No FDIC for You: What the GENIUS Act Means for the Future of Crypto Payments: By Nkahiseng Ralepeli

Finextra

5 days ago

The U.S. Congress is flirting with crypto's version of a 'ChatGPT moment.' A new bipartisan bill – cheekily named the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) – promises to catapult dollar-backed stablecoins from the fringes of online trading into the mainstream of payments. Having just cleared the Senate with a 66-32 vote after some high-political drama, the proposed legislation now heads to the House. Lawmakers and lobbyists are hailing it as a long-awaited federal framework to 'reaffirm the dominance of the U.S. dollar' in a digital era – even as critics warn it might be a genius plan in name only. The stakes are high: from your neighborhood coffee shop to far-flung international markets, stablecoins could soon be as common as cash or card at the point-of-sale, reshaping who and what powers the world's payments.
From Wild West to Regulated Rails
If enacted, the GENIUS Act would transform stablecoins from a regulatory gray area into a tightly supervised financial product. Stablecoins, for the uninitiated, are crypto tokens pegged 1:1 to an asset like the U.S. dollar – a breed of digital chits designed to hold steady value. Under the bill's provisions, only vetted 'permitted issuers' could circulate these digital dollars. In practice, that means insured banks and licensed nonbanks only. Key safeguards in the Senate-approved draft include:
Issuers must hold 100% reserve assets (U.S. currency or liquid equivalents) for every coin in circulation, and publish monthly reserve reports. The concept is not foreign to the crypto industry - this is an extension of Proof of Reserves, really. Crucially though, holders would also have first claim on reserves if an issuer went bust, protecting consumers in a worst-case scenario.
Prospective issuers have a choice of a federal license or state supervision (with a ~$10B cap if state-regulated). Either way, they'll answer to financial regulators. The bill explicitly brings stablecoin issuers under Bank Secrecy Act rules – i.e. strict anti-money laundering (AML), know-your-customer, and sanctions compliance obligations. Those in the crypto world may, however, argue this represents a fundamental tear in the principles of crypto, but it is realistically the direction that we are going if we intend for space to go mainstream.
To the relief of crypto markets, properly issued stablecoins would not be treated as securities – sidestepping the SEC's jurisdiction and affirming these tokens are more like digital cash than investment contracts. However, the act pointedly does not bestow Federal Reserve accounts or insurance on stablecoin issuers. In fact, issuers can't brand themselves in any way that implies FDIC backing or U.S. government guarantees. These dollars may be digital, but they're private-sector dollars, not Fed coins.
Interestingly, the GENIUS Act opens a door (carefully) for foreign stablecoin issuers to operate in the U.S., but only if Treasury deems their home regulations 'comparable' to U.S. standards. At the same time, late amendments threw up guardrails against corporate giants muscling in: large publicly traded or foreign tech companies not primarily in finance would be barred from issuing stablecoins without special approval from a new Stablecoin Certification Board.
The bill even includes a somewhat surreal conflict-of-interest clause inspired by current events: government officials (Congress members, senior exec branch) cannot issue a stablecoin while in public service. (Yes, this is the first U.S. law that implicitly says 'No, Mr. President, you can't officially run your own coin while in office.')
These provisions mark a dramatic shift from the free-for-all that saw unregulated stablecoins swell to a $230+ billion market on sheer market demand. Senator Kirsten Gillibrand (D-NY), a co-sponsor, touts the act as bringing 'regulatory clarity' to an important industry while keeping innovation onshore and adding robust consumer protection. By formally legitimizing stablecoins, Congress would effectively invite traditional institutions into the arena. As MIT's Christian Catalini puts it, 'This opens the floodgates… consumers will have more choices. This will bring more competition and innovation in payments.'
The idea is that with clear rules of the road, banks, fintechs, and even brands like Meta or PayPal can confidently integrate stablecoins into their offerings, driving crypto-dollars into everyday use. Indeed, just days ago major U.S. banks (JPMorgan, BofA, Citi, Wells) were reported to be mulling a joint stablecoin venture – a move directly 'following US regulatory action' on the GENIUS Act.
Not everyone is cheering, however. Detractors label the bill as industry-friendly flimflam, heavy on future promise and light on immediate safeguards. Senator Elizabeth Warren (never one to mince words) blasted the final draft as 'a weak bill [that] is worse than no bill at all', arguing it fails to address glaring conflicts of interest and could turbocharge financial risks. She's pointed squarely at the elephant in the room: the current U.S. President's family is deeply involved in the stablecoin business, raising eyebrows about self-dealing at the highest level. 'This Act will supercharge the stablecoin market – and the reach and profitability of [Donald] Trump's own stablecoin, USD1,' Warren warned on the Senate floor. It's an extraordinary subplot: President Trump's crypto venture, World Liberty Financial, launched 'USD1' in March, and it's already among the top five stablecoins.
