What The GENIUS Act Means For Crypto-Native Stablecoin Issuers

After an arduous process the first comprehensive stablecoin legislation, and first pro-crypto federal legislation, has become law in the form of the GENIUS Act. Although this piece of legislation is definitively worth of celebration, and has been celebrated by crypto investors and policy advocates alike, the reality is that the landscape for payment stablecoins and stablecoin issuers has changed irrevocably. Before diving into what these implications are shaping up to be, it is worth highlighting some of the core points contained in the legislation that issuers seeking to operate will need to comply with going forward.

One of the first, and arguably most important changes is that issuers will need to provide monthly disclosures, undergo annual audits, and have CEO/CFO certification. In other words, issuers will need to comply with the same reporting and disclosure requirements that virtually every other entity operating in U.S markets must comply with. Secondly, the list of qualified entities that will be able to operate issuers include 1) bank subsidiaries, 2) non-bank issuers that have received OCC approval, 3) state licensed issuers operating under equivalent state-based frameworks that have issuance under $10 billion. These qualified issuers are also indicative of what is sure to be a rapidly evolving and shifting landscape for stablecoins moving into the future.

Let’s take a look at a few of the considerations crypto native firms will need to contend with as the GENIUS Act opens the landscape to increasing competition for stablecoin issuers.

Increased Competition And Rewards

One of the most obvious implications of the GENIUS Act becoming law is that there will invariably be increasing competition for the crypto-native stablecoin issuers. Since TradFi has received regulatory approval to enter the cryptoasset sector in full force, with the ability to issue and offer custodial services around stablecoins, this will result in multiple other dollar-backed tokens coming to market that have the support of industry giants and leaders With said competition it will quickly become a race between different issuers as to which products and/or associated services present the best deal for investors.

With institutions including titans such as J.P. Morgan Chase, as well as non-bank entities such as Walmart and Amazon, either having launched or actively considering launching dollar-backed tokens the competition is already coming to market. Especially since TradFi firms such as the previously mentioned already have strong network effects and economic ecosystems built around operations, the appeal of rewards or other benefits (in lieu of interest or dividends) will be stronger than those offered by crypto-native firms.

Additionally, since the ban on interest payments or distributions remains unlikely to change in near to medium term, the likelihood of rewards-based programs or other similar work arounds will increase. This plays directly into the offerings that are sure to emerge from TradFi organizations, since potential users and customers are 1) used to said reward systems and loyalty programs, and 2) most likely already have accounts and purchasing habits enabled by these established firms.

In short, the entrance of new players into the stablecoin space will grow the market, but will also increase the competition for customers and market share.

Diversification Among Crypto-Native Issuers

A common critique of stablecoin issuers is that, for all of the expansion and development of the stablecoin sector, these firms are almost entirely dependent on interest income from reserves for profitability. For instance, Circle derived nearly the entirety of revenues and income as reported in 2024 from interest on these reserve assets, but that has the potential to change rapidly. For instance, and taking into account the current revenue split that Circle and Coinbase are operating under, an increase in supply of USDC would flow directly to the bottom line. If comments by Secretary Bessent are any indication, alongside growing usage of stablecoins for cross-border payments and digital asset settlements (including those including real world assets) this is not an unlikely scenario. Additionally, the number of API-based applications and services that Circle has recently introduced to enable non-crypto-native firms to engage with the on-chain landscape will allow stablecoin issuers to potentially serve as the base layer for Web3 and other tokenized finance operations.

Tether, the other juggernaut of the crypto-native stablecoin world, has been diversifying investments and operations in a significant manner. Propelled by surging profits, Tether has invested approximately $14 billion in over 120 companies operating in range of industries that include – but are not limited to – AI, blockchain, energy, and payments. Addressing potential concerns the firm emphasized that all investments were funded entirely by operating profits and that customer-backed reserves linked to USDT remain unaffected and separate from these initiatives. Additionally, Tether’s bitcoin holdings have exceeded 100,000 and have been codified via a bitcoin purchasing strategy to increase holdings on top of the $2 billion in investments allocated for bitcoin mining operations. These bitcoin-centric strategies are aimed toward reinforcing the security and integrity of the bitcoin network, as well as serving as an illustration of the broad scope Tether seeks to embrace.

The GENIUS Act being signed into law will have ramifications – primarily positive – for the stablecoin sector, but crypto-native firms need to be aware of the challenges that come alongside this growth. Diversifying operations and income streams, contending with challenges from titans of global finance and payments, and the potential for further regulatory changes will make the run-up to the bill taking effect an exciting one for crypto entrepreneurs, advocates, and investors alike.