Author: Patti, ChainCatcher

Editor: TB, ChainCatcher

In a surprising turn of events, the U.S. Senate's "GENIUS Act" passed a key procedural vote on Monday evening (May 20), regaining political momentum for this stablecoin legislation, which is expected to be formally passed in the coming days, despite having faced failure less than two weeks ago.

The vote was a "motion to proceed," meaning the bill is allowed to move into the next stage of the review process. While this does not equate to final legislative approval, it lays a crucial foundation for subsequent votes. According to Senate procedures, the bill must first secure over 60 votes for a "cloture vote" to formally pass, followed by a simple majority for final approval.

From Failure to "Resurrection"

Just on May 9, the bill was defeated in the same procedural vote with a tally of 48:49, primarily due to strong concerns within the Democratic Party regarding potential conflicts of interest involving President Trump's family in the cryptocurrency space. However, within just a week, the Senate reached a compromise and proposed a revised version of the bill, ultimately garnering over 60 votes in the May 20 vote, successfully crossing the procedural threshold.

The key to this turnaround in voting was the softening of positions within the Democratic Party and continued pressure from industry organizations.

After the initial motion was defeated, crypto giants like Coinbase and Circle quickly took action. Coinbase CEO Brian Armstrong publicly expressed support for the bill for the first time and mobilized platform users through the political action organization "Stand With Crypto" to contact congressional members and push for a re-examination of the bill.

This organization has raised over $300 million in political donations for the 2026 midterm elections and rates each member of Congress within its app. Coinbase also made it clear that if the stablecoin bill cannot advance, "we will not be able to push for more comprehensive market structure legislation."

Meanwhile, the two co-sponsors of the bill, Gillibrand and Lummis, successfully persuaded several Democratic members to change their stance, with Gillibrand even "reversing" her position in the two rounds of voting.

Timeline of the "GENIUS Act":

• March 2025: The Senate Banking Committee passed the bill draft with a vote of 18:6;
• May 9: The motion vote failed (48:49), and the bill was temporarily stalled;
• May 15: A bipartisan compromise was reached, introducing a revised version of the bill;
• May 19: The Senate voted again (results not disclosed);
• May 20: The motion vote passed, and the bill moved to the next stage;
• Early June (expected): Final Senate vote (if successful, the bill will be sent to the House for review);
• July to August (expected): House committee review + full House debate (the bill will undergo preliminary review in the House and enter the debate process);
• September to October (expected): Final House vote (if the House version aligns with the Senate version, it will enter the presidential signing process; if there are differences, it will require a bicameral reconciliation process);
• November (expected): Reconciliation of the two versions and passage of a unified text;
• December (optimistic expectation): Presidential signing, and the bill officially takes effect.

Key Content Interpretation of the New Draft

According to the new version of the "GENIUS Act", several key provisions have been adjusted and clarified, including:

Core Content of the Regulatory Framework

• Limited Issuer Qualifications: Only "qualified issuers" are allowed to issue payment stablecoins within the U.S., including compliant subsidiaries of regulated banks or federally approved non-bank financial institutions that meet prudential standards.
  Corresponding Provisions: SEC. 3(a), SEC. 5, SEC. 4(a)(7)

• Mandatory 1:1 High-Quality Reserves: All stablecoins must be fully backed 1:1 by high-quality assets such as U.S. cash, Federal Reserve account funds, and short-term U.S. Treasury securities. Issuers must disclose reserve composition monthly and undergo third-party audits.
  Corresponding Provisions: SEC. 4(a)(1)(A–C), (3)

• Dual Regulatory Mechanism: Stablecoins with a total issuance not exceeding $10 billion may be subject to state-level regulation; once exceeded, they must transition to a federal regulatory framework to ensure dynamic matching of scale and regulatory intensity.
  Corresponding Provisions: SEC. 4(c), SEC. 6(a)(1), SEC. 7(d)

• Customer Asset Segregation and Bankruptcy Protection: Mixing of customer funds is prohibited, reserve assets cannot be re-pledged, and stablecoin holders have statutory priority claims in the event of issuer bankruptcy.
  Corresponding Provisions: SEC. 4(a)(2), SEC. 4(a)(7)(B), SEC. 11

• Misleading Advertising Ban: Stablecoins cannot use terms like "FDIC insurance" or "U.S. government guarantee" in branding or marketing to prevent the public from mistakenly believing they are official legal tender.
  Corresponding Provisions: SEC. 4(e)(1–3), (9)

• Ban on Yield-Generating Stablecoins: Regardless of whether the issuer is a foreign entity, no stablecoin products offering interest or yield may be provided to prevent the disguised circulation of similar financial instruments.
  Corresponding Provisions: SEC. 2(23)(B), SEC. 4(a)(7)

