BitMart Research Releases Report Examining the GENIUS Act and USD1's Rapid Ascent

This in-depth analysis explores the legal, financial, and political implications of the GENIUS Act and USD1's rapid ascent

Mahe, Seychelles, May 27, 2025 (GLOBE NEWSWIRE) - BitMart Research, the research arm of BitMart Exchange, has released a report examining the pivotal moment in the evolution of digital finance. As the U.S. accelerates efforts to regulate the stablecoin ecosystem with the GENIUS Act and the launch of USD1, a fully fiat-backed stablecoin associated with former President Donald Trump's family, signals a major shift in both regulatory alignment and market power. This analysis explores the legal, financial, and political implications of the GENIUS Act and USD1's rapid ascent, highlighting their combined potential to solidify U.S. dominance in the global digital asset economy.

Since the collapse of TerraUSD (UST) in 2022, the market share of algorithmic stablecoins has continued to decline. As an algorithmic stablecoin, UST was not backed by any fiat currency or assets but relied solely on an algorithmic mechanism to maintain its peg to the U.S. dollar. Once confidence collapsed and the mechanism failed, a chain reaction ensued in the market. In contrast, fiat-backed stablecoins, such as USDT, USDC, and USD1, which are supported by highly liquid assets like U.S. dollars and Treasury bonds, have gradually become the mainstream. However, even these stablecoins continue to face scrutiny regarding their regulatory compliance and transparency.

To address these challenges, the United States has recently accelerated the advancement of the GENIUS Act, aiming to establish a comprehensive regulatory framework for the stablecoin market. The GENIUS Act plays a pivotal role in the regulation of the crypto market, particularly in the realm of stablecoins. Its core provisions include restrictions on issuance eligibility, reserve requirements, compliance obligations, user protection, and international applicability. The Act clearly stipulates that stablecoins must be fully backed by an equivalent amount of highly liquid assets, ensuring that users can redeem their holdings at any time. To protect token holders, the assets of an issuer must be prioritized for user repayment in the event of bankruptcy.

Moreover, issuers must strictly comply with anti-money laundering (AML) and counter-terrorism financing (CFT) requirements to prevent the misuse of stablecoins for illicit purposes. Overall, while the GENIUS Act enhances regulatory oversight and protects user rights, it also raises the entry bar for stablecoin issuers in the short term. Existing issuers will be required to restructure their asset reserves, disclosure practices, and internal systems, which may entail significant costs and operational complexity.

Key Provisions of the GENIUS Act

1. Licensing and Regulatory Framework

The Act permits only three types of entities to issue payment stablecoins:

* Federally insured depository institutions (e.g., major banks)

* State-licensed trust companies

* Money transmitters

2. Reserve Requirements and Backing Assets

All stablecoins must be backed by 100% reserves and can only use highly liquid assets, defined as:

* U.S. Treasury securities with a remaining maturity of 18 months or less

* Deposits in federally insured depository institutions

* Cash and cash equivalents

3. Transparency, Auditing, and Accountability Mechanisms

Issuers are required to disclose reserve asset compositions monthly and undergo audits by certified public accounting firms.Regulators will also establish standards for capital adequacy, liquidity, and risk management.

4. Anti-Money Laundering and Counter-Terrorism Financing Compliance

Stablecoin issuers are classified as financial institutions under the Bank Secrecy Act and must implement AML and sanctions compliance programs, including:

* Know Your Customer (KYC) procedures

* Suspicious activity reporting requirements

* Sanctions screening and compliance

5. International Issuer Restrictions and Cooperation

Foreign stablecoin issuers that fail to comply with U.S.-equivalent standards will be prohibited from operating in the U.S.Large technology companies (e.g., Meta, Amazon) must meet stringent financial compliance, user privacy, and fair competition requirements to prevent monopolistic behavior and systemic risks.

6. Consumer Protection and Bankruptcy Priority

Stablecoin holders will have priority claims on issuer assets in the event of bankruptcy.To avoid conflicts of interest, the Act prohibits members of Congress and senior executive officials from participating in stablecoin issuance during their term in office.

7. Legal Classification and Regulatory Clarity

The Act explicitly states that payment stablecoins are not classified as securities or commodities, thus excluding them from SEC and CFTC jurisdiction. This provides legal clarity and prevents overlapping regulation.

Legislative Progress

As of May 22, the GENIUS Act passed a motion to proceed to debate with 69 votes in favor and 31 against, entering the amendment phase. With the House and Senate rapidly advancing their respective versions of stablecoin legislation and a rare bipartisan consensus on crypto regulation, the Act is widely expected to complete the legislative process by Q4 2024.

World Liberty Financial Inc. (WLFI), a decentralized finance (DeFi) platform co-founded by members of former