GENIUS Act vs STABLE Act: Will Congress Kill or Fuel Stablecoin Growth?
- David Zhang
- Jun 15
- 6 min read
This article was originally published by Samuel McCulloch on Leviathan News (March 31, 2025).
What's going on SQUIDs? Today we’ve got a breakdown of the two Stablecoin bills in the US Congress.
A final stablecoin bill is expected to be passed sometime later in 2025, so its important to understand what’s in the bill and how it’s going to effect our industry going forward.
Introduction
We’re in a bull market. A stablecoin bull market.
Since the bottom of the market post-FTX collapse, the stablecoin supply has doubled in 18 months to $215bn USD, and this isn’t even taking into account the new crypto only entrants like Ondo, Usual, Frax, and Maker.
The stablecoin industry is wildly profitable with current interest rates at 4-5%. Tether booked $14bn(!) worth of profits last year with less than 50 employees. Circle is going to file for IPO in 2025. Everything is stablecoin.
Now that Biden is gone, we’re 100% going to get stablecoin legislation in 2025. Banks have watched as Tether and Circle had a 5 year head start for gaining market traction. Once the new laws are passed legalizing stables, every bank in America will issue their own digital dollar.
Two major legislative proposals are now in play: the Senate’s Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (GENIUS Act) and the House’s Stablecoin Transparency and Accountability for a Better Ledger Economy Act of 2025 (STABLE Act).
These bills have been bouncing around forever… but now we’re finally getting consensus and one of them will be passed this year.
Both the GENIUS Act and STABLE Act aim to create federal licensing regimes for “payment stablecoin” issuers, establish strict reserve requirements, and clarify oversight responsibilities.
Payment stablecoins are just a nice term for authorized digital dollars issued against bank or non-bank institution balance sheet. It’s defined as digital assets used for payment or settlement that are pegged to a fixed monetary value (typically 1:1 to the dollar) with reserves held in short term treasuries or cash.
Critics of stablecoins think they will erode government’s ability to control monetary policy. Go read Gorton and Zhang’s epic “Taming Wildcat Stablecoins” for a full breakdown of their fears.
The no. 1 rule for dollars in the modern age is no depegs.
A dollar is a dollar, no matter where it is.
Deposited into JP Morgan, held in Venmo or PayPal, credits in Roblox. Wherever dollars are used, they must always meet the following two rules:
Every dollar must be interchangeable: There's no mental accounting that labels dollars as "special," "reserved," or tied to a specific purpose. Dollars in JPM can’t be thought of different than what’s held on Tesla’s balance sheet.
Dollars are fungible: All dollars are the “same” no matter where they are, cash, bank deposits, reserves.
The entire fiat financial system is built around this one principle.
This is the Fed’s entire job, ensure the dollar stays pegged and strong. No Depegs.
This slide above is from Zoltan Pozsar’s “How the Financial System Works.” It’s the definitive guide to the dollar and will give you loads of context on what these stablecoin bills are trying to achieve.
Right now all stablecoins fit into the lower right box as Private shadow money. If Tether or Circle were shut down or went bust, while apocalyptic for crypto, the impact on the overall financial system would be negligible. Life would go on as we all know it.
Economist fear that by legalizing stablecoins, allowing banks to issue them, and allowing them to be Public shadow money is where the risk lies.
Because the only question that matters in the fiat monetary system is who gets bailouts when shit hits the fan. That’s what the slide above shows.
Remember 2008? US based Mortgage backed securities were a very small part of the global economy, but banks operate on near 100x leverage at all times and collateral is shared around on each other’s balance sheets. So when one bank (Lehmann Bros.) blows up, it started a chain effect of similar implosions due to leverage and balance sheet contagion.
The US Fed, and other monetary institutions like the ECB, had to step in (globally) to ensure that all bank balance sheets would be saved from the spread of the toxic debt. It took billions of bailouts, but the banks were saved. The Fed will always bailout the banks, because without them, the global financial system wouldn’t function, and the dollar might depeg in institutions that have poor balance sheets.
You don't even have to go back to 2008 to see an example of this.
In March 2023, Silicon Valley Bank collapsed over a single weekend, triggered by a rapid bank run fueled by digital withdrawals and panicked social media chatter. SVB’s failure wasn't caused by risky mortgages, derivatives, or crypto; it was simply due to holding supposedly safe, long-duration US treasury bonds that dramatically lost value as interest rates rose. Yet, despite SVB's relatively small size in the overall banking ecosystem, its collapse threatened systemic contagion, forcing the Fed, FDIC, and Treasury to quickly step in and guarantee all deposits—even those exceeding the standard $250,000 insurance limit. The government's swift intervention underscored the principle: when dollars held anywhere become suspect, the entire financial system can unravel overnight.
The SVB collapse had immediate ripple effects into crypto. Circle, the issuer of USDC—which at the time had about $30 billion in total supply—held a significant portion of its reserves at SVB. Over that weekend, USDC lost its peg by roughly eight cents, briefly trading around $0.92, causing panic across the crypto market. Now, imagine an asset dislocation like this, but on a global scale. That’s precisely what's at stake with the introduction of these new stablecoin bills. By allowing banks to issue their own stablecoins, policymakers risk embedding potentially volatile instruments deeper into the global financial infrastructure, raising the stakes dramatically when—not if—the next financial shock occurs.
The entire point of Zoltan Pozsar's slide above is that when financial disasters strike, it's ultimately the government that has to step in and bail out the financial system.
Today, we have multiple categories of dollars, and each comes with a different level of security.
Dollars issued directly by the government itself—known as M0 dollars—carry the full faith and credit of the United States and are essentially risk-free. However, as we move into the banking system and start categorizing money as M1, M2, and M3, the government's guarantee becomes progressively weaker.
This is precisely why bank bailouts are controversial.
Bank credit lies at the heart of the U.S. financial system, but banks have incentives to pursue maximum risk within the boundaries of the law, often becoming dangerously over-leveraged. When their risk-taking crosses the line, financial crises erupt, and the Fed is compelled to intervene and provide bailouts to prevent total systemic collapse.
The fear is that because the vast majority of money today exists as bank-issued credit—and because banks are deeply interconnected and leveraged—multiple simultaneous bank failures could trigger a domino effect, spreading damage across every sector and asset type.
We witnessed exactly this scenario in 2008.
Few imagined that a seemingly isolated segment of the U.S. housing market could destabilize the global economy, but due to extreme leverage and fragile balance sheets, banks could not withstand the collapse of collateral once deemed safe.
This context helps explain why stablecoin legislation has been so divisive and slow to develop.
Consequently, lawmakers have been cautious, carefully defining exactly what qualifies as a stablecoin and who can issue them.
This caution has produced two competing legislative proposals: the GENIUS Act, which takes a more flexible approach to stablecoin issuance, and the STABLE Act, which imposes strict limitations around eligibility, interest payments, and issuer qualifications.
Both bills, however, represent critical steps forward, potentially unlocking trillions of dollars for on-chain transactions.
Let's examine these two bills in detail to understand how they're similar, how they differ, and what's ultimately at stake.
The GENIUS Act: Senate’s Stablecoin Framework
The GENIUS Act of 2025, formally known as the Guiding and Establishing National Innovation for U.S. Stablecoins Act, was introduced in February 2025 by Senator Bill Hagerty (R-TN) along with bipartisan co-sponsors including Senators Tim Scott, Kirsten Gillibrand, and Cynthia Lummis...