• Anti-Money Laundering and National Security Compliance Requirements: Stablecoin issuers must comply with the Bank Secrecy Act, establish KYC, AML, sanctions compliance, and risk assessment mechanisms, with FinCEN authorized to regulate related activities.
  Corresponding Provisions: SEC. 4(a)(5), SEC. 8, SEC. 13

• Severe Penalties for Violations: Entities issuing stablecoins without authorization may face fines of up to $100,000 per day, and those with subjective intent may face further criminal liability.
  Corresponding Provisions: SEC. 7(b)(5)(A-C)

Highlights of New Provisions:

Stablecoin Regulation Maturing: Limited Issuance + Mandatory Reserves + Dual Regulation:

The newly revised bill delineates a clear regulatory logic: who is qualified to issue, how to issue in compliance, and who is responsible for regulation.

First, only "permitted issuers" are allowed to issue payment stablecoins in the U.S. This "qualified" status includes not only compliant subsidiaries of regulated banks but also extends to certain approved non-bank financial institutions. Such qualification restrictions will block the risks associated with unlicensed, highly leveraged, and low transparency issuance models like Tether from replicating within the U.S.

Second, there is a strengthening of the reserve mechanism. The draft explicitly requires all stablecoins to achieve 1:1 backing by high-quality assets, limited to U.S. cash, Federal Reserve accounts, and short-term government bonds, and must undergo audits by registered accountants with monthly disclosures of reserve details.

Third, the introduction of a federal-state dual regulatory mechanism: those with total issuance below $10 billion may be subject to state regulation, while those exceeding this threshold must accept federal oversight.

"Moral Governance" and "Data Checks"

Another major highlight of this round of revisions is the federal government's restrictions on the "identity" and "motives" of issuers:

The draft introduces a "moral boundary" clause for the first time, prohibiting federal executive officials (such as the Secretary of the Treasury, SEC Chair, etc.) from directly or indirectly participating in stablecoin issuance, and includes specific "special government employees" (such as White House advisor David Sacks) on the restricted list. However, the President and Vice President are exempt from this ban, especially against the backdrop of several tech-friendly individuals within the Trump administration deeply involved in shaping Web3 policy, which will undoubtedly become ammunition for political adversaries.

For large tech platforms, this version of the draft also sets new thresholds.

Due to concerns over "platforms as states," all non-financial tech companies wishing to issue stablecoins must undergo approval from a "Stablecoin Certification Review Committee" and are prohibited from using their user data for financial operations. This means that if Meta, Apple, or Google have stablecoin plans, they must first address issues of "data sovereignty" and "financial function abuse."

Geopolitical Restrictions on Foreign Stablecoins Revisited

Another controversial new provision in the draft is the compliance screening mechanism for foreign stablecoin issuers. The Treasury Department is authorized to impose three requirements on non-U.S. issuers like Tether:

1. Whether they can technically cooperate with U.S. law enforcement;

2. Whether their home country is a "compliant country";

3. Whether they have sufficient assets to support their issuance.

This not only positions the U.S. Treasury as the de facto international "gatekeeper" for stablecoin distribution but also leaves ample diplomatic and geopolitical maneuvering space. Should diplomatic relations with a certain country deteriorate, this mechanism could even be used as a tool for financial pressure, raising significant concerns about its politicization risks.

FDIC Absence, Safety Mechanism Still Lacking

Despite the regulatory body increasing transparency and prudent management requirements, the bill does not include payment stablecoins within the federal deposit insurance (FDIC) system. Instead, it only requires issuers to submit an assessment report on bankruptcy disposal and asset segregation within three years. This means that in the event of a large-scale run or a related financial institution's collapse, stablecoin users will still struggle to obtain institutional protection as "lenders of last resort."

What This Means for the Crypto Industry?

Unlocking Trillions in Funding Potential

If the "GENIUS Act" is ultimately passed, it will establish a federal-level regulatory foundation for the legal issuance of stablecoins in the U.S., marking the first time one of the most important infrastructures of the crypto industry is included in the mainstream financial regulatory framework.

Currently, the market capitalization of stablecoins has reached approximately $250 billion, serving as the core infrastructure supporting liquidity in the crypto market, payment networks, and even cross-border settlements. The compliance of stablecoins could unlock hundreds of billions of new funds entering the market, accelerating the entry of more traditional financial institutions, including Wall Street banks and payment giants.

