Stablecoins are on the rise again. As stablecoins gain an increasingly solid foothold in the cryptocurrency market, mainstream regulators have introduced new rules in an attempt to find a balance between protecting financial stability and encouraging innovation.
BlockSec and Grandway Law Firm focus on the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) discussed by the U.S. Senate, deeply analyzing the compliance challenges faced by Web3 projects under the GENIUS Act and providing targeted and practical solutions.
§
text="">February 4, 2025: Draft introduced
Senators Bill Hagerty, Tim Scott, Kirsten Gillibrand and Cynthia Lummis jointly introduced the GENIUS Act draft in the Senate.
§ March 13, 2025: Senate Banking Committee passed
The Senate Banking Committee passed the GENIUS Act with a bipartisan support rate of 18 votes in favor and 6 votes against, and formally submitted the bill to the Senate. Since March 2025, the GENIUS Act has undergone several rounds of revisions.
§ May 8, 2025: The Senate's first vote on the motion to end the debate
In the Senate's first vote on the motion to end the debate, it failed with 48 votes in favor and 49 votes against, failing to reach the 60-vote threshold. The Democrats collectively opposed it. The controversial points included:
Regulatory loopholes for foreign issuers (such as the risk of Iran and North Korea evading sanctions);
There is no restriction on the Trump family making profits through the USD1 stablecoin;
The entry rules for technology giants are vague.
§ May 15-19, 2025: Act Amendments
The two parties urgently negotiated to revise the terms, including but not limited to:
Remove direct restrictions on Trump's cryptocurrency project and turn to strengthening consumer protection;
Require foreign issuers to have the ability to freeze transactions.
§ May 20, 2025: Senate vote on second motion to end debate
In the Senate's second vote on the motion to end debate, it passed with 66 votes in favor and 32 votes against. This key progress marks that the United States is only one step away from establishing the first federal-level stablecoin regulatory framework. Although the GENIUS Act has not yet completed the final legislative process, this vote has cleared important stage obstacles for it.
§ June 11, 2025: The Senate voted on the motion to terminate the debate three times
In the Senate's three votes to terminate the debate, the GENIUS Act and its latest amendments were passed with 68 votes in favor and 30 votes against. This key progress marks that the United States is only one step away from establishing the first federal-level stablecoin regulatory framework. Although the GENIUS Act has not yet completed the final legislative process, this vote has cleared important stage obstacles for it.
§ Subsequent procedures: Senate plenary debate and amendment procedures
After the bill enters the Senate's plenary debate and amendment procedures, a simple majority (51 votes) is required to pass the final version.
§ Subsequent procedures: House of Representatives deliberation
After that, the bill will be submitted to the House of Representatives for deliberation. In the House of Representatives, a bill only needs a simple majority (218 votes) to pass. Given that the Republicans currently hold a slim majority in the House of Representatives (220:215), it is expected that the GENIUS Act has a high chance of being passed by the House of Representatives.
§ Subsequent process: Presidential approval
After the House of Representatives passes the bill, it will be submitted to the President for signature and approval. Considering that Trump previously promised to establish a stablecoin regulatory framework by August 2025, it is more likely that he will directly sign the bill. However, if the final version of the bill includes a clause prohibiting the President or his immediate family members from holding shares in the stablecoin issuer, it cannot be ruled out that Trump may veto or shelve the bill due to political risks or public pressure.
Compared with the draft GENIUS Act of February 4, 2025, the latest passed version has major adjustments as follows:
In addition to the above details, we recommend focusing on: adding supervision on foreign payment stablecoin issuers and strengthening anti-money laundering (AML) supervision.
The GENIUS Act sets out a regulatory framework for foreign payment-type stablecoin issuers established overseas or in U.S. overseas territories (such as Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, etc.). The core of the supervision lies in"registration system"and"registration equivalence recognition". The "registration system" means that foreign payment stablecoin issuers must register with the Office of the Comptroller of the Currency and meet strict compliance requirements before they can provide or sell payment stablecoins in the United States through U.S. digital asset service providers. "Regulatory equivalence determination" means that after a foreign payment stablecoin issuer submits a registration application to the Office of the Comptroller of the Currency, the Office of the Comptroller of the Currency will review the registration application of the foreign payment stablecoin issuer. The review factors include: the Ministry of Finance's determination of whether the regulatory system of the country where the foreign payment stablecoin is located is equivalent to that of the United States, the financial and management capabilities of the foreign payment stablecoin issuer in the United States, the transparency of the review materials submitted by the foreign payment stablecoin issuer, the risks that the issuance behavior may cause to the financial stability of the United States, and the possibility that the issuance behavior involves illegal activities.
