What is the Stablecoin Act?

The Stablecoin Act, officially known as the GENIUS Act (Guarding End-users against Needless Instability and Upholding Safeguards), is designed to regulate and promote the issuance of stablecoins backed by U.S. dollar reserves. According to the Act, only regulated banks, credit unions, and compliant non-bank institutions are permitted to issue dollar-backed stablecoins at a 1:1 ratio. The Act mandates that these stablecoins must be primarily backed by U.S. cash and Treasury bonds to ensure their stability and security.

The purpose of the Stablecoin Act is to further digitize and globalize U.S. dollar assets by leveraging blockchain technology to expand traditional dollar-based payment and settlement systems into decentralized networks.

Impact of the Stablecoin Act

The implementation of the Stablecoin Act is expected to bring several notable effects:

1. Improved transparency and compliance: Traditional stablecoins have often lacked clarity in reserve backing or relied on over-collateralization. The GENIUS Act enforces transparent, high-quality reserves, enhancing investor confidence and regulatory alignment.
2. Globalization and digitization of the dollar: With the legal foundation of stablecoins, a large volume of compliant U.S. dollar stablecoins will enter blockchains and Layer-2 networks, promoting offshore usage of the dollar and expanding its global financial influence.
3. Boosting DeFi appeal: Compliant stablecoins will make the DeFi ecosystem safer and more attractive. Users can easily gain yield from U.S. Treasuries by holding stablecoins, potentially drawing institutional investors into DeFi platforms.
4. Driving cryptocurrency market growth: Widespread compliant stablecoin adoption will significantly increase the liquidity and depth of crypto markets, particularly for major assets like Bitcoin, which could see further valuation and market cap growth.

Timeline for Passage

According to current forecasts, the GENIUS Act is expected to pass the U.S. Senate in July 2025. The Act may take effect and enter enforcement in the third quarter of 2026.

It is worth noting that political momentum and economic incentives may accelerate the legislative process. For instance, the Trump team has already introduced its own stablecoin, USD1, which could fast-track the passage of the Act.

Outlook for China’s Stablecoin Regulation

Compared with the U.S., China has maintained a cautious stance toward digital currencies, having banned Bitcoin trading and mining. Instead, China has focused on promoting its centralized digital currency, the digital yuan, issued by the central bank. However, under the influence of global stablecoin trends, Hong Kong is becoming a testbed for stablecoin policy experimentation. The local government actively supports exploration, with large enterprises such as JD.com Xiaomi, and Ant Group participating in initiatives to promote the internationalization of RMB-backed stablecoins under controlled risk environments.

Conclusion

In summary, the Stablecoin Act not only provides a legal basis for the globalization and digitization of the U.S. dollar but also exerts a profound impact on global financial markets and the development of blockchain technology. In response to this trend, countries including China are seeking to adapt to the new financial landscape by exploring stablecoin policy paths suited to their systems. The future of the stablecoin market presents significant opportunities and is worth close attention.