How the GENIUS Act Turned USDC Into Wall Street’s NEW Cash Superhero!

The GENIUS Act, which became law on July 18, 2025, created the first national set of rules for stablecoins in the U.S.

Summary

USDC, a digital currency issued by Circle, was already set up to meet legal requirements, holding nearly all of its reserves (98.9%) in safe, short-term US Treasury bonds and cash. These reserves were held at BNY Mellon, with BlackRock overseeing the fund, and were subject to full monthly audits. The company also operates under US regulations. Three things then happened that helped USDC become even more popular with institutions.

The Securities and Exchange Commission (SEC) recently updated its rules for broker-dealers, now allowing them to count USDC stablecoin holdings as regulatory capital with only a 2% reduction in value – the same treatment given to money market funds. Additionally, Circle, the company behind USDC, partnered with FIS in July 2025 to integrate USDC into a banking network spanning 46 US states and Europe, giving it direct access to common payment systems like ACH and FedNow.

Circle’s initial public offering (IPO) on the New York Stock Exchange in June 2025, trading under the symbol CRCL, saw its market value briefly climb above $77 billion. This briefly made the company worth more than all the USDC stablecoins in circulation, indicating strong investor confidence in the long-term viability of the stablecoin business. These events, while seemingly small, represent a significant shift in how the market views this type of financial technology.

USDC has evolved from a cryptocurrency-based stablecoin favored by crypto companies to a mainstream financial tool that *also* happens to be a stablecoin. This shift is significant, often overlooked in current discussions, and will reshape how different stablecoins compete in the future.

What the GENIUS Act actually requires

Understanding the details of the GENIUS Act is crucial because it will decide which stablecoins are best suited for use by larger institutions. While many reports see it simply as providing general rules, the specific parts of the law are actually what will make the biggest difference.

As a crypto investor, I was really interested to see the GENIUS Act signed into law on July 18, 2025. After a lot of back-and-forth in Congress, it finally creates a clear national standard for stablecoins. Basically, it sets up a special designation – a “Permitted Payment Stablecoin Issuer” – and lays out what companies need to do to qualify. The best part is it overrides the different rules each state had been trying to implement, which was becoming a real headache. This should bring some much-needed clarity and consistency to the stablecoin space.

The main rules focus on how the stablecoin is built. To ensure stability, each stablecoin must be fully backed – meaning for every coin issued, there’s one dollar’s worth of assets held in reserve. These reserves must be highly liquid, mainly consisting of short-term US Treasury bills, cash, and repurchase agreements. The specific types of assets held are defined, and independent accounting firms are legally required to verify these reserves and confirm their composition each month.

Companies issuing stablecoins must follow strong anti-money laundering and sanctions checks, similar to those required for traditional banks. Larger issuers, exceeding a certain amount of issuance, will be directly overseen by the federal government through the Office of the Comptroller of the Currency (OCC). Smaller issuers have the option of being supervised by approved state programs instead.

A key part of the proposed law is how stablecoin holders would be paid if a stablecoin issuer were to fail. The law would give stablecoin holders priority access to the funds backing their tokens, meaning they would be paid back before other creditors in a bankruptcy situation. This change is important because it transforms stablecoins from simply being tokens with reserves into more heavily regulated financial instruments with a secure backing, making them a viable option for widespread use by institutions.

The law will take effect on January 18, 2027, or 120 days after official rules are finalized, whichever is later. While businesses have until 2027 to fully comply, they started preparing for the changes right away. In fact, banks, brokerages, and other financial firms began planning to use USDC as soon as the law was passed in July 2025, even before the official compliance deadlines were established.

Federal preemption is important because it removes the confusion that previously made it difficult for institutions to use stablecoins. Before the GENIUS Act, businesses had to deal with different regulations in each state, making compliance complicated and the overall legal landscape unclear. Now, the GENIUS Act creates a single, national set of rules, offering clear oversight from both federal and state authorities.

