July 2025 Genius Act Provides Fewer Consumer Protections Than Supports Claim
Washington, D.C. – In coming months and years, consumers will be urged to make payments using stablecoins. This form of cryptocurrency already can be purchased through services such as PayPal, Apple Pay, and Google Pay, and is likely to be issued by banks, bank card companies, and major retailers.
In July 2025, a new congressional law purported to provide adequate consumer protections for this new payment method. Yet, according to a Consumer Policy Center (CPC) report issued today, the law includes far fewer protections than provided for other payment methods such as checks, credit cards, and debit cards. For example, there is no protection for unauthorized transfers; there is no mandated procedure for issuers to investigate and resolve errors; there are few required disclosures; and there is no private right of action for consumers to sue over unfair and fraudulent actions.
“Consumers should be very cautious about using stablecoins to make payments,” said Mark Budnitz, an emeritus law professor and senior fellow at the Consumer Policy Center. “Users are at greater risk of fraud and deceptive practices than if they pay by check, credit card, or debit cards,” he added. Budnitz wrote the new CPC payment stablecoins report titled, “The GENIUS Act of 2025 Does Not Adequately Protect Consumers Who Use Stablecoins to Make Payments.” These risks are illustrated by the example given below.
Consumers using stablecoins for payments may also face higher costs. The GENIUS Act does not require issuers to limit fees in any way.
In addition, serious questions have been raised about the interest of federal regulators in adequately overseeing this new marketplace. Key administration officials have a personal stake in the growth of crypto markets. And the law may preempt state efforts to provide stronger protections.
“Because the GENIUS Act is now a Federal law, it will be difficult in the future to add needed consumer protections,” said the CPC’s Budnitz. “Consumers need basic protections that are provided by laws regulating other well-established payment methods.” As explained by the report, these protections relate to periodic statements, fee disclosures, customer services, unauthorized transfers, error resolution, security and privacy, coin redemption, private right of action, and mandated arbitration agreements. “Consumers should review the issuer’s Terms and Conditions to see if they provide more protections than the Act’s inadequate requirements,” noted the CPC’s Budnitz.
What Are Payment Stablecoins?
Payment stablecoins are a separate and distinct form of stablecoin. They can be used to pay for goods and services and make payments overseas. They are redeemable for dollars at a predetermined, fixed amount. Consumers purchasing payment stablecoins must first choose a crypto exchange or a digital wallet platform such as Coinbase, Kraken, or PayPal. They then must create and verify an account and designate a bank account or platform that enables payments through services such as Apple Pay, Google Pay, or PayPal.Having done that, consumers have the option of buying several different stablecoins such as USD Coin, Tether, and PayPal, which they can store on the exchange or transfer to a private wallet.
Illustration Of Potential Risks And Costs To Users
Joe bought $5,000 worth of payment stablecoins from Reliable Stablecoins, Inc. A week later he tried to redeem $700 of the stablecoins to make a car payment. Reliable informed Joe there would be a $75 redemption fee. That seemed outrageously high. Joe checked the documents he signed when he opened his account and the Terms and Conditions page on Reliable’s website. They said nothing about any fee. Joe paid the fee and was able to complete the redemption.
A month later Joe checked his Reliable account and to his surprise saw that someone had transferred $3,000 from his account to an account he could not identify. Frantically, he called Reliable’s customer service number. An automated message informed him that the number was no longer in service. Reliable’ s website provided no other way to contact the company.
Joe found a news article that said Reliable had recently suffered a cyberattack and could not account for $100,000 it held in reserve for its customers. The report quoted a Reliable official saying she believed some consumers’ funds had been transferred from their accounts by those committing the cyberattack.
Joe rushed to his lawyer, Portia Peterson. Portia explained that the GENIUS Act does not place any limit on the amount of the redemption fees issuers can impose. Furthermore, the Act gives Joe no protection for unauthorized transfers, and it imposes no security requirements to prevent cyberattacks. The Act includes no customer service requirements; it doesn’t require any type of error resolution process when consumers have problems.
Reliable’s only violation of the Act was its failure to publicly disclose the redemption fee. However, Joe could not sue Reliable because the Act does not give consumers the right to sue issuers who violate the Act. Portia explained there was nothing she could do to recover his money. She advised Joe to immediately redeem the rest of his stablecoins. If he waited to do that, he ran the risk that other consumers would learn of the cyberattack and try to redeem their Reliable stablecoins before him. As a result, Reliable might not have enough in its reserves to pay Joe. Joe could report his problem to the government agency that had authorized Reliable to issue payment stablecoins, but Portia doubted the agency would do anything to help him.
