GENIUS Act vs. Fed Policy: Clash Over Stablecoins and Ethereum’s Role in Institutional Finance

In July 2025, Congress passed the GENIUS Act, aimed at ensuring that stablecoin issuers cannot be denied a license solely because they choose to operate on an open, public blockchain — such as Ethereum. The challenge? The Federal Reserve’s Policy Statement No. 9(13) from January 2023 remains in force, advising banks to avoid issuing tokens on open blockchain networks. The Fed had warned that such activity is “highly likely to be inconsistent with safe and sound banking practices.” This divergence between Congress and the Fed comes as major financial institutions announce new blockchain projects — raising questions about Ethereum’s future role in institutional finance.

Ethereum Still Leads the Market As of August 2025, Ethereum controls 49–54% of the global stablecoin supply, worth $271.1 billion. On Ethereum alone, daily USDC transfers exceed $20 billion, far surpassing volumes on other networks. Together with TRON, which holds a 35% share, the two platforms account for nearly 84% of the stablecoin market. TRON dominates USDT transaction counts (over 1 million per week), while Ethereum remains the primary network for stablecoins integrated into DeFi and tokenized institutional assets, including BlackRock’s BUIDL fund worth $2.3 billion.

Political Tensions Fed’s Policy Statement 9(13) was introduced during the Biden administration, driven by concerns over money laundering, cybersecurity, and operational risks on public blockchains. By contrast, the GENIUS Act explicitly states that issuing a stablecoin on an open, public, or decentralized network cannot be a valid reason to reject a license application, unless it threatens safety and stability. In the July 2025 White House report on digital assets, President Donald Trump urged the Fed to repeal Statement 9(13), warning that bias against permissionless blockchains harms US competitiveness and “only protects the interests of legacy institutions.” Similarly, Senator Cynthia Lummis directly pressed Fed Chair Jerome Powell during a June banking committee hearing to align policy with the new law and enable US banks to innovate. Powell responded that the Fed “welcomes Congressional action” but its top priority remains “safety and stability,” and that it is reviewing the policy “with due caution” toward permissionless platforms.

New Blockchain Initiatives In recent days, at least two new projects targeting regulated stablecoin environments have emerged: Circle’s Arc – an EVM-compatible layer-one network for regulated stablecoins, set to launch a public testnet in fall 2025.Stripe’s Tempo – reportedly developed with Paradigm and focused on payment infrastructure, though not yet officially confirmed. These moves suggest major players prefer permissioned or semi-permissioned networks that can later bridge to public chains, rather than issuing stablecoins directly on Ethereum.

Market Implications Despite regulatory uncertainty, Ethereum remains the dominant platform for stablecoins and institutional asset tokenization. The key question is whether future bank-issued stablecoins will launch directly on Ethereum under revised Fed guidance — or if a two-step model (initial issuance on a permissioned network, followed by bridging to a public chain) will become the standard.

Path Forward A combination of the GENIUS Act’s open-network mandate and the Fed’s caution could lead to a hybrid model — a stable regulatory framework that encourages innovation while safeguarding the financial system. Hybrid approaches linking permissioned infrastructures with public blockchains could allow banks to leverage Ethereum’s liquidity and interoperability while remaining fully compliant. Advances in blockchain analytics and RegTech could make it easier for issuers to meet AML, cybersecurity, and prudential oversight requirements without sacrificing the transparency of public ledgers. If regulators and lawmakers can align on a shared strategy, the US could set a global benchmark for integrating permissionless blockchain technology into regulated finance — potentially reshaping digital asset markets for years to come.

#GENIUSAct , #FederalReserve , #Ethereum , #Stablecoins , #USDC

Stay one step ahead – follow our profile and stay informed about everything important in the world of cryptocurrencies! Notice: ,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“