Now that clear rules are in place, banks and other financial institutions can treat well-behaved stablecoins like regular money, instead of complicated crypto. This creates a solid legal basis for using them in everyday banking activities like managing funds, processing payments, and settling transactions. The debate has shifted from *if* institutions can use stablecoins to *which* ones will become the most popular.

Why USDC was structurally aligned before the law passed

USDC became the preferred choice for institutions largely because Circle designed its business to comply with the regulations the GENIUS Act ultimately required. This wasn’t luck; it was a deliberate, long-term strategy.

Since its beginnings, Circle has primarily held US Treasury securities as reserves. As of mid-2025, roughly 99% of the reserves backing USDC were in short-term US Treasuries and cash. These reserves are held with The Bank of New York Mellon, a major global custody bank, and managed by BlackRock, the world’s largest investment firm. Detailed reports on the reserve composition are published every month.

This setup mirrors exactly what the GENIUS Act demands for a company to be considered a PPSI. It includes fully backing USDC with things like U.S. Treasury bills and cash, keeping those assets with a trusted institution, providing monthly proof of those reserves, and using a regulated U.S.-based issuer. Circle had already implemented all of these things before the law officially defined the requirements. So, when the GENIUS Act passed in July 2025, USDC was essentially already meeting the standards, needing only to formally apply for PPSI status.

Compared to the wider stablecoin market, Tether operates differently. Its main stablecoin, USDT, is managed by Tether Operations, a company not licensed in the US and not built to follow the rules of the GENIUS Act. While Tether did launch USAT in January 2026 – a US-compliant stablecoin issued through Anchorage Digital Bank – the original USDT still doesn’t meet those requirements. Smaller stablecoin companies now have to decide whether to reorganize to comply with these rules, or risk being excluded from wider institutional use.

As a researcher, I’ve found that USDC benefits significantly from established relationships with key institutions. Our partnership with BlackRock for reserve management adds a level of credibility that’s hard for newer stablecoins to match. We also use BNY Mellon for custody, which is the same trusted system used by many large asset managers and funds. Importantly, we have full audits from major accounting firms – not just basic attestations – which further builds confidence. This all means that when institutional treasurers, compliance teams, and risk managers look at how USDC operates, they find a familiar and reassuring structure, rather than something completely new or unknown.

Coinbase is a key partner, forming the third important part of our strategy. As the biggest seller of USDC, Coinbase shares in the revenue earned from the interest generated by USDC reserves. This shared financial benefit motivates both companies to encourage wider use of USDC. Importantly, Coinbase’s connections with large institutional investors – through a service called Coinbase Prime – provide a direct pathway for bringing USDC into traditional financial systems.

For years, Circle developed more than just a stablecoin; they created a complete system for institutions. This included being a regulated issuer, providing secure custody, working with leading asset managers, partnering with major exchanges, and ensuring full regulatory compliance. The GENIUS Act essentially confirmed this system as the industry standard, meaning other stablecoins now need to adapt to meet the level of infrastructure USDC already had in place.

The SEC broker-dealer rule that quietly changed everything

A significant shift for USDC’s use by institutions occurred quietly in early 2026 when the SEC updated its rules for broker-dealers. This update clarified how stablecoins could be used as regulatory capital, and while the details are complex, the overall effect is substantial.

Financial firms that handle investments must keep a certain amount of capital on hand to protect their clients. Rules dictate which assets count toward meeting this requirement and how much value those assets contribute. Traditionally, stablecoins – a type of cryptocurrency – haven’t been counted favorably under these rules, often being valued at zero or significantly less than their face value.

New SEC rules, starting in early 2026, allow broker-dealers to use certain stablecoins – specifically those meeting the GENIUS standard, like USDC – as regulatory capital with a small 2% reduction in value. For example, $100 million in USDC can now be counted as $98 million towards a firm’s capital requirements, a significant change from the previous rule where it counted as zero. This effectively treats USDC the same way as money market funds, which have long been considered standard, near-cash assets for meeting these requirements.

This change has significant benefits for financial firms. Broker-dealers can now use USDC as part of their required reserves, allowing them to use it for things like settling trades and managing short-term cash flow without facing previous financial disadvantages. With broker-dealers holding over $500 billion in reserves, even a slight move towards using USDC could significantly increase demand for the stablecoin.

