.

• ANTI-MONEY LAUNDERING INNOVATION: Section 9 directs the Treasury Department to solicit public input on innovative tools financial institutions can use to detect illicit activity involving digital assets, such as money laundering. This includes exploring technologies like application program interfaces (APIs), artificial intelligence, digital identity verification, and blockchain monitoring. The Treasury Department is also required to assess innovative or novel methods, techniques, or strategies that regulated financial institutions use, or have the potential to use to detect illicit activity, integrating studies on digital assets, stablecoins, and illicit finance into the Treasury National Risk Assessment. GENIUS also mandates the Financial Crimes Enforcement Network to, no later than 3 years after the date of GENIUS enactment, issue guidance or promulgate a notice and comment rulemaking on the implementation of innovative or novel strategies to detect illicit activity involving digital assets, standards for payment stablecoin issuers, including for blockchains, digital asset mixing services, tumblers, and “tailored risk management standards for financial institutions interacting with decentralized finance protocols.” 

The passage of the GENIUS Act marks a significant step toward establishing a comprehensive federal framework for regulating payment stablecoins in the U.S. 

Put simply, GENIUS regulates payment stablecoin issuers and focuses on ensuring compliance through trusted financial intermediaries, while respecting disintermediation and decentralization, and does not touch on broader conversations on market structure.

GENIUS DEFINITION OF DIGITAL ASSET SERVICE PROVIDER (DASP)

While the GENIUS Act is limited to establishing a regulatory framework for centralized payment stablecoin issuance, some provisions of the bill regulate secondary trading on centralized venues. As DEF has emphasized, decentralized protocols and developers of such protocols should not be treated like centralized intermediaries. Particularly critical in GENIUS is the definition of “digital asset service provider,” which regulates the secondary trading of payment stablecoins on intermediated venues. 

“(7) DIGITAL ASSET SERVICE PROVIDER.—The term ‘‘digital asset service provider’’— 

(A) means a person that, for compensation or profit, engages in the business in the United States (including on behalf of customers or users in the United States) of—

(i) exchanging digital assets for monetary value;

(ii) exchanging digital assets for other digital assets; 

(iii) transferring digital assets to a third party;

(iv) acting as a digital asset custodian; or

(v) participating in financial services

relating to digital asset issuance; and

(B) does not include—

 (i) a distributed ledger protocol;

(ii) developing, operating, or engaging in the business of developing distributed ledger protocols self-custodial software interfaces;

(iii) an immutable and self-custodial software interface;

(iv) developing, operating, or engaging in the business of validating transactions or operating a distributed ledger; or

(v) participating in a liquidity pool or other similar mechanism for the provisioning of liquidity for peer-to-peer transactions.”

Under the GENIUS Act, DASPs include centralized exchanges and trading venues, and are prohibited from facilitating the offer, sale, or secondary trading of payment stablecoins issued by foreign entities that have been designated as noncompliant by the Treasury Department. 

Importantly, the definition of DASP is limited to centralized actors who custody and control user assets, including those who engage in the business of exchanging, transferring, custodying, or issuing digital assets on behalf of customers or users in the U.S. The definition critically excludes decentralized distributed ledger protocols and self-custodial software interfaces, ensuring that DeFi is protected from regulation suited for centralized financial intermediaries. This validates that the government views secondary transactions in stablecoins as peer-to-peer, and, if passed, will be the first time the U.S. government has codified this recognition into federal law. 

Section 3 of GENIUS stipulates that it shall be unlawful for any DASP to offer or sell a payment stablecoin to a person in the U.S. unless the payment stablecoin was issued by a permitted payment stablecoin issuer. Further, Section 3 establishes that it shall be unlawful for any DASP to offer, sell, or otherwise make available in the U.S. a payment stablecoin issued by a foreign payment stablecoin issuer unless the foreign payment stablecoin issuer has the technological capability to comply with the terms of any “lawful order,” which includes compliance with freeze, seize, or burn orders in relation to anti-money laundering or sanctions laws. 

