BitMart Research—The Rise of USD1 and the GENIUS Act: Trump’s Push to Reshape the Stablecoin Market
Preface
Since the collapse of TerraUSD (UST) in 2022, the market share of algorithmic stablecoins has continued to decline. As an algorithmic stablecoin, UST was not backed by any fiat currency or assets but relied solely on an algorithmic mechanism to maintain its peg to the U.S. dollar. Once confidence collapsed and the mechanism failed, a chain reaction ensued in the market. In contrast, fiat-backed stablecoins—such as USDT, USDC, and USD1—which are supported by highly liquid assets like U.S. dollars and Treasury bonds, have gradually become the mainstream. However, even these stablecoins continue to face scrutiny regarding their regulatory compliance and transparency. To address these challenges, the United States has recently accelerated the advancement of the GENIUS Act, aiming to establish a comprehensive regulatory framework for the stablecoin market.
- GENIUS Act
Significance of the GENIUS Act to the Crypto Market
The GENIUS Act plays a pivotal role in the regulation of the crypto market, particularly in the realm of stablecoins. Its core provisions include restrictions on issuance eligibility, reserve requirements, compliance obligations, user protection, and international applicability. The Act clearly stipulates that stablecoins must be fully backed by an equivalent amount of highly liquid assets, ensuring that users can redeem their holdings at any time. To protect token holders, the assets of an issuer must be prioritized for user repayment in the event of bankruptcy.
Moreover, issuers must strictly comply with anti-money laundering (AML) and counter-terrorism financing (CFT) requirements to prevent the misuse of stablecoins for illicit purposes. Overall, while the GENIUS Act enhances regulatory oversight and protects user rights, it also raises the entry bar for stablecoin issuers in the short term. Existing issuers will be required to restructure their asset reserves, disclosure practices, and internal systems, which may entail significant costs and operational complexity.
Key Provisions of the GENIUS Act
1. Licensing and Regulatory Framework
The Act permits only three types of entities to issue payment stablecoins:
- Subsidiaries of banks or credit unions
- Non-bank financial institutions approved by federal regulators (e.g., institutions regulated by the OCC)
- State-licensed issuers that meet federal “substantive equivalence” standards
The Act adopts a dual regulatory system:
- Issuers with a market cap over $10 billion must be subject to federal oversight
- Smaller issuers may be regulated at the state level, provided they meet federal baseline requirements
2. Reserve and Asset Segregation Requirements
All stablecoins must be backed by 100% reserves and can only use highly liquid assets, such as:
- Cash and demand deposits
- Short-term U.S. Treasury securities (≤ 93 days)
- Short-term repurchase agreements (≤ 7 days, under central bank oversight)
- Central bank reserves
Customer assets must be strictly segregated from operating funds, cannot be re-pledged, and may only be temporarily pledged for short-term liquidity purposes.
3. Transparency, Auditing, and Accountability Mechanisms
Issuers are required to disclose reserve asset compositions monthly and undergo audits by certified public accounting firms.Regulators will also establish standards for capital adequacy, liquidity, and risk management.
- Issuers with a market cap over $50 billion will face stricter audit and compliance standards
- CEOs and CFOs must sign monthly compliance certifications
- False statements may lead to criminal liability
4. AML and National Security Compliance
Stablecoin issuers are classified as financial institutions under the Bank Secrecy Act and must implement AML and sanctions compliance programs, including:
- Transaction monitoring
- Risk assessments
- Filing of suspicious activity reports
5. Restrictions on Foreign Issuers and Big Tech
Foreign stablecoin issuers that fail to comply with U.S.-equivalent standards will be prohibited from operating in the U.S.Large technology companies (e.g., Meta, Amazon) must meet stringent financial compliance, user privacy, and fair competition requirements to prevent monopolistic behavior and systemic risks.
6. Consumer Protection and Bankruptcy Priority
Stablecoin holders will have priority claims on issuer assets in the event of bankruptcy.To avoid conflicts of interest, the Act prohibits members of Congress and senior executive officials from participating in stablecoin issuance during their term in office.
7. Legal Classification and Regulatory Clarity
The Act explicitly states that payment stablecoins are not classified as securities or commodities, thus excluding them from SEC and CFTC jurisdiction. This provides legal clarity and prevents overlapping regulation.
Legislative Progress
As of May 22, the GENIUS Act passed a motion to proceed to debate with 69 votes in favor and 31 against, entering the amendment phase. With the House and Senate rapidly advancing their respective versions of stablecoin legislation and a rare bipartisan consensus on crypto regulation, the Act is widely expected to complete the legislative process by Q4 2024.