The benefits of using USDC extend beyond simply starting to use it. Once financial firms incorporate USDC into how they manage funds, it becomes difficult and expensive to switch to a different system. Because changing established financial processes is costly, the first companies to adopt USDC gain a significant and lasting advantage over their competitors, who will then have to overcome those established patterns.

Comparing this to Tether is helpful. Tether’s main stablecoin, USDT, couldn’t benefit from special treatment for broker-dealers because the company behind it didn’t meet certain regulatory standards. While Tether did create a new stablecoin, USAT, that *does* meet those standards, it’s much smaller than its competitor, USDC (around $20 million compared to USDC’s $73-77 billion in early 2026). This means USAT isn’t likely to become a major player for broker-dealer use anytime soon.

As an analyst, I see the recent SEC rule change as a clear indicator of a shifting regulatory landscape. Under Chair Paul Atkins, the agency has consistently focused on facilitating, rather than hindering, crypto activities – a significant departure from the previous administration’s emphasis on enforcement. This broker-dealer haircut change is just one example of several adjustments that, taken together, are creating a more favorable environment for institutional investors to enter the crypto space through established, compliant channels. Given this trend, I believe USDC, as the most demonstrably compliant major stablecoin, is uniquely positioned to benefit from these developments.

The FIS partnership and the banking integration

As an analyst, I’m taking a close look at the partnership between Circle and FIS, announced on July 10, 2025 – just days before the GENIUS Act became law. I believe this collaboration is significant because it shows how USDC is actually being integrated into the traditional US banking system, offering a practical way to see the stablecoin move into mainstream finance.

FIS, formerly known as Fidelity National Information Services, is a leading global financial technology company. They provide essential technology for banks and financial institutions worldwide, handling things like core banking operations, payment processing, and the infrastructure that keeps everything running. Their “Money Movement Hub” acts as a central connection point, linking banks’ internal systems to payment networks such as ACH and FedNow, which enables instant payments.

As a crypto investor, I’m really excited about the new Circle-FIS integration. Basically, it allows US banks to let their customers send and receive USDC – a stablecoin – just like they already send regular payments. For the banks, it works through their existing systems, so it’s like handling an ACH or FedNow transfer. And for us, as customers, sending USDC through our bank will feel just like sending any other payment. The cool part is, all the complicated blockchain stuff happens behind the scenes, handled by FIS, so we don’t have to worry about it.

This is a significant development because it eliminates the obstacles that have previously prevented US banks from offering stablecoin services. Before this, a bank wanting to offer USDC payments had to either create its own blockchain technology, connect with several digital wallet companies, or collaborate with a cryptocurrency firm operating outside of the bank’s usual safety and operational standards. The integration with FIS allows banks to provide USDC services using their existing systems, with the same security and risk controls they already have in place.

FIS is a major player in the financial industry, serving banks in 46 US states and throughout Europe. They handle trillions of dollars in payments each year. Even a limited use of USDC within their network would result in a very large number of transactions using the stablecoin.

This situation has significant competitive consequences. If FIS becomes the leading provider for banks offering stablecoins, and USDC is the most commonly used stablecoin on that platform, more banks will naturally start using USDC. Banks already using FIS for regular payments can easily add USDC services through the same system. Over time, the cost and effort of switching to a different stablecoin would become very high, effectively locking banks into using USDC.

Thanks to a partnership with FIS and a new SEC rule for broker-dealers, USDC is quickly becoming a core part of how US banks and financial markets operate. Banks are using it for payments through FIS, while broker-dealers are using it to meet regulatory requirements and settle transactions with clients. Asset managers are also utilizing the Circle Payments Network for large-scale financial transfers. These integrations build on each other, leading to rapid and substantial adoption by institutions, making it hard for rivals to compete.