The GENIUS Act's backers added the aforementioned ethics clause to quell some concerns, but critics like Warren remain unconvinced. In their view, blessing stablecoins at scale – under a President who literally has skin in the game – is, shall we say, a bold experiment. Nonetheless, 16 Senate Democrats crossed the aisle to join Republicans in advancing the bill. The rare bipartisan alignment signals that many in Washington, despite the drama, see stablecoin regulation as inevitable (and perhaps urgently necessary) to avoid ceding this fintech frontier to overseas rivals.
Stablecoins at the Checkout: Paying with Crypto Dollars
For years stablecoins mostly served as grease for crypto traders – a quick way to hop between Bitcoin and cash without actually touching the banking system. With regulation finally catching up, these digital dollars are poised to leap from trading screens to Main Street tills. The GENIUS Act explicitly frames stablecoins as 'payment stablecoins,' hinting at their intended role in everyday commerce.
At Dubai's recent Token2049 conference – a bellwether for crypto trends – the talk was all about making stablecoins 'ubiquitous' at point-of-sale. In a headline-grabbing appearance, Eric Trump (yes, of that Trump family) extolled the virtues of the USD1 stablecoin his family helped launch. World Liberty Financial (WLFI), the Trump-affiliated startup behind USD1, is literally betting the house on mainstream adoption: 'We're working really hard on… getting integrations into traditional retail point-of-sale systems,' WLFI co-founder Zach Witkoff told the Token2049 crowd.
The vision: shoppers shouldn't even notice (or care) that they're paying with a stablecoin under the hood. Whether you tap your phone or swipe a card, the transaction could settle in USD1 or USDC on a blockchain, while you and the merchant see just dollars. Eric Trump emphasized making USD1 seamless and secure for cross-border payments – touting transparency, full backing by short-term U.S. treasuries, and regulatory compliance as key to winning trust.
If that sounds like stablecoins trying to behave a lot like a digital Pax Americana, that's by design: World Liberty explicitly says it wants to 'promote dollar dominance' via USD1.
They're not alone. Payment innovators are already laying pipes between stablecoins and retail outlets. For example, fintech startups have begun integrating stablecoin wallets with familiar interfaces like Apple Pay, allowing users to spend crypto dollars with a tap – while merchants receive fiat in their bank as usual. The idea is to leverage crypto's speed and cost advantages behind the scenes, without asking the corner store to become a blockchain expert.
Visa and Mastercard, for their part, are piloting stablecoin settlement for cross-border payments, keen not to be left out if transaction volume shifts to public chains. All of this points to a future where stablecoins function as the 21st-century equivalent of cash, zipping across networks of merchants and consumers globally. Cross-border remittances and e-commerce are low-hanging fruit – indeed, stablecoins are already used to send money overseas in minutes.
With clear U.S. legal status, we can expect wider adoption: remittance firms, gig economy platforms, even tourism services could embrace stablecoins to dodge the costs and lags of currency exchange.
To be sure, making stablecoin payments truly 'plug-and-play' at scale faces challenges beyond just legal uncertainty. Performance and user experience are key. The industry is responding by deploying on faster, cheaper networks.
Second, wallet security and ease-of-use must meet the bar set by Big Tech and banks – nobody wants to fumble with private keys at the checkout line. The GENIUS Act indirectly helps here: by enforcing consumer protections and standard disclosures, it should boost confidence that regulated stablecoins won't suddenly break their peg or vanish. When your digital dollar is as boringly reliable as the one in your pocket, you're more likely to spend it.
And what about merchants and payment processors? Many may be blissfully agnostic to how they get paid, as long as it spends like a dollar. That said, merchants will expect stablecoin payments to integrate with their existing systems (invoicing, accounting, etc.) with minimal friction. This is where partnerships between crypto firms and incumbents come in: think point-of-sale providers enabling a 'stablecoin accepted here' option that auto-converts to local currency, or e-commerce platforms adding stablecoin checkout alongside PayPal and cards.
With the GENIUS Act, that catalyst is finally clicking into place.
A New Financial Frontier in Play?
A regulated stablecoin boom will reverberate across the financial industry. Here's a look at how key players might be affected:
U.S. banks are now positioning to play offense. With legal clarity, banks can issue their own stablecoins or tokenized deposits without as much fear of regulatory smackdown. They can also earn fees safeguarding reserves or facilitating conversions between stablecoins and traditional money. Still, if consumers start holding significant funds in, say, Circle's USDC instead of bank accounts, deposit bases could erode (so-called deposit substitution). Banks will need to innovate – offering instant payments and cheaper transfers to compete, or partnering with stablecoin networks to remain central in the flow of funds. The upside? New revenue streams in providing stablecoin payment rails, custody, compliance services, and settlement for clients. Banks that adapt could find themselves default stablecoin dealers for the economy, much as they are for cash today.
