U.S. President Donald Trump on Friday signed a law to create a regulatory regime for dollar-pegged cryptocurrencies known as stablecoins, a milestone that could pave the way for the digital assets to become an everyday way to make payments and move money.

The bill, dubbed the GENIUS Act, passed in the House of Representatives by a vote of 308 to 122, with support from nearly half the Democratic members and most Republicans. It had earlier been approved by the Senate.

Treasury Secretary Scott Bessent, in a statement, said the new technology would buttress the dollar's status as the global reserve currency, expand access to the dollar economy and boost demand for U.S. Treasuries, which back stablecoins.

Stablecoins are designed to maintain a constant value, usually a 1:1 U.S. dollar peg, and their use has exploded, notably by crypto traders moving funds between tokens. The industry hopes they will enter mainstream use for sending and receiving payments instantly.

The new law requires stablecoins to be backed by liquid assets – such as U.S. dollars and short-term Treasury bills – and for issuers to disclose publicly the composition of their reserves monthly.

A big win for crypto supporters

The law is a huge win for crypto supporters, who have long lobbied for such a regulatory framework in a bid to gain greater legitimacy for an industry that began in 2009.

Crypto companies and executives argue such legislation will enhance stablecoins' credibility and make banks, retailers and consumers more willing to use them to transfer funds instantly.

The stablecoin market, which crypto data provider CoinGecko said is valued at more than $260 billion, could grow to $2 trillion by 2028 under the new law, Standard Chartered bank estimated earlier this year.

The law's passage culminates a long lobbying effort by the industry, which donated more than $245 million in last year's elections to aid pro-crypto candidates including Trump, according to Federal Election Commission data.

The Republican president, who has launched his own coin, thanked executives for their support during the 2024 presidential campaign, saying, "I pledged that we would bring back American liberty and leadership and make the United States the crypto capital of the world, and that's what we've done."

Potential risks of stablecoins

However, the act has been met with increasing skepticism domestically and internationally.

Italy's economy minister Giancarlo Giorgetti issued a warning in April, saying the coins posed a threat to Europe's financial stability. Giorgetti said Europe faced the prospect of U.S. tariffs, but stressed that it wasn't the only danger on the horizon.

"Even more dangerous is the new U.S. policy on cryptocurrencies," said Giorgetti. "In particular the policy on dollar-denominated stablecoins."

Warwick Powell, adjunct professor at Queensland University of Technology and senior fellow at Taihe Institute wrote on CGTN that the act presages greater financial risk in both the U.S. and globally as it enables the transformation of U.S. public debt into collateral for a new class of private money, without meaningful regulatory guardrails or public accountability.

He explained that under the GENIUS regime, private institutions can mint dollar-pegged stablecoins by using U.S. Treasury bonds as collateral. These digital dollars can then circulate globally quickly outside government control, creating a faster but more opaque and fragile financial network. For example, he said, if a major stablecoin issuer fails, they may be forced to dump U.S. Treasuries to meet redemptions, which could spark global bond market dislocations.

Domestically, democrats and critics have said the law should have blocked big tech companies from issuing their own stablecoins, which could increase the clout of an already powerful sector, contained stronger anti-money laundering protections and prohibited foreign stablecoin issuers.

"By failing to close known loopholes and protect America's digital dollar infrastructure, Congress has risked making the U.S. financial system a global haven for criminals and adversarial regimes to exploit," said Scott Greytak, deputy executive director of Transparency International U.S.

Demands are on rise

Big U.S. banks are internally debating an expansion into cryptocurrencies as regulators give stronger backing to digital assets, but banks' initial steps will focus on pilot programs, partnerships or limited crypto trading, Reuters reported in May.

Several crypto firms including Circle (CRCL.N) and Ripple are seeking banking licenses, which would cut costs by bypassing intermediary banks.

Backers of the bill have said it could potentially give rise to a new source of demand for short-term U.S. government debt, because stablecoin issuers will have to purchase more of the debt to back their assets.

Trump has sought to broadly overhaul U.S. cryptocurrency policies, signing an executive order in March establishing a strategic bitcoin reserve. The president launched a meme coin called $TRUMP in January and partly owns crypto company World Liberty Financial.

The White House says there is no conflict of interest as these assets are held in a trust managed by Trump's children. But that trust seems to be doing well – Forbes magazine estimates that it's made around $1 billion through crypto ventures.

(With input from Reuters)