Market Structure Legislation as the Next Battleground

Although significant breakthroughs have been made in stablecoin regulation, the overall institutional construction of the crypto industry remains in its early stages, particularly regarding market structure issues such as exchange regulation, token issuance, and the applicability of securities laws, where legislative gaps still need to be filled.

Coinbase CEO Brian Armstrong recently stated during an event with stablecoin legislative advocates Senators Gillibrand and Lummis, "Stablecoins are just the first step; what we need more is comprehensive market structure legislation."

The sensitivity of this issue stems from the core controversy of "whether tokens are considered securities."

Currently, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have not reached a clear division of regulatory authority. During the Biden administration, the SEC has repeatedly sued crypto platforms on the grounds of "illegal securities issuance"; however, after the Trump administration took office, it quickly announced the "withdrawal of all related lawsuits" and promised not to pursue further actions, raising concerns about shifts in regulatory direction.

Trump Family's Deep Involvement Increases Political Risks of Legislation

The advancement of the "GENIUS Act" cannot overlook the political gamesmanship behind it. The Trump family has heavily invested in the crypto space in recent years, covering multiple sectors including Bitcoin mining, NFTs, meme coins, stablecoins, and ETFs. As a result, some Democratic lawmakers have taken a wait-and-see or even hostile attitude towards the comprehensive promotion of crypto legislation, fearing it would "greenlight" capital from the Trump camp.

However, in the latest revised version of the bill, the "moral boundary" clause exempts the President and Vice President from this ban. Given the current context where several tech-friendly individuals within the Trump administration are deeply involved in shaping Web3 policy, this move will undoubtedly become ammunition for political adversaries.

Legal Perspectives: Regulatory Clarity Will Open a New Phase for Stablecoin Development

To this end, ChainCatcher interviewed industry professionals to analyze the actual impact of the "GENIUS Act" on the sector.

Attorney Guo Yatao, who focuses on Web3 and the crypto field, stated that once the "GENIUS Act" is implemented, it will bring much-needed regulatory clarity to stablecoins, a key infrastructure. "Stablecoins are the lifeblood of the crypto market. Previously, everyone was using them, but the regulatory environment was unclear, leaving people anxious. Now that the framework is clear, core issues like reserve mechanisms, asset segregation, and issuance qualifications have answers, which is a significant boost to market confidence."

He pointed out that the significance of the bill lies not only in "providing a framework for the legitimate players" but also in opening pathways for traditional financial institutions to participate. "In the past, it wasn't that they didn't want to engage; they just didn't know how. Now that the compliance path is clear, banks and payment giants are expected to enter the market in large numbers, bringing not just funds but also credit and infrastructure."

However, Attorney Guo also cautioned that stablecoin legislation is just the first step. "More complex issues lie ahead, such as exchange regulation and the classification of tokens, which are gray areas. The fact that stablecoins are the first to be legislated indicates that both parties are starting to find consensus on fundamental issues, but establishing a complete regulatory system will take a long time."

Mao Jiehao, a senior attorney at Shanghai Mankun Law Firm, also believes that the advancement of the "GENIUS Act" signals the increasingly mature regulatory framework for Web3. "The push for compliant stablecoin frameworks by mainstream countries helps clarify the boundaries of responsibilities and behavioral norms for all parties, and will accelerate the integration of Web2 and Web3."

He further pointed out that the implementation of compliant stablecoins may trigger a wave of converting fiat currencies into compliant stablecoins in the short term, while also stimulating the emergence of more application scenario projects, especially in sectors like DeFi and RWA (Real World Asset tokenization).

"For stablecoin issuers, the key to future competition lies in who can provide more attractive use cases. They want users to exchange fiat for their stablecoins, which requires real, stable income-generating assets to back them. RWA is a naturally fitting direction," Attorney Mao added. "The ability to unlock more practical scenarios will become the key battleground for stablecoin issuers, and this application-driven competition will accelerate the maturity and differentiation of the stablecoin market."

Regulatory Boots on the Ground, Next Steps Remain Unknown

Indeed, the "GENIUS Act" provides a predictable framework for the compliance of stablecoins; however, what truly determines whether the crypto industry can enter the mainstream financial system is not just the legal status of payment stablecoins, but whether the entire market structure can build a clear, unified, and robust regulatory framework.

Therefore, although the likelihood of the bill passing in the House has significantly increased, its final approval still needs to navigate multiple political hurdles, including coordination between the two chambers and presidential signing. Industry insiders estimate that the most optimistic timeline for the bill's final passage may extend to the end of 2025.

Additionally, whether the U.S. can complete legislation on core mechanisms such as exchanges, token issuance, and cross-border capital flows will determine if the "second wave of compliance" in the crypto industry can arrive.

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