SEC Chair Paul Atkins has publicly backed the Growing Economy through New and Innovative Uses of Stablecoins (GENIUS) Act, proposed legislation designed to create a comprehensive regulatory structure for stablecoin markets. The bill focuses on enhancing transparency, strengthening security measures, and bolstering consumer protections while fostering continued innovation within the digital asset ecosystem.
Under the GENIUS Act, stablecoin issuers would be required to register with either federal or state regulators. These entities must maintain high-quality liquid reserves, such as U.S. Treasury bills, to underpin their digital assets. Crucially, the legislation mandates all permitted stablecoins to maintain full 1:1 reserve backing, aiming to reinforce market confidence and prevent destabilizing supply-demand imbalances.
The bill explicitly excludes algorithmic stablecoins from its regulatory scope, addressing demonstrated vulnerabilities in uncollateralized models. This exclusion references historical failures like TerraUSD’s collapse as justification for limiting systemic risks inherent in non-collateralized designs.
The SEC’s endorsement represents a significant milestone toward establishing clear regulatory parameters for stablecoins, providing market participants with standardized operational guidelines. By requiring registration and stringent reserve standards while excluding high-risk algorithmic variants, the GENIUS Act seeks to balance consumer safeguards with support for responsible technological advancement in digital finance.