Skip to main content

US Crypto Regulatory Trifecta

· 9 min read
Dora Noda
Dora Noda
Software Engineer

In July 2025, President Trump signed the GENIUS Act into law—America's first federal legislation on digital assets. The House passed the CLARITY Act with a 294-134 bipartisan vote. And an executive order established a Strategic Bitcoin Reserve holding 198,000 BTC. After years of "regulation by enforcement," the United States is finally building a comprehensive crypto framework. But with the CLARITY Act stalled in the Senate and economists skeptical of Bitcoin reserves, will 2026 deliver the regulatory clarity the industry has demanded—or more gridlock?

The GENIUS Act: America's First Stablecoin Law​

The Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act) represents a watershed moment for crypto regulation. Signed into law on July 18, 2025, it passed the Senate 68-30 and the House 308-122—rare bipartisan majorities in a politically divided Congress.

What the GENIUS Act Actually Does​

The legislation creates the first federal regulatory framework specifically for payment stablecoins. Key provisions include:

100% Reserve Requirements: Stablecoin issuers must maintain full backing with liquid assets like US dollars or short-term Treasuries. No fractional reserves, no algorithmic mechanisms—just straightforward collateralization.

Monthly Public Disclosures: Issuers must publish the composition of their reserves every month. The days of opacity around Tether's backing are numbered, at least for US-regulated stablecoins.

Regulatory Clarity on Securities Status: Crucially, permitted payment stablecoins are explicitly excluded from securities law. This settles the question that plagued the industry: stablecoins that meet GENIUS Act requirements are not securities.

Limited Issuers: Only insured depository institutions (banks, credit unions), bank subsidiaries, or nonbank financial institutions with Federal Reserve approval can issue stablecoins. This effectively creates a licensing regime that favors established financial players.

AML Compliance: All issuers must comply with the Bank Secrecy Act, including anti-money laundering programs, sanctions verification, and customer identification requirements.

Implementation Timeline​

The GENIUS Act takes effect on the earlier of 18 months after enactment or 120 days after regulators issue final implementing rules. The FDIC has already approved a notice of proposed rulemaking for application procedures. Realistically, the law could kick in as early as late March 2026.

Market Impact​

The regulatory clarity has already shifted market dynamics. USDC's market cap grew 73% to $75 billion in 2025, outpacing USDT's 36% growth to $187 billion. Total stablecoin transactions soared 72% to $33 trillion, with USDC accounting for $18.3 trillion—surpassing USDT's $13.3 trillion despite a smaller market cap.

The reason is clear: USDC's compliance-first approach positions it favorably under GENIUS Act requirements, while Tether faces questions about whether its reserves and operations can meet the new standards.

The CLARITY Act: Still Waiting for the Senate​

While stablecoins got their framework, the broader crypto market structure question remains unresolved. The Digital Asset Market Clarity Act of 2025 (CLARITY Act) passed the House in July with strong bipartisan support, but the Senate hasn't followed through.

The SEC-CFTC Jurisdiction Problem​

The fundamental question the CLARITY Act addresses: Is a crypto token a security (SEC jurisdiction) or a commodity (CFTC jurisdiction)? For years, the SEC claimed nearly everything was a security while the CFTC argued for commodity treatment of major assets like Bitcoin and Ether.

The CLARITY Act proposes a test: if a token's value is "intrinsically linked" to the use of a blockchain system, it's a digital commodity subject to CFTC jurisdiction. Tokens that represent investment contracts remain SEC-regulated securities.

Under this framework:

  • CFTC would have exclusive jurisdiction over spot digital commodity markets
  • Digital commodity exchanges, brokers, and dealers would register with the CFTC
  • SEC would retain authority over primary market crypto transactions and tokens that function as securities

Senate Gridlock​

The Senate Banking Committee scheduled a markup for January 15, 2026, but postponed it. The Boozman-Booker bipartisan draft released in November 2025 builds on the House bill but introduces additional wrinkles.

Meanwhile, the Senate Banking Committee's September 2025 draft of the Responsible Financial Innovation Act proposes a different framework entirely, including a unique category of "ancillary assets" that are neither digital commodities nor securities.

Multiple competing frameworks, election-year politics, and stakeholder disagreements mean the CLARITY Act may slip to 2027. TD Cowen analysts have warned about "growing headwinds as lawmakers shift into campaign mode."

What's Actually Happening Without Legislation​

In the absence of comprehensive legislation, the SEC and CFTC are coordinating through administrative action:

Project Crypto-Crypto Sprint: In September 2025, SEC Chair Paul Atkins and CFTC Acting Chair Caroline Pham announced joint harmonization efforts. A September 29 roundtable explored information-sharing agreements, joint examinations, and harmonized reporting forms.

Digital Assets Pilot Program: Launched in December 2025, this CFTC initiative permits tokenized assets including Bitcoin, Ether, and USDC as collateral in derivatives markets.

SEC Project Crypto: The SEC plans "Regulation Crypto" rulemakings in 2026 for a comprehensive framework, including amendments for crypto trading on exchanges and guidance on tokenized securities.

