President Donald Trump signed the GENIUS Act into law on July 18, 2025, establishing a legal framework for stablecoin issuers. One month later, its effects are becoming clear, as stablecoin-focused blockchains and corporate-issued stablecoins take center stage. How has the GENIUS Act fueled these developments, and why are comparisons to the Free Banking era resurfacing in discussions about the law?
The GENIUS Act and Its Impact on the Stablecoin Sector
The GENIUS Act, short for the Guiding and Establishing National Innovation for U.S. Stablecoins Act, establishes regulatory guidelines for stablecoin issuers. Stablecoins are cryptocurrencies designed to maintain a fixed value, typically pegged to a fiat currency or another type of asset, with the U.S. dollar dominating the market.
For many users, stablecoins have become a convenient tool for remittances. Unlike other cryptocurrencies, they retain their value while enabling fast, cross-border transfers using just a crypto wallet. While Bitcoin is often seen as a store of value, or “digital gold,” stablecoins are primarily used for practical payments. In countries experiencing high inflation, where local currencies quickly lose value against the U.S. dollar, stablecoins also function as a reliable form of savings.
According to the White House ‘Crypto Czar’ David Sacks:
“Stablecoins really have the potential to ensure American dollar dominance internationally, to increase the usage of the U.S. dollar digitally as the world’s reserve currency, and in the process create potentially trillions of dollars of demand for U.S. treasuries.”
The rising global use of USD-pegged stablecoins is creating an indirect demand for the U.S. dollar and Treasury bills. This trend is reinforced by the GENIUS Act, which requires stablecoin issuers to fully back their tokens and ensure each one is redeemable. As a result, issuers hold onto dollars to back their stablecoin supply, rather than selling them, while users continue adopting stablecoins—not just to bypass sanctions or make illicit purchases, but because they offer a convenient payment method. With anticipated integrations with Mastercard and other traditional payment networks, stablecoins are poised to become even more widely used.
How is the GENIUS Act affecting the stablecoin market?
The GENIUS Act had an impact even before it became law. As a bipartisan initiative under a crypto-friendly administration, it prompted major corporations to announce plans for projects involving stablecoins. Companies like Apple, X, Uber, and Airbnb began exploring potential stablecoin integrations even before the Act’s passage.
A new trend emerging from this legal clarity is the rise of stablecoin-focused layer-1 blockchains, which were nearly impossible during the earlier gray-area period for stablecoins. For example, Circle, the issuer of USDC, is developing the Arc blockchain specifically for stablecoins, while payment processor Stripe is working on its own stablecoin-focused Tempo blockchain. Startups like Stable and Plasma are also building their own stablecoin blockchains. This growing competition reflects companies’ desire to gain greater control over stablecoin flows and reduce transaction costs.
By July, several corporations outside the crypto space—including Walmart, Meta, and Amazon—had announced plans to launch their own corporate stablecoins. In May, four major banks—Wells Fargo, Citigroup, JPMorgan, and Bank of America—began exploring a joint stablecoin initiative.
Since the GENIUS Act became law, the number of companies planning to issue USD-pegged stablecoins has surged, while existing issuers continue to scale their products for institutional use. Currently, corporations actively developing their own USD-pegged stablecoins include Société Générale, Revolut, and Fiserv.
It is hardly a coincidence that the emergence of such a massive and diverse surge in stablecoin-focused projects by big tech corporations and startups takes place when the GENIUS Act streamlines the stablecoin business.
The GENIUS Act and free banking
For years, critics of USD-pegged stablecoins have compared them to the Free Banking era in the U.S., a 19th-century period when banks issued their own dollar-denominated currencies backed by gold, often with minimal government oversight.
With the recent surge in stablecoin popularity—and particularly following the introduction of the GENIUS Act—this comparison has gained renewed attention. Some view it as a positive model, while others are more cautious, pointing to the chaotic “wildcat” banknotes that once disrupted several regions of the country.
Crypto investor and writer Nic Carter offered a definitive perspective on the debate. In his essay, “The Last Word on Stablecoins and Free Banking,” Carter argues that before the GENIUS Act, stablecoins resembled the unreliable “wildcat” currencies of the past. He credits the new law with eliminating these risks through requirements such as 100% backing of stablecoin supply and additional protections for holders.
“…when you consider today’s stablecoins against the failures of the banks in antebellum America, the specific reasons that free banks failed in the US are today addressed with stablecoins, especially in the post-GENIUS regime. In my view, the lessons of this particular historical episode actually vindicate the contemporary stablecoin project, rather than diminishing it.”
Carter points out that free banking in Canada and Scotland was far more successful than in the U.S., attributing the failures of the American system to restrictive government policies.
Carter argues that many stablecoin critics invoke the Free Banking era to push for central bank digital currencies—a type of central-bank-backed stablecoin opposed by the Trump Administration.
Matt Hougan, CIO at Bitwise, is another prominent critic of comparing stablecoins to wildcat banks. On the day the GENIUS Act was signed into law, he took to X to reject what he called a “careless comparison.” Hougan noted that a major flaw of free banking was that redeeming banknotes required a physical visit to the issuing bank, meaning notes often traded at a discount depending on the distance from the issuer.
In defense of stablecoins, Hougan wrote:
“In the Genius Act, there are strict limits on the assets [issuers] hold, redemptions can be made daily from anywhere, and stablecoin prices will trade on exchanges, allowing instant convertibility and price discovery. State-regulated stablecoins are size-limited ($10b cap), which means they’ll be a vanishing fraction of the market, and are generally subject to the same asset holding and redemption provisions as the federally regulated stablecoins that will make up 95%+ of the market.”
Recently, positive comparisons between the Free Banking era and stablecoins have become more common than alarmist ones, suggesting a shift toward a more favorable narrative. However, one month is a very short time in the world of large-scale business, and much can still change in the months ahead.