The IPO verdict and public-market validation

Circle plans to become a publicly traded company on the New York Stock Exchange in June 2025, using the stock symbol CRCL. This move reflects the strong foundation built by its USDC stablecoin. How the stock performs after the initial offering will reveal both the potential and the difficulties of running a stablecoin business.

As a crypto investor, I remember when Circle went public at $31 a share, giving them a valuation of around $6.8 to $6.9 billion. It was incredible to watch the stock price skyrocket in the following months, eventually hitting almost $300 a share! At its peak, Circle’s market cap actually went *above* $77 billion, which was wild because, for a short time, it was worth more than the total amount of USDC in circulation – around $73 to $74 billion. It was a strange situation, seeing a company valued higher than the actual assets it held for its users.

Investors believed Circle was worth so much because they saw it as more than just a stablecoin company. They recognized its potential to build the underlying technology for a new financial system online, with projects like Arc, the Circle Payments Network, USYC, and the EURC stablecoin. The high valuation reflected this long-term vision, not just how much money Circle was currently making from stablecoins.

The significant drop in CRCL’s value (from around $61.92 in February 2026, a roughly 80% decrease from its peak) highlights the inherent difficulties of the stablecoin business, especially with increased regulatory attention. Circle largely relies on earning interest from its Treasury reserves for revenue – about $1.25 billion in the first half of 2026, with 95.5% coming from this source. This creates two key weaknesses: declining revenue if Treasury yields fall, and limited growth potential if USDC doesn’t gain market share as quickly as anticipated.

First quarter 2026 results demonstrated a period of change. While the amount of USDC in circulation reached $77 billion, net income decreased by 15% to $55 million. This drop in income was due to increased spending on key areas like developing the Arc blockchain, expanding the Circle Payments Network, and building other important infrastructure. Investors recognize that Circle is actively investing for the future, but they want to see consistent performance and profitability, which hasn’t been demonstrated yet.

For those following Circle (CRCL), the company is a key test of whether stablecoin businesses can thrive and grow over the long term, or if their profits are limited by how much interest they earn on their reserves. Initial results are somewhat unclear. Circle is currently profitable and the amount of USDC in circulation is increasing, showing real growth. However, the high valuation the company once reached ($77 billion) depends on successfully executing future plans that haven’t materialized yet. A more realistic valuation (around $29 billion) suggests expectations for more moderate growth.

CRCL’s main conclusion is that the market recognizes regulated stablecoin companies as legitimate and worthwhile. However, significant growth depends on successfully developing related products like Arc, CPN, and USYC, and maintaining a positive regulatory landscape. While USDC’s strong position with institutions is important, it isn’t enough on its own to achieve the most optimistic growth projections for CRCL.

The competitive picture and what could change

Thanks to factors like the GENIUS Act, SEC regulations, a partnership with FIS, and successful IPO support, USDC now has a strong position for attracting large US institutions. Other stablecoins are now working to catch up, and it’s important to have an open and realistic discussion about the competitive landscape.

Tether’s USDT is still the most widely used stablecoin with a market value of around $186 billion, compared to USDC’s $73-77 billion. However, more institutions are starting to prefer USDC. USDT’s complex legal structure and lack of US regulation prevent it from benefiting from certain rules designed to encourage responsible digital asset use. Tether tried to address this by launching USAT, but it’s currently very small (around $20 million) and isn’t a real competitor to USDC. Additionally, restrictions in Europe are limiting where USDT can be used legally.

New stablecoins aiming to meet regulations are facing hurdles similar to those USAT encountered. Ripple‘s RLUSD, launched at the end of 2024, is leveraging Ripple’s existing business connections to grow, but its total value remains relatively small, only a few billion dollars. PayPal’s PYUSD benefits from PayPal’s widespread payment system, but its use is mostly limited to within the PayPal network. While banks are starting to issue their own stablecoins, these are typically designed for specific institutional purposes rather than trying to capture a large share of the overall market.

USDC benefits from being the first widely adopted stablecoin in the financial industry – a significant advantage known as “first-mover advantage.” As major financial institutions like FIS, broker-dealers, and asset managers begin using USDC for their operations, it becomes increasingly difficult and expensive to switch to other stablecoins. This creates a strong and growing competitive advantage for USDC over time. Even if competing stablecoins offer better rates or features, the practical challenges and disruptions of switching will likely keep institutions using USDC.