The agencies are trying to create clarity administratively, but it's a patchwork approach that could be reversed by future administrations.

The Bitcoin Act: A Strategic Reserve for America​

The most controversial piece of the regulatory trifecta is the Strategic Bitcoin Reserve—established by executive order on March 6, 2025, with the BITCOIN Act of 2025 seeking to codify and expand it.

What the Executive Order Created​

The order established a Strategic Bitcoin Reserve as a "permanent reserve asset" funded initially by Bitcoin the federal government already holds—approximately 198,000 BTC seized through criminal forfeitures. This makes the US the largest known state holder of Bitcoin globally.

Key provisions:

  • Treasury and Commerce must develop "budget neutral" strategies for acquiring additional Bitcoin
  • The reserve is designed as a permanent holding, not a trading position
  • Agencies can transfer their Bitcoin holdings to the reserve

The BITCOIN Act Goes Further​

Senator Cynthia Lummis's BITCOIN Act of 2025 (Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide) would authorize Treasury to directly purchase 1 million Bitcoin over five years—approximately 5% of total Bitcoin supply.

Additional provisions include:

  • Sale restrictions: No more than 10% of reserve assets can be sold in any two-year period
  • State participation: States can store their Bitcoin holdings in the reserve through segregated accounts
  • Annual reporting for 20 years on the Bitcoin Purchase Program status

The Economic Critique​

The reserve has provoked sharp criticism from economists. In a February 2025 survey by the University of Chicago, not a single economist agreed that borrowing money for a crypto reserve would benefit the US economy.

The concerns are straightforward:

  • Volatility: Bitcoin's price fluctuations make it unsuitable as a traditional reserve asset
  • No yield: Unlike Treasury bonds, Bitcoin generates no income
  • Opportunity cost: Capital allocated to Bitcoin can't fund other government needs
  • Market manipulation risk: Government purchases at this scale could distort prices

State-Level Action​

While federal debate continues, states are moving independently:

New Hampshire: Governor Kelly Ayotte signed HB 302 in May 2025, allowing the state treasurer to invest in digital assets with at least $500 billion market cap—currently only Bitcoin qualifies.

Texas: SB 21 became law in June 2025, creating the Texas Strategic Bitcoin Reserve.

Whether driven by genuine conviction or political signaling, state-level adoption creates precedents that could influence federal policy.

The Bigger Picture: What's Actually Changing​

The regulatory trifecta—GENIUS Act, CLARITY Act (pending), and BITCOIN Act—reflects a fundamental shift in how Washington views crypto. After years of hostility from SEC enforcement actions and banking restrictions, the industry now has allies in power.

Winners and Losers​

Clear Winners:

  • Compliant stablecoin issuers: Circle and other GENIUS Act-compliant issuers gain regulatory moats
  • Traditional finance: Banks can now issue stablecoins; incumbents have clearer paths to crypto products
  • US-based exchanges: Clearer rules benefit domestic platforms over offshore competitors

Potential Losers:

  • Non-compliant issuers: Tether faces pressure to meet GENIUS Act standards or lose US market access
  • DeFi purists: Regulatory frameworks assume intermediaries; fully decentralized protocols face uncertainty
  • Algorithmic stablecoins: The GENIUS Act's reserve requirements effectively ban algorithmic approaches

The Global Competition​

America's regulatory framework arrives as Europe implements MiCA and Hong Kong passes its Stablecoin Bill. The race for crypto regulatory clarity is global, and the US regulatory trifecta positions America competitively—if the CLARITY Act can actually pass.

Countries including Canada and the UK have renewed stablecoin framework efforts following the GENIUS Act's passage. Western Union, MoneyGram, and Zelle are all launching stablecoin-based systems in 2026.

The US Treasury estimates the stablecoin market could grow from $312 billion today to $2 trillion by 2028. The GENIUS Act ensures American companies and regulators have a seat at that table.

2026 Outlook: Clarity or Continued Gridlock?​

The regulatory picture for 2026 remains mixed:

Likely to happen:

  • GENIUS Act implementation (late Q1 2026)
  • Continued SEC-CFTC coordination through administrative action
  • State-level Bitcoin reserve adoption
  • Major stablecoin issuers restructuring for compliance

Uncertain:

  • CLARITY Act passage—election-year politics may delay it to 2027
  • BITCOIN Act codification into law
  • The extent of new Bitcoin purchases by Treasury

Unlikely:

  • Full resolution of SEC-CFTC jurisdictional disputes without legislation
  • Retroactive enforcement against compliant actors under new frameworks

The crypto industry finally has regulatory momentum in Washington. The GENIUS Act proves comprehensive crypto legislation can pass with bipartisan support. But the CLARITY Act's Senate delays show the limits of that support when broader market structure questions come into play.

For builders and investors, the message is clear: compliance-first approaches will be rewarded. The era of regulatory arbitrage and offshore operations is ending. Whether that's good for innovation or just good for incumbents remains the open question.

This analysis is for informational purposes only and does not constitute investment advice. Always conduct your own research before making investment decisions.

Share on Twitter