Three major impacts of the Genius Act on the cryptocurrency industry in the next five years

By Alex Carchidi

Compiled by: Vernacular Blockchain

On June 17, the U.S. Senate passed the Guidance and Establishment of a United States Stablecoin National Innovation Act (Genius Act), the first comprehensive federal stablecoin regulatory framework, overcoming the biggest hurdle.

The bill has now been sent to the House of Representatives, where the House Financial Services Committee is preparing its own text for a consultation session and a possible vote later this summer. If all goes well, the bill could be signed into law by the fall, greatly reshaping the cryptocurrency industry landscape.

The bill’s strict reserve requirements and nationwide licensing system will determine which blockchains are favored, which projects become important, and which tokens are used, thereby affecting the flow of the next wave of liquidity. Let’s take a deep dive into the three major impacts that the bill will have on the industry if it becomes law.

1. Payment tokens may disappear overnight

The Senate bill would create a new “licensed payment stablecoin issuer” charter and require each token to be backed 1:1 by cash, U.S. Treasuries, or overnight repurchase agreements (repos) — with annual audits for issuers with more than $50 billion in circulation. This is in stark contrast to the current “Wild West” system, which has few substantive safeguards or reserve requirements.

This clarification comes at a time when stablecoins are becoming the dominant medium of exchange on blockchains. In 2024, stablecoins accounted for approximately 60% of the value of cryptocurrency transfers, processing 1.5 million transactions per day, with most transactions being less than $10,000.

For daily payments, a stablecoin token that always maintains a value of $1 is obviously more practical than most traditional payment tokens, whose prices may fluctuate by 5% before lunch.

Once U.S.-licensed stablecoins can legally circulate across state lines, merchants who still accept volatile tokens will find it difficult to justify the additional risk. In the coming years, the utility and investment value of these alternative tokens may decline significantly unless they can successfully transform.

Even if the Senate bill does not pass in its current form, the trend is clear. Long-term incentives will clearly favor dollar-pegged payment channels rather than payment-based tokens.

2. New compliance rules may actually determine new winners

The new regulations would not only provide legitimacy to stablecoins; if the bill becomes law, it would ultimately effectively direct the flow of these stablecoins to blockchains that can meet audit and risk management requirements.

Ethereum (ETH 1.15%) currently hosts approximately $130.3 billion in stablecoins, far more than any competitor. Its mature decentralized finance (DeFi) ecosystem means that issuers can easily access lending pools, collateral lockers, and analytical tools. In addition, they can also piece together a set of regulatory compliance modules and best practices to try to meet regulatory requirements.

In contrast, XRP(XRP 0.22%) Ledger (XRPL) is positioning itself as a compliance-first tokenized currency platform, including stablecoins.

In the past month, fully backed stablecoin tokens have been launched on the XRP Ledger, each with account freezing, blacklisting, and identity screening tools built in. These features are highly consistent with the Senate bill’s requirement that issuers maintain strong redemption and anti-money laundering controls.

Ethereum’s compliance system could allow issuers to violate this requirement, but it is difficult to determine how strict regulators will be in this regard.

Nonetheless, if the bill becomes law in its current form, large issuers will need real-time verification and plug-and-play Know Your Customer (KYC) mechanisms to remain broadly compliant. Ethereum offers flexibility but complex technical implementation, while XRP offers a simplified platform and top-down control.

At the moment, both blockchains appear to have advantages over chains focused on privacy or speed, which may require expensive modifications to meet the same requirements.

3. Reserve rules may bring a flood of institutional funds to blockchain

Since each dollar of stablecoin must be held in reserves of an equivalent amount of cash-like assets, the bill quietly links cryptocurrency liquidity to short-term U.S. debt.

The stablecoin market is already worth more than $251 billion. If institutional adoption continues on its current path, it could reach $500 billion by 2026. At that size, stablecoin issuers would become among the largest buyers of short-term U.S. Treasuries, using the proceeds to support redemptions or customer rewards.

For blockchain, this connection means two things. First, the need for more reserves means more corporate balance sheets will hold treasuries while holding native tokens to pay network fees, driving organic demand for tokens like Ethereum and XRP.

Second, the interest income from stablecoins may provide funds for aggressive user incentives. If issuers return part of the treasury bond proceeds to holders, using stablecoins instead of credit cards may become a rational choice for some investors, thereby accelerating on-chain payment volume and fee throughput.

Assuming the House retains the reserve provision, investors should also expect increased currency sensitivity. If regulators adjust collateral eligibility or the Fed changes Treasury supply, stablecoin growth and cryptocurrency liquidity will fluctuate in tandem.

This is a risk worth noting, but it also shows that digital assets are gradually being integrated into mainstream capital markets rather than being independent of them.