Ushering in a New Era of Digital Finance: The GENIUS Act and the Rise of USD1

BitMart Research, the research arm of BitMart Exchange, has released a comprehensive report examining a pivotal moment in the evolution of digital finance.

Mahe, Seychelles, May 27, 2025 (GLOBE NEWSWIRE) -- BitMart Research, the research arm of BitMart Exchange, delves deep into a pivotal moment in the evolution of digital finance with its latest report. As the U.S. rapidly advances efforts to regulate the stablecoin ecosystem through the groundbreaking GENIUS Act, the launch of USD1—a fully fiat-backed stablecoin associated with former President Donald Trump's family—marks a major convergence of 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 redefine the stablecoin landscape and 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. 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 be subject to 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

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

• Federally insured banks or savings associations

• De novo (new) banks applying for a federal charter through the Office of the Comptroller of the Currency (OCC)

• Existing or de novo trust companies applying for and receiving a license from the Treasury Secretary

The Act adopts a dual regulatory system:

• For institutions already regulated by federal agencies like the Federal Reserve or the FDIC, their existing charters and licenses will suffice for stablecoin issuance.

• Institutions not covered by federal charters, such as state-licensed trust companies, will be subject to Treasury licenses and regulations.

The Act mandates that all stablecoins be backed by 100% reserves and can only use highly liquid assets, including:

• U.S. Treasury securities with a maturity of less than 12 months

•R epository (e.g., Fed) balances

• U.S. dollar deposits in federally insured banks

•Cash equivalents

Customer assets must be strictly segregated from operating funds, cannot be re-pledged, and may only be temporarily pledged for short-term liquidity purposes.

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.

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) and AML obligations

•Sanctions screening and compliance

The bill prohibits foreign stablecoin issuers that do not comply with U.S.-equivalent standards from operating in the U.S. and grants the Treasury Secretary the authority to impose sanctions on foreign issuers, effectively blocking their access to the U.S. financial system.

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.

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.

The Act explicitly states that payment stablecoins are not classified as securities or commodities, thus excluding them from SEC and