In addition, foreign payment stablecoin issuers need to ensure that they hold sufficient reserves to meet the redemption needs of U.S. users. If the regulatory system of their country is determined by the Treasury Department to be comparable to that of the United States and there are reciprocal provisions between their country and the United States, they may be exempted from the requirement to maintain reserves in the United States, but they must still have the technical capacity to regulate.
The GENIUS Act adds two new provisions, namely, anti-money laundering protection and anti-money laundering innovation, to strengthen anti-money laundering supervision.
Anti-money laundering protection
In terms of anti-money laundering protection, compared with the original version which only briefly mentioned the anti-money laundering compliance requirements for foreign payment-type stablecoin issuers in accordance with the principle of international reciprocity, the new bill specifies in detail the anti-money laundering compliance requirements for foreign payment-type stablecoin issuers, imposes penalties on non-compliant issuers, and also stipulates an exemption mechanism.
Compliance requirements for foreign payment stablecoin issuers
Foreign payment stablecoin issuers who want to publicly offer, sell or trade their stablecoins in the United States must demonstrate that they have the technical capabilities and are willing to comply with the "lawful orders" of the United States. These lawful orders may include freezing, seizing or preventing the transfer of specific stablecoins.
Non-compliance determination and penalties
The Ministry of Finance has the right to list foreign payment stablecoin issuers that do not meet compliance requirements in the illegal list and publish the list, and prohibit digital asset service providers from providing secondary market trading services for stablecoin transactions of non-compliant foreign payment stablecoin issuers. Digital asset service providers that violate this provision will face a fine of up to $100,000 per day, while foreign payment stablecoin issuers may face a fine of up to $1 million per day, or even be banned from engaging in financial transactions in the United States. In addition, the GENIUS Act also gives the Treasury Department the right to file civil lawsuits against non-compliant foreign payment stablecoin issuers to recover the aforementioned fines, apply for an injunction prohibiting foreign payment stablecoin issuers from participating in U.S. financial transactions, and require digital asset service providers to remove the issuer's payment stablecoins.
Foreign payment stablecoin issuers need to invest more resources to meet U.S. technical and compliance requirements, which may cause some small issuers to exit the U.S. market, otherwise they may face high fines, which may prompt industry consolidation, and only large compliant platforms can survive.
Waivers and Exceptions
The U.S. Treasury Department may exempt certain entities or transactions based on special circumstances. Such exemptions may involve factors such as national security, intelligence and law enforcement activities, and the fact that the foreign issuer is taking substantial steps to remedy non-compliance.
Anti-Money Laundering Innovation
Anti-Money Laundering Innovation The Anti-Money Laundering Innovation section focuses on using innovative technologies to enhance the ability to detect and avoid illegal activities involving digital assets, including anti-money laundering. Specific measures include:
Public Opinion Collection and Research left;">The Treasury Department will launch a 60-day public comment period within 30 days of the GENIUS Act taking effect to identify innovative methods, technologies, or strategies that regulated financial institutions are currently using or may adopt to detect and circumvent illegal activities involving digital assets, including money laundering. These methods may involve application program interfaces (APIs), artificial intelligence (AI), digital identity verification, and blockchain monitoring technologies.
The adoption of APIs, AI, and blockchain monitoring technologies will drive regulators to transition from traditional manual review to automated supervision, and improve the efficiency of anti-money laundering review and supervision.
Research and Evaluation
After the above public comment period ends, the Treasury Department will conduct a study based on the public comments. The Financial Crimes Enforcement Network (FinCEN) will evaluate the innovative approaches mentioned in the public comments and compare them with existing approaches to determine their progress in terms of regulatory effectiveness, costs, privacy risks, operational efficiency, and cybersecurity impact. After the evaluation, FinCEN will develop specific requirements for regulated financial institutions to adopt innovative approaches to detect illegal activities involving digital assets, operating specifications for payment stablecoin issuers to identify and report illegal activities involving their payment stablecoins, and operating specifications for payment stablecoin issuers to monitor blockchain transaction systems and practices.
Risk Assessment and National Strategy
The Treasury Department needs to incorporate the national counterterrorism and illicit financing strategy required by the Countering America’s Adversaries Through Sanctions Act into the regulation of illegal activities involving digital assets, paying attention to the use of digital assets in money laundering and sanctions evasion and the high-risk behavior in foreign jurisdictions that uses digital assets to obtain legal currency to facilitate illegal activities.
Congressional Report
The Ministry of Finance will submit reports to Congress on a regular basis to report on the research results and progress of technical implementation of innovative detection technologies, and put forward legislative recommendations.
The GENIUS Act has a wide range of impacts, but the severity of compliance challenges faced by different types of Web3 projects varies significantly. The following analyzes the specific challenges faced by various types of projects in order of severity.
