Stablecoin market surges post-genius act as banks and asset managers enter

The ink on the GENIUS Act is barely dry, but its ripple effects are already visible across the crypto industry. In just seven days, the sector added nearly $4 billion, pushing the stablecoin market cap above $264 billion and fueling corporate interest in related ventures.

The surge is no surprise. The landmark legislation provides banks, asset managers, and other institutional investors with a federal framework for fiat-backed stablecoins without the looming threat of enforcement actions by the Securities and Exchange Commission (SEC).

With regulatory clarity comes new capital, new players, and intensified competition. Signs of this shift had already emerged even before the GENIUS Act was enacted.

In a May interview with Yahoo Finance, Coinbase CEO Brian Armstrong was asked if he was concerned about banks entering the stablecoin market. “No,” he replied. “I think everybody should be able to create stablecoins.”

Traditional finance seems to agree, and with new entrants pouring in, attention is shifting to stablecoin design and the institutions behind them.

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Not all stablecoins are created equal

While all stablecoins aim to maintain a stable value, they can differ significantly in how they achieve that stability. These tokens generally fall into four categories: fiat-backed, crypto-backed, algorithmic, and commodity-backed.

Fiat-backed stablecoins are the most common, pegged 1:1 to a fiat currency, such as the US dollar, and backed by cash or short-term assets, like US Treasurys. At the time of writing, they make up roughly 85% of the stablecoin market.

The GENIUS Act specifically targeted this type of stablecoin. The largest fiat-backed stablecoins are USDt (USDT) by Tether and USD Coin (USDC) by Circle, with a combined market capitalization of over $227 billion. Under the GENIUS Act, compliant fiat-backed issuers must hold full reserves, undergo audits, and be appropriately licensed.

Crypto-backed stablecoins are tokens overcollateralized with crypto assets like ETH or tokenized Bitcoin. The leading example is DAI (formerly MakerDAO), which is backed by a mix of crypto collateral and holds a market cap of around $4.35 billion, according to DefiLlama.

The final two categories are minor but noteworthy. Algorithmic stablecoins maintain their peg by automatically adjusting supply, but they’ve proven fragile, most notably with the collapse of the Terra ecosystem. Algorithmic stablecoins are sidelined under the GENIUS Act and slated for separate treatment.

Commodity-backed stablecoins, like Pax Gold (PAXG), are backed by commodities such as gold and could be used as an inflation hedge, though adoption remains limited due to liquidity and custodial complexity.

Related: How traditional financial tools are making crypto investing more accessible

Here come the institutions

Since the GENIUS Act was signed into law on July 18, the number of businesses, institutions, and banks entering the stablecoin market is surging.

On Tuesday, Anchorage Digital, the only federally chartered crypto bank in the US, launched a stablecoin issuance platform in partnership with Ethena Labs. The initiative will bring Ethena’s USDtb stablecoin onshore under the GENIUS Act’s new regulatory framework.

On the same day, Wall Street asset manager WisdomTree launched USDW, a dollar-backed stablecoin to enable dividend-paying tokenized assets. The product was also designed to comply with the GENIUS Act standards and makes WisdomTree one of the first asset managers to enter the regulated stablecoin space. 

The world’s biggest banks are also taking action. On July 16, a few days before the GENIUS Act was signed into law, Bank of America CEO Brian Moynihan said the bank is exploring the issuance of dollar-backed stablecoins, pending complete regulatory alignment under the GENIUS Act. Earlier in July, JPMorgan and Citigroup confirmed they are also preparing to enter the stablecoin market.

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