Several factors could alter the current situation. Changes in regulations, technical problems with USDC, or strong competition could all have a significant impact. While the current Securities and Exchange Commission leadership is unlikely to undo recent rules that benefit USDC, future administrations might. A major operational issue with USDC – like losing its connection to the dollar, a lack of transparency about its reserves, or a problem with how it’s held – could shake trust among large investors, creating an opportunity for competitors. Finally, the entry of a large, established financial firm – such as JPMorgan Chase, Goldman Sachs, or BlackRock – with a competing stablecoin could divide the market.

These situations aren’t likely to happen soon, but they could weaken USDC’s standing with institutions. While USDC currently has a significant lead, it’s not guaranteed to last forever. The market is constantly changing, so Circle must continue developing its infrastructure (like Arc, CPN, and USYC) to hold onto the benefits it gained from the GENIUS Act.

From my analysis, USDC has clearly become the go-to stablecoin for most new US institutions entering the crypto space. However, it’s important to remember that the market isn’t a one-size-fits-all situation. I’m still seeing USDT, and other stablecoins, preferred for specific purposes like international money transfers, crypto exchange activity, and providing dollar access in developing markets. While USDC is the default choice for institutions, a variety of viable options continue to exist to meet different needs.

What this means for the broader market

As a researcher, I’ve been following the move of USDC into traditional Wall Street systems, and it’s becoming clear this isn’t just about Circle or the stablecoin itself. We really need to openly discuss the wider impact this could have on the entire market.

As an analyst, I see the GENIUS Act as a potential game-changer for stablecoins. It essentially draws a line between companies playing by the rules and those that aren’t, and I believe this will heavily favor those who *are* compliant. The stablecoin market is expected to grow significantly – some forecasts are over $1 trillion by 2030 – but that growth won’t be evenly distributed. We’ll likely see the majority of it go to issuers who can connect with existing banks and financial systems. I anticipate USDC, in particular, is well-positioned to gain a larger share of the market than it currently holds.

For banks and other financial companies, it’s now much easier to start using stablecoins. They can now connect with USDC through FIS, use USDC to meet certain regulatory requirements, and move large sums of money with the Circle Payments Network. The technical challenges that once held back institutions from using stablecoins are now largely solved. How quickly these institutions adopt stablecoins in the next two years will depend on how comfortable they are with the risks involved and how much pressure they feel from competitors, not on whether the technology is available.

As a researcher studying global finance, I’ve been looking into how the increasing use of USDC – a digital dollar stablecoin – impacts the US dollar‘s standing in the world. What I’m finding is that institutional adoption of USDC is creating fresh ways for the dollar to be used in international finance, particularly in regulated markets. Specifically, using USDC to settle cross-border payments through established bank channels expands the dollar’s reach into areas previously dominated by slower, more expensive traditional methods, or riskier, unregulated stablecoin transfers. Ultimately, this seems to be strengthening the dollar’s position by providing new, compliant avenues for its use.

USDC’s increasing popularity is creating more demand for US Treasury bills, as these bills support the stablecoin’s reserves. This is comparable to how Tether uses Treasury holdings, but USDC is more connected to and visible within traditional financial institutions. If USDC grows to over $200 billion, it could add over $150 billion in demand for Treasury bills – a similar effect to what we’ve seen with Tether.

As a researcher studying the financial landscape, I’ve been looking at how the growing adoption of USDC impacts existing systems like SWIFT, traditional banking, and other payment networks. It presents a bit of a double-edged sword for them. On one hand, USDC and other stablecoins offer faster and cheaper ways to handle certain payments, which could be disruptive. But on the other hand, these established players can actually benefit by working *with* stablecoin technology – we’ve already seen SWIFT begin to do this with Chainlink. I believe the most probable future isn’t one where stablecoins replace everything, but rather a hybrid approach where both stablecoins and traditional systems coexist and work together.