Mainstream stablecoin issuersAs the core regulatory objects of the GENIUS Act, they face the most stringent compliance requirements and the highest implementation costs. These projects must obtain federal or state licenses within 120 days, establish a 100% reserve support system, implement monthly public disclosures, and have the technical capabilities to freeze assets in real time. For large issuers with a market value of more than $50 billion, they are also required to accept annual audits and enhanced reporting requirements. Compliance costs are expected to be an initial investment of $8 million to $20 million, and ongoing operating costs of $3 million to $10 million per year.
Algorithmic and decentralized stablecoin projectsAlthough they may not be directly subject to traditional reserve requirements, they face uncertainty in regulatory classification. These projects need to reassess their governance structure, technical architecture, and compliance strategy to determine whether existing models need to be adjusted to adapt to regulatory requirements. In particular, stablecoin mechanisms involving yield generation may be classified as securities and face SEC supervision.
DeFi lending protocolFacing fundamental adjustments to the business model, in particular, the ban on yield-based stablecoins will force these protocols to redesign their product architecture. The protocol needs to remove or reconstruct strategies based on yield-based stablecoins, adjust the interest rate model, and ensure that all integrated stablecoins come from compliant issuers. Such projects will also need to implement enhanced transaction monitoring and reporting mechanisms to comply with AML requirements.
DeFi yield protocolsare most directly impacted, as their core business model - providing yield on stablecoins - may be classified as securities issuance. These protocols will need to completely redesign their product portfolios, remove strategies based on non-compliant stablecoins, or seek new models that operate within the regulatory framework. 2.3 Moderate Impact: Decentralized Exchanges and International Exchanges Decentralized Exchanges (DEX) benefit relatively from the asymmetry of regulation, as GENIUS is mainly aimed at issuers rather than trading platforms. However, these platforms still need to adjust their front-end interfaces to identify compliant stablecoins, and may need to implement a compliant stablecoin priority strategy and consider compliance factors in the routing algorithm. DEXs that focus on stablecoin trading, such as Curve, face more direct impacts and need to reconfigure their liquidity pool structure.
International exchangesface a binary choice: either establish a comprehensive U.S. compliance framework or exit the U.S. market. These platforms need to reconfigure stablecoin trading pairs, prioritize the promotion of compliant stablecoins, and may need to limit services to U.S. users. The cost and complexity of compliance will drive these platforms to reassess their global market strategies. 2.4 Moderate Impact: Wallet Service Providers
Custody Wallet Providers
Custody Wallet Providers
Facing similar regulatory requirements as money transmitters, these companies are required to implement fund segregation measures and enhanced consumer protection. These companies must separate customer funds from operational assets, establish user protection mechanisms in the event of the issuer's bankruptcy, and may need to obtain corresponding financial services licenses.Self-custodial wallet providersremain relatively independent, but need to implement stablecoin compliance status display functions in the user interface, provide user education, and may need to make strategic decisions on the treatment of compliant and non-compliant stablecoins. This type of impact is mainly reflected in product function adjustments rather than regulatory compliance requirements.
Payment infrastructure providersare actually beneficiaries of the GENIUS Act, as regulatory clarity will promote cooperation from traditional financial institutions and adoption by the corporate market. These companies need to adjust their products to prioritize support for compliant stablecoins, but overall will benefit from increased market confidence and an expanded customer base.
Compliance infrastructure service providersface huge market opportunities, as the entire Web3 industry's demand for blockchain analysis, transaction monitoring, hosting services, and compliance consulting will increase dramatically. These companies need to quickly expand their service capabilities to meet market demand.
Through the analysis of the above types of Web3 projects, we summarize several common compliance challenges brought about by the GENIUS Act:
Almost all Web3 projects involving stablecoins in the U.S. market need to adjust their technical architecture. Stablecoin issuers need to establish real-time transaction monitoring systems and asset freezing capabilities; DeFi protocols need to redesign smart contracts to distinguish between compliant and non-compliant stablecoins; DEX platforms need to integrate compliance status displays in the front-end interface; wallet providers need to implement user education and risk warning functions. The complexity and cost of these technical adjustments vary depending on the type of project, but all require a lot of development resources.
For most Web3 projects, establishing and maintaining regulatory relationships is a new challenge. Directly regulated entities(such as stablecoin issuers and custodial wallet providers) need to establish direct contact with the OCC, state regulators, and FinCEN;indirectly affected entities(such as DeFi protocols and DEX) need to establish a regulatory compliance framework through legal counsel;international projectsneed to evaluate whether to establish a U.S. subsidiary or seek regulatory exemptions. The establishment of a regulatory relationship requires not only a lot of legal and compliance involvement, but also long-term maintenance investment.
