The US regulatory framework designed to supply safety to customers of dollar-pegged stablecoins, referred to as the GENIUS Act, would current structural flaws that might go away buyers able of utmost vulnerability.
Regardless of guarantees of shopper safety, within the occasion of the chapter of an issuer of those digital property, retail holders won’t be the primary to get better their funds, however will as an alternative occupy a distant fifth place within the order of fee precedence, in keeping with analysis.
Cory Swan, CEO of the bitcoin companies agency Swan, issued a warning on March 27, 2026 after analyzing the authorized implications of this regulation. In accordance with Swan, there’s a important threat of customers being left stranded because of the contradiction within the authorized texts.
Swan emphasizes the crucial significance of inspecting the “wonderful print” of the GENIUS Regulation, permitted and enacted in 2025, as reported by CriptoNoticias. In accordance with the specialist, the laws incurs a technical contradiction that places customers’ capital in danger. “It makes an attempt to offer holders ‘first precedence’ on reserves, however individually removes these reserves from the chapter property,” which would go away the funds outdoors the court docket’s jurisdiction for quick distribution.
This authorized ambiguity may end in courts missing jurisdiction to distribute the funds or, failing that, customers being relegated behind different collectors, he warned.
In accordance with the technical report from the monetary evaluation agency Credit score Slips, revealed in December 2025, the order of distribution in an insolvency situation locations stablecoin holders behind 4 classes of most well-liked collectors.
First are claims for repurchase agreements (repo) and margin loans. Second place goes to debtor-in-possession (DIP) financing lenders, adopted by chapter professionals — reminiscent of attorneys and accountants — who assure their fee via particular reserves. In fourth place are the compensation rights of depositories and brokers.
Adam Levitin, authorized specialist, professor at Georgetown College and creator of the report, explains that the GENIUS Act “doesn’t give stablecoin holders the precedence they imagine they’ve.” Levitin clarifies that, though the regulation makes use of “precedence” phrases, it refers solely to unsecured money owed. In apply, any secured creditor will accumulate earlier than the frequent person.
The specialist warns that this situation is way from the safety provided by a financial institution insured by the Federal Deposit Insurance coverage Company (FDIC), the place the return is 100% and virtually instantly. Nevertheless, This construction is determined by belief and state assistparts that don’t switch to the digital asset ecosystem.
For his half, Swan emphasizes that this threat will not be theoretical, since most of the monetary relationships of the most important issuers of digital property are structured on this method.
“If an issuer deposits its reserve Treasury payments with a custodian and in addition borrows from that custodian, the custodian’s declare for compensation is secured. He’s paid earlier than you,” he concludes.