The bottom line

Circle didn’t become a trusted provider for institutions overnight. They had been strategically building that position for years with choices like holding mostly Treasury securities in reserve, using BNY Mellon for custody, partnering with BlackRock for asset management, and undergoing thorough audits – all while operating as a regulated US company. The GENIUS Act didn’t *create* this position; it confirmed that Circle’s existing approach met the new regulatory standards, which then paved the way for wider institutional adoption.

Three key advancements – a new rule for securities firms, a partnership with FIS, and the company’s initial public offering (IPO) – significantly strengthened USDC’s position in the market. The rule change allowed firms to use USDC as regulatory capital, the FIS partnership made USDC part of the everyday workings of US banks, and the IPO proved the company’s value and provided funds for future growth. As a result, USDC went from being seen as just one option for a regulated stablecoin to becoming the preferred choice for new stablecoin integrations within the US financial system.

USDC is in a good position to compete, but faces challenges. While Tether’s USDT is still the most widely used stablecoin and continues to grow overall, its share of the market is decreasing. Other stablecoins that follow regulations, like USAT, RLUSD, and PYUSD, are aiming to capture specific parts of the market. We may also see large banks create their own stablecoins, which could further divide the market. USDC has a significant advantage with institutional users, but this lead isn’t guaranteed to last.

Circle has a unique position that presents both potential and challenges. They have the opportunity to become a core part of the internet’s financial system, using USDC as its base and expanding with products like Arc, CPN, and USYC. However, their business relies heavily on earning interest from its Treasury reserves, which makes it vulnerable to changes in interest rates and competition for those earnings. The company’s stock performance – initially reaching a high market value of over $77 billion before falling to around $29 billion – shows how the market is constantly evaluating these factors.

For banks and other large institutions, USDC is quickly becoming the go-to stablecoin for new U.S. integrations. It meets key regulatory requirements, is accepted by financial institutions, works with existing banking systems like FIS, offers secure custody with BNY Mellon, and its reserves are managed by BlackRock. This combination makes USDC the easiest and most secure option for institutions in 2026, and it will become even more deeply integrated over time.

The increasing use of USDC by institutions is expanding how the US dollar is used in global finance, specifically within regulated systems. This creates further demand for US Treasury bills, strengthening the dollar’s position as the world’s dominant currency. While similar to how Tether holds Treasury bills, USDC operates through different networks and reaches a different group of users, adding to the overall effect.

As a researcher following the crypto space, I’ve been particularly struck by the story of USDC. It’s a prime example of how regulated crypto can actually become part of traditional finance, and at a significant, institutional level. What’s interesting is it’s not happening with big pronouncements or hype; it’s built on the groundwork of things like SEC rule changes, partnerships with banks, secure custody solutions, and careful management of reserves. I believe that over the next few years, this steady progress will make USDC a fundamentally important part of the US financial system, far beyond what its current market value suggests.

The GENIUS Act didn’t create anything new; it simply formalized what Circle had already developed. It opened doors for institutions to use the existing system as it was intended. Because of this groundwork, USDC has become the preferred stablecoin for Wall Street, not through flashy advertising, but through consistent, careful development of the infrastructure that regulated financial institutions require.

This situation isn’t just about Circle; it affects the entire US financial system and how stablecoins fit into it. It also raises questions about the future of the US dollar in a world of new financial technologies, and how cryptocurrency and traditional finance can work together effectively. These are now serious discussions happening throughout the financial world, a shift from previous dismissive attitudes.

USDC is currently the preferred stablecoin for institutions, which is why we’re even having these discussions about the future of digital currency. What happens next depends on whether Circle, the company behind USDC, can successfully build out its planned infrastructure – including projects like Arc, CPN, and USYC – and whether new competitors or changes in regulations alter the current path. We’ll see the answers unfold over the next few years through concrete progress, not one big announcement.

USDC has become Wall Street’s preferred stablecoin, and the underlying factors supporting this are now established. We’re continuing to see the effects of this trend develop.

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2026-06-01 14:03