The US regulatory framework intended to provide security to users of dollar-pegged stablecoins, known as the GENIUS Act, has structural flaws that could leave investors in an extremely vulnerable position.
The study shows that despite consumer protection promises, if issuers of these digital assets go bankrupt, retail holders will not be the first to recover their funds and will instead occupy a distant fifth place in payment priority.
Cory Swan, CEO of Bitcoin services company Swan, issued a warning on March 27, 2026 after analyzing the legal implications of this regulation. According to Swan, There is a significant risk of user isolation Because there is a contradiction in the legal text.
As reported by CriptoNoticias, Swann emphasized that it is critical to scrutinize the “fine print” of the GENIUS law, which was approved and enacted in 2025. Experts say the law has technical inconsistencies that put users’ capital at risk. “It attempts to give holders ‘first priority’ in reserves, but separately removes those reserves from the bankruptcy estate,” which takes the funds out of the court’s jurisdiction and makes them immediately distributed.
He warned that this legal ambiguity could result in courts losing jurisdiction to distribute the funds, or could leave users in the shoes of other creditors if they were unable to do so.
According to a technical report from financial analysis firm Credit Slips published in December 2025, stablecoin holders rank behind four categories of preferred creditors in the distribution order in bankruptcy scenarios.
First, request a repurchase agreement (repository) and margin loans. In second place are debtor-in-possession (DIP) lenders, followed by insolvency professionals such as lawyers and accountants, who guarantee payments through specific reserves. Fourth place is the indemnification rights of depository agents and brokers.
Adam Levitin, a legal expert, Georgetown University professor, and author of the report, explains that the GENIUS Act “does not give stablecoin holders the priority they believe they have.” Levitin clarified that while the law uses the term “priority,” it only refers to unsecured debt. in fact, Secured creditors collect before ordinary users.
The expert warns that this scenario is a far cry from the protection offered by banks insured by the Federal Deposit Insurance Corporation (FDIC), where returns are 100% and nearly instantaneous. but, This structure relies on trust and state supportelements that are not transferred to the digital asset ecosystem.
Swan emphasizes that this risk is not theoretical, as many of the financial relationships of the largest issuers of digital assets are structured this way.
“If an issuer deposits reserve Treasury bills with a custodian and borrows from that custodian, the custodian’s claim for compensation is secured; he is paid before you are,” he concluded.
(Tag to translate) Cryptocurrency
