On July 18, the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS ACT) was signed into law, creating the first federal regulatory framework for payment stablecoins. The law prohibits the issuance of payment stablecoins in the United States unless the issuer is a permitted entity under a state or federal regime that meets strict reserve, redemption, compliance, and disclosure requirements.
The Act (previously discussed here) defines a payment stablecoin as a digital asset used for payment or settlement purposes that is redeemable at par for U.S. dollars, but not a deposit, security, or legal tender. It authorizes both the OCC and state regulators to supervise different categories of issuers and directs the Treasury Department to develop a framework for certifying comparable state regimes.
Key provisions of the GENIUS Act include the following:
- Strict reserve backing and disclosure rules. Stablecoins must be backed 1:1 with U.S. dollars or Treasuries, and issuers must publish monthly reserve breakdowns.
- Redemption and operational requirements. Issuers must maintain clear redemption policies, demonstrate operational soundness, and retain the technical ability to freeze or burn coins if legally required.
- Marketing and misrepresentation prohibitions. Issuers are barred from claiming their stablecoins are legal tender, federally insured, or backed by the U.S. government.
- Consumer data privacy restrictions. Issuers cannot use transaction data for targeted advertising or share it with non-affiliates without consent.
- Eligibility limits for issuers and officers. Non-financial public companies are barred from issuing stablecoins without unanimous approval of the Stablecoin Certification Review Committee chaired by the Secretary of the Treasury, and individuals with certain financial crime convictions may not serve as officers or directors of a stablecoin issuer.
- Federal and state supervisory structure. Federal issuers are supervised by the OCC, while certain state issuers may operate under certified state-level regimes if they remain under $10 billion in issuance.
Putting It Into Practice: The GENIUS Act marks the most significant federal intervention to date in stablecoin regulation, introducing formal requirements around licensing, reserve requirements, and issuer conduct. By carving out a dual supervisory regime and placing hard caps on state-level authority, the Act creates both opportunity and complexity for payment stablecoin issuers. Moreover, state regulators with existing digital asset oversight programs may seek certification to continue supervising local issuers.
