How the U.S. recognition of stablecoin under the GENIUS Act will impact India’s Fintech sector

Landmark U.S. law validating stablecoins – GENIUS Act

On July 18, 2025, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), resulting in a landmark crypto law. Along with the upcoming CLARITY Act and the USDC Act, U.S. is recognizing crypto financial systems – starting with stablecoins, widely considered to be the safest cryptocurrency.

Stablecoins are block-chain based digital assets that are backed by fiat currency or assets like gold, and unlike other cryptocurrencies, maintain a stable value, can be redeemed, converted or repurchased for equivalent value since they are not speculative in nature. Citigroup predicts the stablecoin market to grow into a $3.7 trillion business by 2030, which may explain the U.S. Treasury’s interest in regulating this product.

The regulatory framework under the Genius Act is a combination of federal and State oversight (any issuer having over $10b stablecoins IOUs will be subject to federal control), and will allow approved stablecoin issuers – like banks, credit unions, approved non-banks, to issue stablecoins provided they maintain equivalent reserves on a 1:1 basis in U$ treasury bills, bonds or currency. The issuers must also publish redemption policies, comply with monthly disclosures and audits, AML/sanctions, consumer protection and advertising compliances, and obtain insurance protection. The holders of such instruments will be accorded preference in bankruptcy proceedings; however they can no longer be issued interest-bearing stablecoins, which was a recent market feature provided by some players in this unregulated industry. It appears that the act attempts to create a closed market for only licensed US stablecoin issuers, as foreign payment issuers can issue stablecoins in the U.S. (alone or with digital service providers) if they are regulated under a comparable regime offshore, obtain approval from the Comptroller of Currency, and comply with liquidity and AML/sanctions rules. This move will particularly impact Tether (USDT) (largest stablecoin issuer with 65% market share, registered in El Salvador).

What is the impact to the stablecoin market?

The markets are responding to this law positively. Stablecoin issuers like Circle (USDC) who are already dealing in U$ currency-backed stablecoins will repurchase more currency to maintain reserves to file for approval under this law. Circle, along with Binance, has been taking steps for a wider adoption of USDC, and a clear law will boost user sentiment. Reports indicate that Tether may set up a new entity that trades only in U.S.-backed stablecoins. Fintech players like PayPal may expand their offerings to set up 24/7 payment rails, and push for use of stablecoins for cross-border remittances, if they see users keen on holding stablecoin wallets.

Retailers like Amazon and Apple, and Bigtech like Google, Meta have been keen to either accept user payments in stablecoin, or issue their own stablecoin, a plan that may mature now. One of the primary desired uses of stablecoins as touted by the market is 24/7 de-centralized payments, with negligible transaction charges. Large retailers have a problem statement that can be fixed by this new payment method– they pay large fees to banks/credit card companies/payment processors for sale transactions, are unable to access all countries, and wait for days for clearances, all of which is fixable by stablecoin settlements. Having said that, issuance of stablecoins by such entities who are otherwise non-banking financial companies is not an easy path under the Genuis Act – they need to seek unanimous approval from the Stablecoin Certification Review Committee, are prohibited from offering tying arrangements (linking their services with stablecoins).

How are banks viewing this law?

There are reports that Bank of America, Citigroup, and JP Morgan may issue their own stablecoin. While banks will have to comply with GENIUS act to do so, such as having a separate entity, and isolated financial controls for the 1:1 reserve-backing, it can be assumed that unlike the fintech issuers, if banks enter this sector, they will have access to a much wider user base & network for adoption of stablecoins. Banks will also work extensively with stablecoin issuers to maintain reserves, and provide services at the time of redemption, transfer, etc. If more countries enable stablecoins to be used for cross-border transactions, banks’ and payment firms’ entry in this sector is likely.

The U.S. approach

Ultimately, this law will create more demand for U$ fiat currency due to increased global adoption of U$-backed digital assets globally. While one can certainly debate if this law is in fact a centralization of cryptocurrencies, a product that was intended to work as a decentralized financial ecosystem, it is clear that regulators are not inclined to allow the crypto industry to flourish without oversight and control, and are offering them an alternate regulatory framework, with conditions different than applicable to banks.

The Indian approach on digital assets 

India has so far had a conservative outlook towards crypto regulation. In 2018, the RBI restricted all banks and financial entities from dealing in cryptocurrency, which was later overturned by the Supreme Court in 2020 for being an overreach of existing law. By way of amendment to the Income Tax Act, 1961, a definition of ‘virtual digital assets’ (VDA) was introduced, followed by imposition of a flat tax of 30% on any income deriving from such assets, along with 1% TDS to be deducted from proceeds paid to a VDA holder.  Earlier draft legislations, both prohibiting and regulating crypto, were never tabled in Parliament. Other regulators focused on security & AML aspects – like CERT-in requiring VDA service providers to report cyber security incidents, maintain logs of all transactions in India for a period of 180 days, and VDA exchanges/service providers being classified as regulated entities under PMLA, triggering FIU registration, KYC checks, and maintain records of transactions. Failure to comply with FIU guidelines triggered MEITY-approved blocking orders for crypto exchanges in India.

Since India has not classified VDAs as legal tender or a currency, trading in and settling payments through VDAs is fraught with complexity. If VDA providers enable a system that processes payments between a payer and a beneficiary, involving clearing, payment or settlement services, then arguably, such providers need to obtain an RBI authorization for their operations in India. It is however unlikely that they will be issued this authorization, if there is no specified law regulating VDAs in India. Further, cross border dealing in stablecoins is not possible, since foreign exchange laws do not classify it as a current account transaction which is ordinarily permissible. Resultantly, offering of stable-INR redemption by VDA providers is not technically permissible in India, and users who accept such transfer proceeds into their bank accounts, especially in cross-border dealings, can face challenges from regulators These issues drain Indian reserves and add financial risks, with crypto transactions becoming more prevalent with Indian investors.

The way forward?

Another law that follows the Genius Act, the U.S. Anti-CBDC Surveillance Act bans the Federal Reserve from bringing its own stablecoins as a central bank digital currency. This diverges from the Indian approach, where RBI has launched its own digital currency with 15 banks (The Digital Rupee), currently in pilot phase. The U.S. law proposes entry routes for foreign stablecoin issuers if they are from comparable regulatory regimes, which may convince countries like India to bring in a stablecoin law, whether to enter the U$ market with their own stablecoins, or to challenge the dollar supremacy in global trades and remittances by bringing an INR-backed stablecoin. While India may continue to be exchange-controlled as a matter of policy, if more global remittances are done by U$-backed stablecoins through U$-backed stablecoins through the de-fi framework, that too with lesser fees and faster timelines, India may need to reflect on its response strategy. In times to come, national currency-backed stablecoin will be a form of payment sovereignty for countries. With the review of RBI’s CBDC, India appears to see the benefit of this approach already.

It is safe to say however that it is early stages to expect that private entities will be licensed to issue INR-backed stablecoins and maintain reserves with Indian banks under an Indian law, as this effectively brings these early-stage payment products too close to the financial systems, since banks will have to redeem these backed-coins with reserves maintained with them, including during bankruptcies. What we can expect is a law that recognizes INR-CBDC in a relatively decentralized form that establishes India’s entry into the stablecoin markets, and hopefully a clear classification of stablecoins as a digital currency– neither a security nor a commodity.