- The GENIUS Act stablecoin legislation, signed July 18, 2025, established the first federal framework for dollar-backed stablecoins under U.S. Treasury stablecoin regulation.
- The law imposes strict stablecoin reserve requirements, mandating that issuers fully back tokens primarily with short-term U.S. debt, creating structural private-sector demand for Treasuries.
- The policy is part of a dollar dominance strategy, aiming to reduce government borrowing costs by turning stablecoins into structural buyers of U.S. debt.
The U.S. officially turns stablecoin into lenders. Signed into law on July 18, 2025, the GENIUS Act stablecoin legislation makes dollar-backed stablecoins an official tool of government finance, requiring issuers to back them with short-term Treasury bills. For the first time, the Treasury treats digital dollars not as a risk, but as a built-in buyer of U.S. debt, a mechanism to reinforce the dollar dominance strategy and cut borrowing costs.
GENIUS Act Stablecoin Reserve Requirements
Under Treasury Secretary Scott Bessent, the U.S. pivoted, turning stablecoins into a direct channel for institutional capital into government debt. “We are going to keep the U.S. the dominant reserve currency in the world, and we will use stablecoins to do that,” Bessent said earlier this month, framing the move as a cornerstone of the administration’s dollar dominance strategy.
The law, backed by both parties, sets strict rules. Stablecoins must now be fully backed by liquid U.S. assets, primarily dollars and Treasury bills with maturities under 93 days. This establishes the new stablecoin reserve requirements. Issuers must hold licenses, maintain transparency, undergo risk audits, and protect consumers, with the Treasury monitoring them for systemic risk. The legislation regulates stablecoins and establishes their role as a structural component of U.S. finance through their debt requirements.
Federal Stablecoin Legislation Drives Debt Demand
The push for federal stablecoin legislation gained urgency early this year. On February 4, White House crypto czar David Sacks stressed the administration’s commitment.
“They are very committed to moving legislation through the House and the Senate this year in order to provide that clear regulatory framework that the digital assets ecosystem needs to sustain innovation in the United States,” Sacks told CNBC’s Closing Bell Over Time.
The numbers show why the Treasury moved quickly. By July 29, 2025, the stablecoin market had grown to $266 billion, up 5% from the prior month.
Global transaction volume for stablecoins hit $27 trillion in 2024. Analysts say the new U.S. Treasury stablecoin regulation is attracting fresh capital, particularly from hedge funds and corporate treasuries seeking faster settlements and yield from short-term Treasury bills.
Assessing Fiscal Risks of Stablecoins U.S. Debt Backing
The GENIUS Act designates dollar-backed digital assets as a structural source of demand for U.S. Treasuries, aimed at lowering borrowing costs and offsetting federal deficits. This use of stablecoins U.S. debt is the key fiscal component of the law.
Secretary Bessent framed the goal plainly. “A thriving stablecoin ecosystem will drive demand from the private sector for U.S. Treasuries,” he said.
“This newfound demand could lower government borrowing costs and help rein in the national debt.”
Some market watchers are cautious.
“If I choose stablecoins for funding, I simultaneously create demand for the Treasuries I need to offload,” said Emma Muhleman, a macro hedge fund portfolio manager. “Not a bad deal, but it creates strange dependencies.”
Others worry that concentrating demand through a handful of issuers could stress market stability.
The GENIUS Act stablecoins policy is now law. The companion STABLE Act, which covers licensing, reserve transparency, and risk oversight, is expected to move through House markup by August 2025.
The legislation ensures stablecoins operate as an official lever of U.S. fiscal policy.
Chain Street’s Take
The U.S. is betting on stablecoins as a strategic tool, not a financial novelty. If Treasury oversight and market execution hold, digital dollars could become a reliable engine for borrowing efficiency, but the concentration risks and new dependencies are real.
