On July 18, 2025, U.S. President Donald J. Trump signed the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), an act designed to establish a framework for the regulation of “payment stablecoins,” into law. The GENIUS Act marks a significant development for both the digital asset and banking industries, establishing a comprehensive regulatory regime for payment stablecoins.
Stablecoins are a class of digital assets designed to maintain a stable value relative to a reference asset, such as a fiat currency. Issuers of these stablecoins represent that holders will be able to convert, redeem, or repurchase their stablecoins for a fixed value. Stablecoins are intended to be used as a medium of exchange to facilitate transactions rather than as a speculative investment.
Prior to the passage of the GENIUS Act, there was no comprehensive federal regulatory framework for stablecoins. Regulatory efforts were fragmented among different bodies. The CFTC expressed the view that stablecoins are commodities and subject to its jurisdiction. More recently, in April 2025, the SEC’s Division of Corporation Finance released a Statement on Stablecoins stating that they do not consider stablecoins that meet certain criteria to be securities. Those criteria include stablecoins that are “designed to maintain a stable value relative to the United States Dollar, or “USD,” on a one-for-one basis, can be redeemed for USD on a one-to-one basis . . ., and are backed by assets held in a reserve that are considered low-risk and readily liquid with a USD-value that meets or exceeds the redemption value of the stablecoins in circulation” and that are marketed “solely for use in commerce, as a means of making payments, transmitting money, and/or storing value, and not as investments.”
The GENIUS Act provides regulatory certainty and imposes significant new regulatory requirements for a specific type of stablecoin—defined in the Act as a “payment stablecoin”—that meets certain criteria. Among other things, it provides that such stablecoins are not securities or commodities, limits the types of persons that can issue such stablecoins, identifies the key agencies (primarily the same federal agencies that serve as primary regulators of banks and credit unions or certain state regulators) that will regulate those issuers, and details the types of assets that must be held in reserves “on an at least 1 to 1 basis” with outstanding payment stablecoins by those issuers.
Definition of Payment Stablecoin
The GENIUS Act narrowly defines a “payment stablecoin” as a digital asset that is, or is designed to be, used as a means of payment or settlement, the issuer of which is obligated to convert, redeem, or repurchase it for a fixed amount of money (i.e., a national currency) and represents that it will maintain, or create the reasonable expectation that it will maintain, a stable value relative to the value of a fixed amount of money. Issuers will be prohibited from paying holders of payment stablecoins “any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding, use, or retention of such payment stablecoin.”
Persons Permitted to Issue Stablecoins
Under the GENIUS Act, issuers must meet certain criteria to be permitted to issue payment stablecoins in the U.S. Digital asset service providers (broadly defined in the GENIUS Act to generally cover persons that, for compensation or profit, engage in the business of exchanging digital assets for monetary value; exchanging digital assets for other digital assets; transferring digital assets to a third party; acting as a digital asset custodian; or participating in financial services relating to digital asset issuance) will be prohibited from offering or selling payment stablecoins that were not issued by a permitted issuer.
Permitted payment stablecoin issuers include subsidiaries of insured depository institutions approved to issue payment stablecoins by their primary regulator, as well as certain other institutions approved by the Office of the Comptroller of the Currency or certain state regulatory authorities. The GENIUS Act requires public companies not predominantly engaged in one or more financial activities, and their wholly or majority-owned subsidiaries or affiliates, to obtain certain additional approvals before being permitted to issue payment stablecoins.
Permitted issuers are only allowed to issue and redeem payment stablecoins, manage the reserves for their stablecoins, provide related custodial services, and perform any related incidental activities.
The GENIUS Act provides that all permitted issuers will be treated as financial institutions under the Bank Secrecy Act and will, accordingly, be subject to all federal laws relating to economic sanctions, prevention of money laundering, customer identification, and due diligence that are applicable to financial institutions in the United States. Among other things, permitted issuers are required to (1) maintain effective anti-money laundering and economic sanctions programs; (2) retain appropriate records; (3) monitor and report suspicious transactions; (4) have technical capabilities, policies, and procedures to block, freeze, and reject transactions that violate federal or state laws; and (5) maintain an effective customer identification program.
The GENIUS Act also permits non U.S.-based payment stablecoin issuers, provided they meet certain requirements, including that the Secretary of the Treasury determines that such issuers are subject to a regulatory and supervisory regime comparable to that established under the GENIUS Act; register with the Office of the Comptroller of the Currency (and are then subject to reporting, supervision, and examination requirements as determined by the Comptroller); and hold reserves in a United States financial institution sufficient to meet the liquidity demands of United States customers.
Prudential Requirements
Reserves. Under the GENIUS Act, payment stablecoins must be backed by reserves on at least a one-to-one basis. Eligible reserve assets include cash, demand deposits, and short-term treasuries. These reserves must be segregated; issuers are prohibited from commingling these reserves with their operational funds. Reserves may not be pledged or reused except for limited, specified purposes.
Disclosure Requirements. Issuers are also subject to several disclosure requirements, including requirements to:
- publish monthly reports on the composition of reserves. The information in the monthly report must be examined by a registered public accounting firm, and the CEO and CFO of the issuer are required to submit a certification as to the accuracy of the report to the issuer’s primary stablecoin regulator; and
- publish their redemption policies, which must disclose their procedures for timely redemption of their stablecoins and applicable redemption fees.
In addition, large issuers (those that have issued more than $50 billion in payment stablecoins) that are not SEC reporting companies must prepare and publish audited annual financial statements.
Capital, Liquidity and Risk Management. While the GENIUS Act does not contain specific capital, liquidity, and risk management requirements for issuers, it directs regulators to establish these requirements.
When the GENIUS Act Takes Effect
The GENIUS Act will take effect on the earlier of (a) 18 months after enactment; and (b) 120 days after the primary federal payment stablecoin regulators, in coordination, issue final regulations implementing the GENIUS Act; the restrictions on the offer and sale of stablecoins by digital asset service providers will, however, take effect three years after enactment. Industry participants should prepare for a staged compliance timeline and monitor forthcoming federal and state regulations closely.
