Lawmakers in the U.S. Senate have introduced a bipartisan bill they hope will create a clear regulatory framework for stablecoins.

The legislation seeks to establish straightforward licensing standards, ensure consumer protection, and support financial innovation in crypto.

Establishing a Regulatory Framework

Known as the GENIUS Act, short for the Guiding and Establishing National Innovation for U.S. Stablecoins, the bill was introduced by three Republican Senators, Bill Hagerty, Tom Scott, and Cynthia Lummis, and one Democratic legislator, Kirsten Gillibrand. It defines stablecoins as digital assets pegged to the U.S. dollar and sets licensing and reserve requirements for issuers.

The proposed law also applies different oversight mechanisms based on the size of the stablecoin issuer. For example, companies with more than $10 billion worth of assets in circulation will be required to follow Federal Reserve regulations. This is expected to mainly affect Tether and Circle, whose respective stablecoins, USDT and USDC, boast market caps of $140 billion and $55.1 billion in that order.

Those below the $10 billion threshold, including Ethena USDe, DAI, and the recently introduced Ripple USD, will be allowed to operate under state-level rules. However, the document also provides mechanisms for a waiver process to allow issuers exceeding the limit to remain state-regulated.

According to Senator Hagerty, the GENIUS Act will create an environment enabling growth and innovation and help fulfill President Donald Trump’s bold promise to make the United States the global center of crypto.

“My legislation establishes a safe and pro-growth regulatory framework that will unleash innovation and advance the President’s mission to make America the world capital of crypto.”

Reacting to the bill, Tim Scott, who chairs the Senate Banking Committee, highlighted the importance of stablecoins in modern finance, noting their role in facilitating quick and inexpensive transactions. He also stressed that it will promote financial inclusion while ensuring the U.S. remains competitive in the crypto sector.

Stablecoin Adoption to Increase

With a combined market cap just north of $227 billion, stablecoins represent about 1% of the United State’s money supply and FX operations. However, a report from last year suggested they could enjoy significant growth of up to 10 times their current value to the U.S. economy.

Additionally, a researcher at Delphi Digital recently predicted that such assets will evolve beyond their role in decentralized finance (DeFi) to become more mainstream mediums of exchange. Compared to other digital currencies, their relative stability makes them better suited for daily transactions and long-term value storage.