On July 18, 2025, the Guiding and Establishing National Innovations for U.S. Stablecoins Act (the “GENIUS Act”) was signed into law by President Trump.[1] The GENIUS Act is the first federal legislation regulating cryptocurrency in the U.S. to take effect and establishes a regulatory framework for payment stablecoins with the goal to provide transparency, safety and regulatory clarity for users of these digital assets.
“Stablecoins” are a type of cryptocurrency that is backed by an external asset class which, in theory, allows its value to remain more stable than the value of other cryptocurrencies.[2] A stablecoin’s value can be pegged to fiat currency, such as the United States dollar, or valuable commodities traded on exchanges, such as gold or precious metals.[3] Stablecoins are used by consumers as a means of payment because of their ability to maintain value while being less volatile than other forms of traditional cryptocurrencies, such as Bitcoin.[4] Although proponents of stablecoins claim they are less volatile than other forms of cryptocurrencies, stablecoins have been able to avoid regulation as a security or a commodity, thus remaining largely unregulated at a federal level and increasing the risk borne by holders of stablecoins.[5]
Defined as “payment stablecoins” under the GENIUS Act, this act aims to provide greater transparency, safety, and confidence for consumers using payment stablecoins.[6] The GENIUS Act establishes reserve requirements mandating payment stablecoin issuers to maintain an adequate reserve backing on at least a 1:1 basis for all outstanding payment stablecoins issued.[7] Reserves may only consist of certain assets, including U.S. dollars, U.S. Treasury Bills and other low-risk assets approved by regulators. Permitted payment stablecoin issuers must publicly disclose the issuer’s redemption policy, which shall establish clear and conspicuous procedures for timely redemption of outstanding payment stablecoins. Payment stablecoins may also only be issued by “permitted stablecoin issuers,” which is a person[8] formed in the U.S. that is (A) a subsidiary of an insured depository institution that has been approved to issue payment stablecoins under section 5; (B) a Federal qualified stablecoin issuer; or (C) a State qualified stablecoin issuer.[9]
The GENIUS Act also amends U.S. federal securities laws and the Commodity Exchange Act to establish that a payment stablecoin is expressly not a security or commodity, leaving the federal regulation of payment stablecoins to banking regulators. Payment stablecoin issuers are now considered a “financial institution” for purposes of the Bank Secrecy Act, for example, subjecting payment stablecoin issuers to federal laws applicable to financial institutions regarding economic sanctions, prevention of money laundering, customer identification and due diligence.[10] The GENIUS Act also prohibits a public company that is not “predominantly engaged in one or more financial activities” from issuing a payment stablecoin unless it obtains clearance from the Stablecoin Certification Review Committee.[11]
The GENIUS Act is set to take effect on the earlier of (i) eighteen (18) months after its enactment or (ii) one hundred twenty (120) days after the primary federal stablecoin regulators issue final regulations implementing the GENIUS Act. With these new regulations, both issuers and users of payment stablecoins should familiarize themselves with the substance of the GENIUS Act to better understand the changing landscape of cryptocurrencies.
[1] Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), S. 1582, 119th Cong. (2025)
[2] See Jack Spira and David Wessel, What are stablecoins, and how are they regulated?, The Brookings Ins.(June 18, 2025) https://www.brookings.edu/articles/what-are-stablecoins-and-how-are-they-regulated/.
[3] See id.
[4] See id.
[5] See id.
[6] See The White House, Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law, (July 18, 2025), https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-signs-genius-act-into-law/.
[7] See GENIUS Act § 4(a)(1)(A).
[8] The term “person” means an individual, partnership, company, corporation, association, trust, estate, cooperative organization or other business entity, incorporated or unincorporate. See GENIUS Act § 2(24).
[9] See GENIUS Act § 2(23).
[10] See GENIUS Act § 4(a)(5).
[11] See GENIUS Act § 4(a)(12)(B)(i).
