MW Genius Act ushers in a new era for stablecoins. Here's what that means for Americans' wallets.

By Andrew Keshner

Stablecoins are meant to be less volatile cryptocurrency

Cryptocurrency has gained a hold in Americans' investment portfolios and their retirement accounts - and now it's a step closer to their wallets for everyday use.

Stablecoins, cryptocurrency's version of cash, are poised to go mainstream after a House of Representatives vote Thursday sent a landmark bill to President Donald Trump's desk.

A decade after stablecoins first emerged as an almost instantaneous payment method used mainly by crypto adopters, the Genius Act is giving these coins more solid footing with financial regulators and a path to wider consumer use.

"The general expectation is this is going to open up the floodgates of much greater adoption," said Columbia Business School professor Omid Malekan, who teaches classes on blockchain and cryptocurrency.

Banks, credit unions and fintechs can get licenses to issue stablecoins under the Genius Act, which stands for Guiding and Establishing National Innovation for U.S. Stablecoins. The new ground rules for operations, reserves and consumer disclosures will coax more financial institutions, investors and consumers to enter a market worth over $250 billion, he said.

On Wednesday, Bank of America $(BAC.SI)$ Chief Executive Brian Moynihan told analysts the bank was exploring how to launch its own coin. "We feel both the industry and ourselves will have responses," he said, according to a transcript. In February, Moynihan signaled the bank was planning to explore stablecoins once regulations materialized.

JPMorgan Chase & Co. (JPM) CEO Jamie Dimon said Tuesday the bank was going to get more involved with stablecoins. Last month, the bank launched a deposit token, JPMD, for institutional clients.

The bill passed the House in a 308-122 vote, mirroring a bipartisan Senate vote last month. Trump has indicated he'll sign the legislation.

For investors, the Genius Act signals Capitol Hill's growing embrace of cryptocurrency. For consumers, the bill signals a growing reason to understand digital assets and their uses - even when they already have many ways to buy and sell at their fingertips.

Just 8% of people said they used cryptocurrency in 2024, according to the Federal Reserve.

Crypto industry organizations praised the bill. Passing the Genius Act marked "a watershed moment for digital assets in the United States," said Blockchain Association CEO Summer Mersinger. "For the first time, Congress has moved comprehensive legislation that provides enforceable, tailored rules for stablecoins - a foundational technology for the future of finance."

But consumer advocates are less enthusiastic. "In the digital-asset space, [stablecoins] are kind of like the closest thing to cash," said Delicia Hand, Consumer Reports' senior director for digital marketplace. "It's meant to perform in a way like cash, but it's not protected like cash."

The money in checking accounts, savings accounts and CDs has FDIC deposit insurance up to $250,000. The cash someone puts inside a stablecoin has no such protection, she noted.

Issuers aren't allowed to say or insinuate that their coins are guaranteed by the FDIC or somehow backed by the U.S. government. Federal regulators' licenses may still lead some people to jump in without knowing more about stablecoins.

"It's a perception issue and sometimes perception matters more than reality," Hand said.

What's a stablecoin to begin with?

Stablecoins are a type of cryptocurrency, like bitcoin (BTCUSD) or ether (ETHUSD). But a stablecoin's value is pegged to another asset, typically the U.S. dollar. Digital currencies like bitcoin and ether aren't tied to currency that's issued and regulated by governments.

By latching the token's value to steadier fiat currency, stablecoins are supposed to avoid volatility - hence the "stable" moniker.

Tether (USDTUSD) is the largest stablecoin by market capitalization, valued at $160 billion. For years, one Tether token has hovered just at $1. Tether's reserves are predominantly cash and equivalents, mostly Treasury debt.

By contrast, the value of one bitcoin was $118,828 on Thursday afternoon. Its value in a 52-week range veered from roughly $49,300 to $123,000.

Those big jumps are a reason it's daunting to pay for everyday goods with bitcoin. In 2010, a software developer paid 10,000 bitcoin for two pizzas - an eye-watering overpayment for the food, had he known bitcoin's future value.

Read also: NFL star Odell Beckham Jr. cheers bitcoin's all-time high after taking his 2021 salary in the crypto. Here's what it's worth now.

A stablecoin's more reliable underlying value removes that fear with everyday transactions, said Salah Ghazzal, policy and legislative analysis manager at the Blockchain Association. "It's just a revolution in how we transact in today's world," Ghazzal told MarketWatch.

The bill says stablecoins from a licensed issuer need to have at least one dollar in reserves for every one dollar of an issued coin.

See also: What you need to know about stablecoins and stock tokens as Robinhood and Circle shares jump

It also specifies the investments allowed in the reserves: That includes highly liquid, short-term Treasury debt and other low-risk investments that commonly are the investments used in money-market mutual funds. These issuers have to undergo audits and they cannot trade or lend against their reserves, the law says.

What's the point of stablecoins right now - and how can everyday people use them?

A stablecoin is supposed to lack the volatility associated with other types of cryptocurrencies. So why hold these steady tokens if it isn't about the chance of profiting from wild swings?

Stablecoins allow fast payments and access to the U.S. dollar across the globe, all without a bank account, said Malekan.

Looking ahead, Hand said stablecoins could become the way people make in-app payments, or they could get linked up to debit cards. They could become the primary way people receive government benefits, she said. "If designed well, the sky is the limit."

That's a big "if," for Hand. Despite their billing, some stablecoins aren't always stable, she said.

The Genius Act does not go far enough to protect consumers from potential volatility and money losses. Hand said. One big concern is what happens if people want their money back after they purchase stablecoin.

"By definition, these assets have to be redeemable," Ghazzal said. Stablecoin holders are the first in line for redemption if an issuer goes bankrupt, the law says.

The law requires disclosures about redemption policies and timelines. Those disclosures might be buried in the fine print, and overlooked by someone who needs their money quickly, Hand said.

Fees may also apply to redemptions, she noted. "If you want your money back you might have to pay for it," Hand said.

Do yield-chasers have options with stablecoins?

Licensed stablecoin issuers are not allowed to pay "any form of interest or yield" to holders, according to the Genius Act.

But the bill keeps a workaround that's already been happening, said Malekan. There's nothing in the law preventing third parties, like a crypto exchange, from paying interest-like rewards to the holders of stablecoins, he said.

Read also: Stablecoins could hurt bank profits, but not for a while: analyst

For example, Coinbase (COIN), has a 4.10% "rewards rate" for people who keep Circle's $(CRCL.UK)$ USDC sitting in their account.

Mega banks can pay low deposit rates, though online bank rates are typically higher. The national savings account rate averaged 0.38% last month, though some high-yield accounts offered at least 4%, according to DepositAccounts.com.

The law could be clearing a new way to put idle money to work, Malekan said. "Banks historically never had to compete with anybody other than each other. ... Suddenly there's a new kind of competition that most people didn't see coming."

-Andrew Keshner

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 17, 2025 16:40 ET (20:40 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.