What Is the GENIUS Act? How US Stablecoin Regulation Affects Users
In 2025, the United States passed the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), the first federal-level stablecoin regulatory framework in U.S. history and one of the most significant pieces of legislation in cryptocurrency regulation.
By 2026, the GENIUS Act had begun to influence the compliance behavior of stablecoin issuers and exchanges, with the CLARITY Act further expanding the regulatory scope on its foundation. If you hold USDT or USDC, the existence of these regulations directly affects the security and usability of the stablecoins you hold.
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1. Core Content of the GENIUS Act
Definition of Stablecoin: The Act defines a "payment stablecoin" as a digital asset pegged to a fixed fiat currency value, primarily used for payments and settlements. It is explicitly not a security, commodity, or investment product, but a payment instrument subject to a specialized framework.
Issuance License Requirement: Only issuers licensed by regulatory authorities can issue payment stablecoins in the United States. Unlicensed issuers have a 3-year transition period.
Reserve Requirement: Stablecoin issuers must hold 1:1 high-quality liquid assets (such as U.S. Treasury bonds, cash) as reserves, and undergo regular audits and public disclosures.
Regulatory Structure: Stablecoin issuers with a scale below $10 billion can choose to operate under a state-level regulatory framework. Those exceeding $10 billion must accept federal regulation.
2. The CLARITY Act: An Extension of the GENIUS Act
In May 2026, the U.S. Senate Banking Committee passed the CLARITY Act, extending the regulation of stablecoin yields to all digital asset service providers, including centralized exchanges, brokers, and custodians.
Simply put:
- The GENIUS Act governs who can issue stablecoins;
- The CLARITY Act governs who can provide yield services on stablecoins.
This has a direct impact on stablecoin deposit interest products offered by exchanges like Coinbase, imposing higher compliance requirements.
3. Impact on USDT and USDC
USDC (Issued by Circle): Circle is a U.S. company that actively embraces the GENIUS Act compliance framework. It went public in 2025 and is one of the most benefited stablecoins under the GENIUS Act. It has higher compliance and increased acceptance among U.S. institutions.
USDT (Issued by Tether): Tether is registered overseas and is not directly bound by the GENIUS Act in the short term. However, compliance pressure in the U.S. market may have a long-term impact on USDT's use within the United States. Currently, USDT remains the largest stablecoin by global circulation, and its daily use by users in mainland China is unaffected.
4. Practical Impact on Mainland China Users
Direct impact is limited, but indirect effects are worth noting:
Positive Impact: The GENIUS Act increases reserve transparency requirements for compliant stablecoins. The security of the USDC you hold is better protected by law.
Points to Watch: As global stablecoin regulation tightens, stablecoins used for deposits and withdrawals may face more compliance requirements in the future, potentially increasing the difficulty of anonymous transfers.
No Short-Term Change: USDT remains the mainstream choice for C2C deposit and withdrawal scenarios among mainland China users. The GENIUS Act has no direct impact on this daily use case.
5. Frequently Asked Questions
Q: Will USDT be banned after the GENIUS Act is passed? It will not be immediately banned; there is a 3-year transition period. In the long term, if Tether does not meet U.S. compliance requirements, it may face restrictions in the U.S. market, but the impact on its use in other global markets is limited.
Q: Is USDC better than USDT because it is more compliant? Higher compliance does not necessarily mean it is better to use. USDC is more popular in U.S. institutional settings, but in global P2P transactions and mainland China C2C deposit/withdrawal scenarios, USDT remains more practical due to its higher liquidity.
Q: Is Hong Kong's stablecoin regulation the same as the GENIUS Act? The approach is similar, both requiring issuers to hold 1:1 reserves and accept regulation. Hong Kong's Stablecoin Ordinance is expected to take effect in August 2025, with the overall framework aligned with the GENIUS Act, though specific details differ.
Q: Will USDT used in mainland China be affected? Not currently. Tether operates for global users, and the use of USDT in mainland China's C2C market is not directly bound by U.S. regulations. China's own regulatory policies (such as the eight-department new rules from February 2026) are what mainland China users need to pay more attention to.
