[co-author: Samantha Ackel]
Today marks a historic milestone in U.S. digital asset policy. The President signed the GENIUS Act into law following its bipartisan passage by 308-122 in the House on July 17 and 68-30 in the Senate on June 17. The GENIUS Act is the first federal law to create a comprehensive regulatory framework for payment stablecoins, digital tokens pegged to monetary value and intended for payments.
The GENIUS Act ushers in a new era of legal clarity for stablecoin issuers operating in the United States. For the first time, federal law defines who may issue a stablecoin, how it must be backed and which federal or state regulator must oversee it.
After years of legal ambiguity, this law is a watershed moment for the crypto industry. It replaces a patchwork of state and federal guidance with enforceable standards for reserve assets, redemption rights, disclosures and custody while clarifying that compliant stablecoins are neither securities nor commodities.
The GENIUS Act is a significant policy victory for the digital asset sector, which has long called for tailored legislation to enable innovation within a well-defined regulatory perimeter. The GENIUS Act sends a strong signal globally that stablecoins are a legitimate financial product.
Background
The passage of the GENIUS Act follows key legislative developments:
- On June 17, the Senate passed the GENIUS Act (S.1582) overwhelmingly with a bipartisan vote of 68-30.
- On June 18, the President urged the House to pass the GENIUS Act without any changes to the legislative text as soon as possible so he could sign it into law.
- On July 3, House Committee on Financial Services Chairman French Hill (R-AR), House Committee on Agriculture Chairman GT Thompson (R-PA) and House leadership announced the week of July 14 would be designated as “Crypto Week,” when the House would consider three pieces of crypto legislation, including the GENIUS Act.
- On July 17, during “Crypto Week,” the House passed the GENIUS Act with bipartisan support by a vote of 308-122.
- On July 18, the President signed into law the GENIUS Act, the most significant digital asset law to date.
What Is a ‘Payment Stablecoin’?
Under the GENIUS Act, a payment stablecoin is defined as a digital asset designed for payment, listed by a stablecoin issuer that maintains the coin will hold a stable value relative to a fixed amount of monetary value. The Act explicitly excludes things like central bank money, bank deposits or traditional securities from this definition.
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Defined Term
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Payment Stablecoin
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Payment Stablecoin
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The term ‘‘payment stablecoin’’ means a digital asset:
- Designed to be used as a means of payment or settlement;
- The issuer of which,
- is obligated to convert, redeem or repurchase for a fixed amount of monetary value; and
- will maintain a stable value relative to the value of a fixed amount of monetary value; and
- Is not a national currency, deposit or otherwise a security. Sec. 2(22).
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Non-Permitted Issuance
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A payment stablecoin that is not issued by a permitted payment stablecoin issuer shall not be:
- Treated as cash or as a cash equivalent for accounting purposes;
- Eligible as cash or as a cash equivalent margin and collateral for futures commission merchants, derivative clearing organizations, broker-dealers, registered clearing agencies and swap dealers; or
- Acceptable as a settlement asset to facilitate wholesale payments between banking organizations or by a payment infrastructure to facilitate exchange and settlement among banking organizations. Sec. 3(g).
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Who Can Issue Stablecoins? Permitted Issuers Only
The GENIUS Act restricts the issuance of payment stablecoins in the U.S. to “permitted payment stablecoin issuers.” Sec. 3(a). Once the Act becomes effective (i.e., the earlier of 18 months after enactment or 120 days after implementing regulations are finalized), it will be unlawful for any person to issue a payment stablecoin unless they are a permitted stablecoin issuer. Sec. 20.
However, digital asset service providers (which include a digital asset exchange or custodian) may continue to offer and sell stablecoins that have not been issued by permitted stablecoin issuers until three years after enactment (i.e., July 2028). Sec. 3(b).
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Defined Terms
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Permitted Stablecoin Issuers
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Permitted Stablecoin Issuer
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Permitted payment stablecoin issuers would include a person formed in the U.S. that is:
- A subsidiary of an insured depository institution approved by the primary federal payment stablecoin regulator;
- A federal qualified payment stablecoin issuer (defined below); and
- A state qualified payment stablecoin issuer. Sec. 2(23).
A permitted stablecoin issuer cannot pay payment stablecoin holders any yield or interest. Sec. 4(a)(11).
Foreign issuers may issue stablecoins in certain circumstances. Sec. 18.
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Federal Qualified Payment
Stablecoin Issuer
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