Section 8 of GENIUS — “Anti-Money laundering protections” — stipulates that a payment stablecoin issued by a foreign payment stablecoin issuer may not be publicly offered, sold, or otherwise made available for trading in the U.S. by a DASP unless the foreign payment stablecoin issuer has the technological capability to comply and complies with the terms of any “lawful order.” Section 8 confers the Secretary of Treasury with the authority to designate any foreign issuer that publicly offers, sells, or otherwise makes available a payment stablecoin as noncompliant, prohibiting it from secondary trading on DASP intermediated venues. 

It is noteworthy that under GENIUS Section 9, legislative recommendations relating to the scope of the term “digital asset service provider” and the application of that term to decentralized finance are mandated as part of the Act. 

Under GENIUS Section 18, the prohibitions on DASPs in Section 3 do not apply to a foreign payment stablecoin issuer if the foreign payment stablecoin issuer is subject to the regulatory oversight of a foreign regulator that has a regulatory framework comparable to the GENIUS Act (reciprocal frameworks), including similarities to the requirements set out in Section 4 on reserves, transparency, capital requirements, and AML.

DeFi Education Fund applauds the bipartisan group of drafters and Members for properly excluding DeFi from regulation and penalties suited for those centralized actors who have the technological capability to comply. DEF, alongside a coalition of advocates across the crypto and DeFi industries, have been proactively working to ensure that peer-to-peer transactions through noncustodial software protocols and self-custodial web interfaces are recognized distinctly under GENIUS Act. The passage of GENIUS out of the Senate represents a massively positive shift for DeFi regulation in the United States, particularly in that a broad, bipartisan group of lawmakers have recognized the nuanced technological realities of DeFi technology. 

And, as noted in a Senate Banking Committee memo on GENIUS: “other comprehensive AML provisions for digital assets, digital asset service providers, and secondary markets, would be more appropriate for a broader discussion, and potentially enacted as a part of a crypto market structure bill.”

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What’s Next? 

The legislation will now head to the House floor, where it might be paired with the House’s proposed regulatory frameworks for digital assets, including payment stablecoins. The House’s proposed regulatory framework for payment stablecoins, the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act of 2025 (H.R. 2392), advanced out of a House Financial Services Committee Markup in April 2025 with a vote of 32-17. The House also recently advanced the Digital Asset Market Clarity (CLARITY) Act of 2025 (H.R. 3633) on June 10, 2025, with a favorable Committee vote of 32-19.

DEF’S PERSPECTIVE 

The Senate’s passage of the GENIUS Act is good news for the digital assets industry in the U.S. It represents a critical first step toward greater regulatory certainty for blockchain technology and digital asset markets, including DeFi. The GENIUS Act provides robust consumer protections and compliance obligations for centralized intermediaries and issuers of payment stablecoins, while appropriately treating decentralized protocols, noncustodial software providers, and self-custodial web interfaces properly. Stablecoins are a critical component of DeFi markets and the future of peer-to-peer payments and transactions. 

DEF believes regulatory clarity for stablecoins is in the best interest of the U.S. dollar, American consumers, and small businesses, and we strongly encourage continued bipartisan support to move this important legislation forward so it can be signed into law. 

As DEF Board Member Jake Chervinsky stated in his testimony before the House Financial Services Committee in 2023: “To strengthen the dollar’s dominance, our main priority should be to spread dollars far and wide, and blockchain-based stablecoins — which enable billions of people around the world who lack financial services to join the global economy for the first time — provide the best mechanism to achieve that priority.”

As GENIUS heads to the House, we urge you to contact your Representative to ask them to support GENIUS and vote YES on advancing our nation’s financial future. Please make your voice heard. For more information, please visit StandWithCrypto.

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For more resources on the GENIUS Act, see the following resources: 

• GENIUS Bill Text (6/12/2025)

• What are Stablecoins? Uniswap Labs Blog

• Fact Sheet on National Security Protections in GENIUS.

• Fact Sheet on Consumer Protections in GENIUS

• Myth vs. Fact on the GENIUS Act