David Sacks, who serves as the senior crypto adviser to President Donald Trump, announced on May 21 that bipartisan support is driving the landmark stablecoin legislation known as the GENIUS Act through the U.S. Senate. This bill, aimed at providing regulatory clarity to the $200 billion stablecoin market, has made significant progress with the backing of 15 Democrats, increasing the likelihood of its passage.
Sacks emphasized the importance of this legislation, describing it as a crucial regulatory fix and a pivotal moment in geopolitics and finance. He believes that by establishing federal regulations for dollar-pegged digital assets, the bill could lead to a substantial increase in global demand for U.S. Treasuries, potentially injecting trillions of dollars into the American financial system.
The GENIUS Act, short for Guiding and Establishing National Innovation for U.S. Stablecoins, represents the most advanced federal effort thus far to set legal boundaries for stablecoins. If approved, the bill would authorize the issuance of stablecoins fully backed by U.S. dollars or Treasuries, subject to licensing and reserve requirements under federal oversight.
Despite the bipartisan support for the bill’s technical aspects, controversy surrounds potential conflicts of interest. Critics have raised concerns about the Trump family’s connections to World Liberty Financial, a crypto company that recently launched its stablecoin, USD1, reportedly backed by U.S. Treasuries and fiat reserves. Questions have been raised about whether the administration’s policy decisions align with private family investments.
Sacks, who disclosed divesting $200 million in crypto assets before joining the administration, declined to comment on any potential benefits the Trump family might receive from the bill’s passage. When questioned about the ethical implications of presidential involvement in cryptocurrency ventures, he redirected the focus to the economic impact of the bill.
However, the path to finalizing the GENIUS Act faces obstacles. Senator Josh Hawley’s recent addition of a provision capping credit card late fees could alienate key financial industry supporters and complicate the coalition needed for the bill’s approval.
In the broader stablecoin landscape, significant developments are underway. Yield-bearing stablecoins, once considered regulatory gray areas, are gaining recognition under the regulatory shift led by the Trump administration. The SEC’s approval of these tokens as “certificates” governed by securities laws has allowed compliant products to offer interest to stablecoin holders, provided they meet specific regulatory standards.
The surge in yield-bearing stablecoins has seen a considerable increase in circulation, reaching $11 billion from $1.5 billion at the beginning of 2024, now accounting for 4.5% of the total stablecoin supply. Decentralized protocols like Pendle have emerged as primary beneficiaries, enabling users to lock in fixed yields or speculate on variable interest rates, with nearly $3 billion in total value locked from yield-bearing stablecoins.
This shift towards stablecoin-based yield opportunities reflects a growing preference among users, especially as traditional tokens remain volatile and the Federal Reserve maintains high interest rates. Despite the dominance of legacy stablecoins like USDT and USDC, which do not offer yield to holders, the potential for stablecoin holders to earn interest is significant, with estimates suggesting they could be forgoing over $9 billion in annual interest.
In conclusion, the passage of the GENIUS Act could have far-reaching implications for the stablecoin market and the broader financial system. It remains to be seen how political tensions and conflicting interests will impact the bill’s progress, but the potential economic benefits of legitimizing stablecoins under federal law are substantial.