- Introduction to USD1
Background of USD1
USD1 is a U.S. dollar-pegged stablecoin launched in March 2025 by World Liberty Financial Inc. (WLFI), a DeFi platform controlled by members of former U.S. President Donald Trump’s family. Each USD1 token is designed to maintain a 1:1 peg to the U.S. dollar and is fully backed by reserves consisting of short-term U.S. Treasury securities, U.S. dollar deposits, and cash equivalents.
The project emphasizes regulatory compliance and transparency, with reserve assets regularly audited by a third-party accounting firm and custodied by BitGo, a leading digital asset custody provider. The project’s key figures include Zach Witkoff, co-founder of WLFI, and Eric Trump, Donald Trump's son, who also serves as WLFI’s head.
Current Status of USD1
As Bitcoin recently broke its all-time high and interest in USD1 surged, ecosystem partners associated with the USD1 network have gained significant market attention. Tokens from partnered projects—such as Buildon, Lista DAO, StakeStone, Haedal, and Cookie—have experienced sharp price increases, fueling enthusiasm around the “WLFI + USD1” narrative.
As of mid-May 2025, USD1’s market capitalization surpassed $2.1 billion, making it the seventh-largest stablecoin. Since its launch in March, USD1 has rapidly expanded across Ethereum, BNB Chain, and more recently, the Tron network.However, according to official statements from WLFI, USD1 is primarily targeted at institutional users. Its most notable real-world application to date is its selection by MGX, an Abu Dhabi-based investment firm, as the official stablecoin for a $2 billion investment into Binance, marking USD1’s first major institutional use case.
USD1 Ecosystem Partnerships
BUILDon
BUILDon is a meme token representing the cultural mascot of the BSC (BNB Smart Chain) builder community. On May 17, the project officially announced the addition of a USD1 trading pair, and has since actively engaged with WLFI on social media. On May 22, WLFI publicly disclosed the purchase of BUILDon’s native token B, triggering a price surge of over 450%.
StakeStone
On May 9, StakeStone announced a partnership with WLFI to provide omnichain liquidity infrastructure and cross-chain staking yield services for USD1 users. On May 22, following Binance’s listing of USD1, StakeStone’s native token STO rose over 20% in a single day.
Lista
On May 7, Lista DAO announced a strategic partnership with WLFI. The Lista ecosystem plans to add USD1 to its treasury, introduce a USD1/lisUSD LP pair, and support USD1 as CDP collateral. On May 22, following the Binance listing news, Lista’s token price jumped 37.9% in one day.
In addition to these core partners, USD1 is now supported across various DeFi protocols including Venus Protocol, Aster, Meson Finance, and Falcon Finance, enabling its use for trading, collateralization, and liquidity provisioning.
On the custody and liquidity side, BitGo is responsible for holding the reserve assets, while BitGo Prime offers institutional-grade liquidity and trading services. DWF Labs has deployed several DeFi liquidity pools for USD1 and has committed $25 million in WLFI token purchases to support the ecosystem.For wallets and consumer applications, USD1 has been integrated into platforms like TokenPocket, HOT Wallet, Pundi X, and Umy, enabling its use in payments, hotel bookings, and merchant settlements within various Web3 scenarios.
Comparison Between USD1 and Competitors
Mechanically, USD1 shares many similarities with leading stablecoins such as USDT and USDC. It follows a 1:1 reserve model, backed primarily by U.S. Treasury securities, cash, and other highly liquid assets, with third-party custody and periodic audits to ensure transparency and regulatory compliance.What sets USD1 apart is its unique political brand value. Backed by the Trump family through WLFI, USD1 has experienced exceptionally rapid early-stage growth, most notably being selected as the official stablecoin for MGX’s $2 billion investment in Binance. This momentum is largely driven by the Trump family's public influence and political capital, which has bolstered confidence in the stablecoin's credibility and regulatory soundness.
However, it’s worth noting that the previously launched $TRUMP meme coin, also associated with the Trump name, experienced significant price volatility, raising concerns about its stability and long-term value. This historical context may impact investor confidence in USD1—especially when considering the broader political dynamics that can influence sentiment and risk in the crypto market.
- Future Outlook
The GENIUS Act is not merely a regulatory framework for stablecoins—it represents a broader strategic initiative by the United States to strengthen the international dominance of the digital dollar. By promoting the issuance of compliant, USD-pegged stablecoins, attracting global capital inflows into U.S. Treasury assets, and imposing stricter controls on foreign issuers, the Act aims to enhance both the security and stability of the overall crypto market while mitigating the risk of incidents like the TerraUSD collapse.
Against this backdrop, highly compliant stablecoin projects are well-positioned to gain greater market recognition. For instance, USD1, with its strong political and institutional backing, may benefit significantly as the GENIUS Act moves forward. Its ecosystem partners and integrations could play an increasingly important role in the future digital asset landscape.
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- Future Outlook
- Introduction to USD1