The GENIUS Act will be a good opportunity to encourage more Web3 projects to rethink their basic operating models. Yield-based stablecoin projectsneed to completely reconstruct their value propositions;decentralized projectsneed to find a balance between maintaining decentralized characteristics and meeting compliance requirements;cross-chain projectsneed to deal with the complexity of compliance in multiple jurisdictions;algorithm-driven projectsneed to introduce more manual supervision and intervention mechanisms. This reconstruction of the operating model may require the project party to rethink the core competitiveness and market positioning of the project.
The GUNIUS Act provides a clear regulatory framework for the issuance of stablecoins in the United States. Clearer compliance requirements will help reduce industry risks, attract more users to participate, and bring new development opportunities to the industry. More and more institutions no longer regard regulation as an obstacle, but actively embrace compliance, and continuously improve their compliance capabilities by implementing KYC, identifying and recording suspicious behaviors related to money laundering and terrorist financing, tracking sanctioned entities, conducting due diligence on large transactions, promptly reporting suspected illegal and irregular transactions, and taking measures to prevent, freeze or reject related transactions.
However, the anonymity of blockchain and the complexity of on-chain interactions (especially cross-chain transactions) have brought huge challenges to institutions in terms of risk assessment, teamwork and compliance review. To this end, BlockSec has established in-depth cooperation with Grandway Law Firm to provide comprehensive compliance support to institutions through the combination of technology and law.
In response to the growing global compliance needs, BlockSec launched the Phalcon Compliance APP to provide VASPs with efficient tools that comply with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) regulatory standards, helping institutions to accurately identify and manage risks associated with addresses/funds.
3.1.1 Accurately identify illegal activities ?
Risk exposure tracking: Through a massive database covering 400 million+address tags and updated in real time, it can accurately locate high-risk entities (such as sanctions lists), support unlimitedjump transaction tracking, and quickly identify suspicious addresses that intersect with high-risk entities.
Transaction behavior analysis: Real-time monitoring of on-chain transactions, combined with an AI-based intelligent behavior analysis engine, parallel processing of 500+ transactions per second, comprehensive analysis of behavioral characteristics, and accurate identification of suspicious activities such as money laundering and fund splitting.
3.1.2 Preset + custom risk engine ?
Preset risk engine: built-in risk engine that complies with FATF standards, covering major risk types such as entity risk, interaction risk, high-frequency transfer, large-value transfer, transit address, etc., to help institutions easily meet international compliance requirements.
Customized risk engine: At the same time, institutions can customize risk rules according to their jurisdiction and business type to meet personalized compliance needs.
Users can choose to screen address risks regularly, or trigger global screening with one click to grasp the address risk status in real time. Once a risk hazard is found or the address risk level changes, the system will promptly push alerts through 7 notification channels such as Telegram, email, Lark, etc. to help institutions quickly learn about relevant risks. 3.1.4 Address and Customer Management ? Users can view the risk level and historical alarm records of the address to understand the overall risk situation of the address. The system also supports associating multiple addresses to one entity to achieve comprehensive risk analysis of customers, so as to have a more comprehensive understanding of the risk characteristics of customers and take more effective risk management measures.
The system has a built-in fund tracing investigation tool MetaSleuth
The system supports functions such as task delegation, adding comments, and setting blacklists. Different roles can collaborate efficiently through the system and handle risk alerts in a timely manner. In addition, BlockSec also introduced Grandway as an external consultant to provide legal support and consulting advice on specific compliance issues.
Users can select the United States, Hong Kong, Singapore and other countries or regions according to their own needs, and export the corresponding STR/SARreports with one click. Through in-depth cooperation with Grandway, BlockSec ensures that the compliance and standardization of the reports meet the regulatory requirements of the corresponding countries or regions, allowing institutions to respond more calmly in a complex regulatory environment.
Faced with complex supervision and upgrading of black industries, Phalcon Compliance APP provides VASP with a full-process compliance solution from real-time monitoring to report generation, builds a dynamic risk control barrier, accurately prevents money laundering, terrorist financing and other risks, and enables efficient implementation of regulatory compliance.
The launch of Compliance APP marks the upgrade of BlockSec Phalcon from an attack monitoring and automatic blocking platform to a platform covering two core modules: security threat defense (Security APP) and compliance risk management (Compliance APP), providing users with a one-stop solution of "integrated offense and defense, worry-free supervision".
The platform now supports 30+ mainstream blockchain networks including Ethereum, BSC, Solana, Base, Tron, Arbitrum, Avalanche, Optimism, Manta, Merlin, Mantle, Sei, Bitlayer, Core, BoB, Story, Sonic, Gnosis, Berachain, etc.
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