Coin flip, resolved

The Senate passed the GENIUS Act by 68 votes to 30 on 17 June 2025.^{2United States SenateRoll Call Vote 119th Congress, 1st Session: S. 1582 (On Passage of the Bill)17 Jun 2025} The House followed by 308 to 122 on 17 July, and President Donald Trump signed the bill the next day.^{5Georgetown International Law JournalReserve Standards vs. Issuer Restrictions: the GENIUS Act18 Jul 2025} Congress has rarely agreed on anything so lopsidedly in so little time, and the subject was a token whose main use, until now, has been settling bets on other tokens.

A stablecoin promises to be worth exactly one dollar. Its issuer takes your dollar, holds something safe against it, and lets you move the token around the internet at any hour. Until now issuers did this in a legal grey zone, answering to a patchwork of state regulators and, occasionally, the enforcement division of the Securities and Exchange Commission. The new law ends the grey. We think it is a good bargain, and a better one than the crypto industry’s critics allow.

Start with what issuers must now do. They must back every coin in circulation with liquid assets, such as dollars or short-term Treasuries, and publish the composition of their reserves every month.^{1The White HouseFact Sheet: President Donald J. Trump Signs GENIUS Act into Law18 Jul 2025} The assets are specified: cash, bank deposits, Treasury securities maturing in 93 days or less, certain Treasury-backed repurchase agreements, and money market funds that hold only such things.^{3Arnold & PorterWhat You Need To Know About Incoming Stablecoin Legislation: STABLE and GENIUS Acts2 Jun 2025,5Georgetown International Law JournalReserve Standards vs. Issuer Restrictions: the GENIUS Act18 Jul 2025} Backing must be at least one-to-one, and an independent accounting firm must examine the monthly reports, with the chief executive and chief financial officer attesting to their accuracy.^{3Arnold & PorterWhat You Need To Know About Incoming Stablecoin Legislation: STABLE and GENIUS Acts2 Jun 2025} If an issuer fails, holders’ claims rank ahead of other creditors.^{1The White HouseFact Sheet: President Donald J. Trump Signs GENIUS Act into Law18 Jul 2025} Issuers must also run anti-money-laundering and sanctions programmes, and be able to freeze or burn coins when lawfully ordered to.^{1The White HouseFact Sheet: President Donald J. Trump Signs GENIUS Act into Law18 Jul 2025}

This is, in effect, the narrow bank that economists have long recommended: a deposit-taker that cannot lend out your money, and so cannot lose it on a bad loan. A firm that holds a dollar of Treasury bills for every dollar of coin is not a bank, and the law rightly declines to treat it as one. Nor is the demand trivial. Stablecoins facilitate more than 80% of trading volume on major centralised crypto exchanges, according to Georgetown’s law journal.^{5Georgetown International Law JournalReserve Standards vs. Issuer Restrictions: the GENIUS Act18 Jul 2025} A product that people already use heavily is better regulated than banned, and it now has a rulebook in place of a rumour.

There is a patriotic argument, too, which Mr Trump made in his usual register. He said the bill would “make America the UNDISPUTED Leader in Digital Assets”, and urged Congress to “Get it to my desk, ASAP”.^{1The White HouseFact Sheet: President Donald J. Trump Signs GENIUS Act into Law18 Jul 2025} Put aside the capital letters. A token that must be backed by Treasury bills creates a steady buyer of short-term government debt, and gives holders abroad a reason to want dollars. A cynic might note that the Treasury has a fiscal interest in this. We note that an interest and a good idea are not mutually exclusive.

The strongest objection comes from consumer groups. Delicia Hand of Consumer Reports said the bill “fails to protect consumers and the economy from the risks posed by these digital assets”. Her group argues that it lacks bank-style dispute resolution and deposit insurance, and lets large technology and retail firms into something close to banking with less scrutiny.^{4Consumer ReportsSenate OKs GENIUS Act without safeguards needed to protect consumers and the financial system from stablecoin risks18 Jun 2025} She has a point about insurance: stablecoins are not deposits, and the law forbids issuers to call them federally insured.^{1The White HouseFact Sheet: President Donald J. Trump Signs GENIUS Act into Law18 Jul 2025} Nor do non-bank issuers get Federal Reserve accounts, and they must rely on intermediary banks.^{5Georgetown International Law JournalReserve Standards vs. Issuer Restrictions: the GENIUS Act18 Jul 2025}

But the absence of a guarantee is a feature, so long as it is honestly labelled. The law bars issuers from claiming that a coin is backed by the government, federally insured, or legal tender.^{1The White HouseFact Sheet: President Donald J. Trump Signs GENIUS Act into Law18 Jul 2025} Customers who want insured deposits can keep them in a bank; those who want a faster, programmable dollar accept the trade. Where Ms Hand is on firmer ground is the plumbing. Issuers below $10bn may opt into state regimes, provided the state’s rules are certified as “substantially similar” to the federal ones, and non-bank issuers answer to the Office of the Comptroller of the Currency.^{3Arnold & PorterWhat You Need To Know About Incoming Stablecoin Legislation: STABLE and GENIUS Acts2 Jun 2025,5Georgetown International Law JournalReserve Standards vs. Issuer Restrictions: the GENIUS Act18 Jul 2025} Critics fear state standards will drift, and the committee of Treasury, the Fed and the FDIC that must vet each state works, the journal warns, without clear criteria.^{5Georgetown International Law JournalReserve Standards vs. Issuer Restrictions: the GENIUS Act18 Jul 2025} On the Senate-passed text, the rules bite on the earlier of 18 months after enactment or 120 days after final regulations.^{3Arnold & PorterWhat You Need To Know About Incoming Stablecoin Legislation: STABLE and GENIUS Acts2 Jun 2025} That leaves regulators a long runway, and a long time to be lobbied.

So the verdict depends less on the statute than on the people who will enforce it. A law that demands full reserves is only as good as the examiner who checks that the reserves exist. Congress has written the easy part.