US Enacts GENIUS Act, Setting First Federal Stablecoin Rules and Shoring Up Dollar Influence
Washington is turning a once-disruptive technology into a tool of monetary strategy. Signed into law on July 18, 2025, the GENIUS Act creates the first comprehensive federal regime for payment stablecoin issuers in the US and requires 1:1 backing with high-quality, liquid, dollar-denominated assets.
The policy aim is clear: if stablecoins expand globally, ensure each token is supported by a stock of US dollar assets—especially US government paper—effectively manufacturing demand that could spill into the short-end of the bond market.
Market size and the reserve mix
In early 2026, total stablecoin capitalization is estimated at $300–$320 billion. More than 98% is pegged to the US dollar. By April 2026, USD-backed tokens represent 99.76% of the stablecoin market, leaving non-dollar stablecoins with just 0.24%.
The GENIUS Act defines eligible reserves as bank deposits, short-term Treasury bills, repurchase agreements, and government money market funds.
Standard Chartered forecasts the stablecoin market could reach $2 trillion by the end of 2028. If so, the bank estimates this could translate into as much as $1 trillion of incremental demand for Treasury bills alone. Tether and Circle—the two largest issuers—already rank among the biggest holders of short-term US Treasuries within their peer set. The Act largely formalizes existing industry practice while extending the same standards to smaller and new entrants.
A regulatory stack emerges
US authorities are now building out the enforcement framework. On April 8, 2026, the US Treasury, FinCEN, and OFAC proposed anti-money-laundering and sanctions rules aimed at the compliance systems that permitted payment stablecoin issuers (PPSIs, as defined by the Act) must implement and maintain. Separately, the OCC floated proposals in late February 2026 addressing capital and liquidity requirements for stablecoin issuers.
Why some remain unconvinced
Not all analysts buy the notion that stablecoins can offset the deeper drivers of dedollarization. BRICS nations are developing alternative payment rails and bilateral currency arrangements intended to reduce reliance on dollar-based trade. Stablecoins may broaden the dollar’s footprint in consumer payments and remittances, but sovereign reserves, commodity pricing, and central-bank swap lines are shaped by different forces.
Investor takeaways
The GENIUS Act reshapes competition among stablecoin issuers. Higher compliance and reporting costs are likely to advantage well-capitalized incumbents such as Tether and Circle, while smaller players may struggle to meet the new reserve and disclosure standards.
For traditional markets, the potential scale of Treasury-bill demand is material. If Standard Chartered’s $2 trillion scenario is even roughly right, increased buying could weigh on short-term yields, with knock-on effects for money market funds, bank funding costs, and the broader fixed-income complex.
Regulatory clarity also tightens the geopolitical screws. With OFAC directly involved, sanctioned entities and jurisdictions may find access to dollar-pegged stablecoins constrained more effectively than before, raising political and compliance risk for globally active issuers.
