The GENIUS Act: Stablecoins Win Big But Privacy Takes a Hit

After years of fumbling around crypto, Congress has finally passed the Genius Act, the first serious federal legislation aimed at the digital currency world. They’ve decided to start with the least controversial piece of the puzzle: stablecoins. These are digital tokens pegged to the US dollar.

The bill, which glided through the House after clearing the Senate, has now been signed by President Donald Trump.

We obtained a copy of the bill for you here.

Attitudes towards crypto have changed considerably over the last few years, and Trump, who once called cryptocurrencies a “scam,” is now one of its loudest champions.

The Genius Act requires that stablecoins be backed one-to-one with safe assets, like dollars or low-risk equivalents.

The legislation is being framed as a win for the crypto industry, which spent years and many millions lobbying for this outcome. By locking in a federal framework, stablecoin issuers now get the blessing to operate with fewer question marks hanging over their business models.

What they also get is a fast track for tech platforms to enter the space without facing the regulatory expectations normally applied to banks. If your favorite e-commerce platform decides to launch its own token tomorrow, there’s now a path for that, with fewer obstacles than if a credit union tried the same thing.

Another key advantage is the potential to modernize and enhance the US payments infrastructure. Supporters of the bill argue that by providing a clear legal pathway for stablecoins to operate, the US could stay competitive globally in the race to develop faster, cheaper, and more efficient payment systems. In contrast to the slower pace of traditional bank transfers, stablecoins offer near-instant settlement times. With proper oversight, this speed and efficiency could benefit not just crypto traders but eventually consumers and businesses more broadly.

The bill earned bipartisan support. About half of House Democrats joined Republicans in backing it, an outcome that suggests most members saw this as a tolerable compromise. Or at least, something they could explain later.

However, there are some aspects of the bill that privacy-conscious readers should be familiar with.

The Act introduces significant surveillance implications for cryptocurrency users, particularly in the realm of financial privacy.

One of the core changes is the bill’s treatment of stablecoin issuers as financial institutions under the Bank Secrecy Act (BSA). This designation brings with it mandatory compliance with Know Your Customer (KYC) and anti-money-laundering (AML) regulations.

As a result, stablecoin issuers will be required to verify customer identities, monitor transactions, and report relevant activity to federal authorities.

These provisions aim to combat illicit finance but they also lay the foundation for increased governmental access to individuals’ financial data.

Another dimension of concern is the nature of blockchain technology itself.

Public blockchains record every transaction permanently, and while this data is technically pseudonymous, combining blockchain analytics with BSA-mandated identity requirements effectively erodes any practical privacy.

Once a user’s real identity is linked to their blockchain wallet, every past and future transaction can be traced.

This surveillance risk extends even further when considering that stablecoins are widely used for peer-to-peer transfers. As more transactions touch regulated stablecoin platforms, the visibility of personal financial behavior increases.

Privacy advocates warn that the surveillance built into the legislation could be expansive and difficult to constrain.

Even transactions that occur outside of direct oversight, such as between private individuals, could be swept into scrutiny if connected through regulated issuers. The bill does not explicitly limit surveillance to issuer-facing transactions, creating concern about how broadly regulators could interpret their authority.

There is also the potential for regulators or law enforcement to pursue retroactive monitoring of wallet activity, raising alarm about how far back authorities might reach.

In addition to federal oversight, the bill effectively delegates significant surveillance duties to the private sector. Stablecoin issuers will be required to conduct ongoing monitoring of their users, keep transaction records, and share data as needed with government entities.

This creates a two-layered system of financial surveillance: one operated by the state, and the other enforced by private companies that may have incentives to over-collect data to avoid regulatory penalties.

Interestingly, the broader legislative package includes a contrasting stance on surveillance when it comes to government-issued digital currencies. A companion bill, the Anti-CBDC Surveillance State Act, prohibits the Federal Reserve from issuing a central bank digital currency.

Lawmakers supporting that measure cited concerns about centralized financial control and mass government surveillance. However, the same concern appears less rigorously addressed in the Genius Act, despite the fact that privately issued stablecoins could produce similarly invasive outcomes if subject to unchecked monitoring.

For users, this bill shows the importance of understanding how digital transactions may now be surveilled. Financial pseudonymity, long considered a benefit of cryptocurrency, will be increasingly compromised when using stablecoins tied to US regulatory structures. Interactions with regulated platforms, even if infrequent, could reveal a user’s broader transaction history.

And as regulatory expectations evolve, further requirements such as real-time tracking or wallet blacklisting may follow.

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