This is a obvious boon for fintech innovators. Firms from PayPal (which already launched a USD stablecoin) to Stripe, Block, and global remittance apps can integrate regulated stablecoins to speed up transactions and cut costs. Social media and e-commerce platforms (imagine Meta, which is reportedly exploring stablecoin payouts again) could use stablecoins to pay creators or suppliers across borders instantly. Payment processors might support merchant acceptance of stablecoins and offer instant stablecoin-to-fiat settlement as a service. There's also a play for card networks to expand their domain – for instance, by enabling crypto wallet spending at any card-accepting merchant, with stablecoin settlement on the back-end. Notably, Visa's CEO has called stablecoins and public blockchain payments a 'natural fit' for moving money; with regulatory approval, such initiatives will accelerate. In short, fintechs stand to gain a new tool in their arsenal: programmable digital dollars that can move 24/7 without bank cut-off times, yet are fully compliant and mainstream-friendly.
Corporate treasury teams might discover stablecoins as a superior way to manage liquidity and payments. Imagine a multinational instantly sweeping funds from overseas markets to U.S. headquarters using a dollar stablecoin? Or a corporate paying suppliers in stablecoins to avoid FX conversion costs – the supplier can hold the stablecoin or convert to local currency at their leisure. Stablecoins could become a kind of universal settlement currency for global trade, simplifying transactions that now hop through multiple bank intermediaries. The GENIUS Act's legal imprimatur would make CFOs more comfortable holding stablecoins on balance sheets as a cash equivalent (particularly if auditors take note of the 1:1 reserve mandate and redemption priority that protect those funds). That said, corporate adoption will hinge on risk and accounting treatment. They'll ask: does holding a pile of stablecoins carry credit risk of the issuer? (Arguably low if reserves are in T-bills, but not zero.) How easily can it be converted to real dollars in a pinch? (Regulation should ensure redemption rights, but liquidity in a crisis will be the test.) We may see treasury management products built around stablecoins, offering automated yield (perhaps via short-term T-bill interest) and on-demand conversion to fiat.
Visa, Mastercard, and the like have a choice: ride the stablecoin wave or get swamped by it. In truth, they're already riding it – using their networks as a bridge between crypto and commerce.). For point-of-sale transactions, card networks could treat a wallet of regulated stablecoins as just another funding source linked to your account. The user taps their Visa, behind the scenes a stablecoin is debited and converted to fiat for the merchant, and everyone is none the wiser – except that settlement finality happens in minutes on-chain rather than days through correspondent banks. These networks have decades of experience in fraud prevention and global acceptance, assets they can bring to bear to make stablecoin usage as convenient as any other payment.
Final thoughts
The GENIUS Act could mark the beginning of a new era where fintech and traditional finance converge on a digitally tokenized dollar. Citi's analysts believe regulatory clarity from the Act will integrate blockchain 'more widely into the existing financial system' – bringing stablecoins from crypto niche to financial norm. Of course, this assumes the bill becomes law and works as intended. As of today, it's halfway there: passed by the Senate, and now in the hands of the House of Representatives. The House may well pass its own version, but momentum is on the side of doing something concrete in 2025. The Trump administration is eagerly supportive – unsurprisingly, given the President's public crypto boosterism and personal stake in the outcome. Should Congress send the bill to the Oval Office, a signature from President Trump seems assured, officially ushering stablecoins into the regulatory fold of the United States.
The authors of the GENIUS Act will have to prove that this framework serves the public interest first and foremost, not just the early movers in the stablecoin industry. Regulators, too, must deliver: the effectiveness of this regime will hinge on rigorous audits, transparency, and enforcement of those AML provisions to prevent 'stablecoin dystopia' scenarios.
The coming months will bring answers, as the House debates the measure and industry stakeholders fine-tune their strategies. Keep an eye on those hearings – expect both starry-eyed testimonials about financial innovation and fiery speeches about corruption and risk.
In the meantime, don't be surprised if you see a stablecoin pilot at a store near you. The race to mainstream crypto dollars has begun, and the GENIUS Act might just be the starter's pistol. In a few years, Americans and many others around the world could be transacting with digital Washingtons and Lincolns as nonchalantly as they do with paper and plastic today – all backed by the full faith and credit of… well, a mix of U.S. Treasuries, tech ingenuity, and a new law born in Congress's halls.