The first piece of major US federal legislation in the global digital assets space was signed into law on July 18, 2025, by President Trump.1 Declared by President Trump as positioning the United States to be the “crypto capital of the world,” this key piece of federal legislation, among other things, creates a regulatory and licensing regime in the United States for issuers of payment stablecoins and clarifies that payment stablecoins are not securities or commodities under US law.
The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) (GENIUS Act, or the Act), establishes a first-ever US federal regulatory framework for “payment stablecoins” — essentially digital assets 100% backed on at least a 1-to-1 basis by liquid assets (such as low-risk reserves), pegged to the value of a reference national currency (such as the US dollar), and redeemable at a fixed value. The Act also establishes strict marketing requirements for payment stablecoins, requirements for providers of custodial services and for third parties engaged in the business of facilitating exchanges, transfers and sales of payment stablecoins, and is designed to establish a consistent regulatory framework for payment stablecoins by aligning state regulatory regimes with the federal stablecoin framework established under the Act.
It emerged quickly from the US House of Representatives during what was dubbed “Crypto Week” (July 14-18) as one of three bills passed by the House. The other two crypto bills passed by the House and now before the Senate are the CLARITY Act, a broader market structure bill on digital assets, and the Anti-CBDC Surveillance State Act, a bill that would prevent the US Federal Reserve System from issuing a central bank digital currency.
The GENIUS Act and the other bills are components of a larger set of federal initiatives designed to position the United States as a global leader in digital assets. A notice from the key federal banking regulators issued last week seeks public comment on ways in which to relieve the burdens of the complex US financial services regulatory framework. These initiatives, including the White House’s AI Action Plan, are all parts of a larger strategy to reduce bottlenecks and to spark innovation by modernizing crucial infrastructures with AI and other supercomputing resources.2
Summary
A key feature of the GENIUS Act is that it creates a new issuer type — specifically, a “permitted payment stablecoin issuer” — and prohibits payment stablecoin issuers from creating and issuing stablecoins in the United States until approved to do so by either a federal banking regulator, an approved state regulator, or a new committee composed of federal banking regulators described below (the Stablecoin Certification Review Committee or SCRC). Payment stablecoin issuers may include:
- approved subsidiaries of insured depository institutions;
- nonbank entities approved by the Office of the Comptroller of the Currency (OCC);
- OCC-chartered uninsured banks and federal branches of foreign banks approved by the OCC;
- state-chartered issuers approved by state regulators;
- some foreign issuers, as described below; and
- public companies that are not predominantly engaged in financial activities (as defined under the Bank Holding Company Act) and are approved by the SCRC.
The SCRC’s approval of such public companies will require the public company to demonstrate it will meet standards related to financial stability, data privacy, and anti-tying restrictions. Stablecoin issuers with assets over $10 billion must pursue the federal pathway but smaller issuers may elect to pursue oversight by a state regulator where such state regime is determined by the SCRC to be substantially similar to the federal framework. Foreign issuers may be eligible to be payment stablecoin issuers, provided they operate under a comparable foreign regulatory regime (as determined by the Secretary of the Treasury with the recommendation of the other members of the SCRC), they are registered with the OCC, and they hold reserves in a US financial institution sufficient to meet liquidity demands of US customers.
Role of Federal Banking Regulators
US federal banking regulators will play the dominant role going forward in determining which entities are permitted to issue payment stablecoins. Applications for federal approval to become a permitted payment stablecoin issuer under the Act will be handled by the OCC, Federal Deposit Insurance Corporation (FDIC), or Federal Reserve Board (Federal Reserve) depending on the type of entity applying, and those federal banking regulators will have supervisory, examination, and enforcement authority over the entities they approve to issue payment stablecoins. The Act also requires the creation of the SCRC, which will be comprised of the Treasury Secretary (who will act as Chair of the SCRC) and the Chairs of the FDIC and the Federal Reserve. The SCRC is empowered to ensure that state-level regulation of payment stablecoins aligns with federal standards and to determine whether public companies that are not primarily engaged in financial activities but want to issue stablecoins meet the law’s standards. The SCRC and the Secretary of the Treasury are responsible for issuing interpretive rules beginning next year, including rules that clarify anti-tying requirements for stablecoin issuers affiliated with public companies, anti-money laundering (AML) and other Bank Secrecy Act (BSA) rules to apply to permitted payment stablecoin issuers, and principles based rules for determining if state-level payment stablecoin regulatory regimes are substantially similar to the federal regulatory framework under the Act. Finally, the SCRC plays a key role in determining whether foreign stablecoin issuers operate under a comparable regulatory regime and should be approved to offer stablecoins in the US market. The Act assigns each federally regulated permitted payment stablecoin issuer to one of the three federal banking regulators based on the type of issuer.
Issuer Requirements
Payment stablecoin issuers must also comply with a multitude of additional requirements, including the following:
- maintain reserve assets that fully back outstanding payment stablecoins issued (on at least a 1-to-1 basis) and that are comprised of high-quality, liquid assets;
- disclose monthly the makeup of the reserve assets, redemption policies, and issuers with more than $50 billion in outstanding payment stablecoins issued must make annual audited financial statements publicly available;
- comply with the BSA (including for foreign issuers); and
- avoid making misleading claims or marketing representations about stablecoins.
Payment stablecoin issuers are also restricted from engaging in stablecoin activities outside of (1) issuance, redemption and custody of payment stablecoins, (2) maintenance and custody of the reserve assets, and (3) activities to directly support those activities. Payment stablecoin issuers may not tie or condition a customer’s access to or use of stablecoins on the purchase of other products or services (or on agreement not to obtain a product or service from a competitor). This anti-tying restriction mirrors banking regulations that prevent banks from bundling services in a coercive manner.3
BSA and sanctions compliance will require stablecoin issuers to implement systems and controls to mitigate the risk of money laundering and terrorist financing, including, for example, a customer identification program, transaction monitoring, sanctions screening, suspicious activity reporting, training, and recordkeeping. These obligations should be comparable to those already applicable to licensed banks and money service businesses, but prospective payment stablecoin issuers that are not already subject to the BSA or similar state-level AML frameworks should consider developing any necessary policies, procedures, and controls in order to come into compliance.
The Act also includes reciprocity provisions for foreign payment stablecoin issuers. Foreign issuers that are subject to supervision in a country with a regulatory framework comparable to that of the United States may register with the OCC. Such issuers must comply with the minimum standards set out in the GENIUS Act and adhere to US sanctions expectations.
The Act includes specific customer protection rules for holders of payment stablecoins. The Act prohibits firms from providing custodial or safekeeping services for payment stablecoin reserves unless subject to supervision by a federal payment stablecoin regulator, financial regulatory agency or an approved state regulator. Custodians are required to separately account for payment stablecoin reserves, payment stablecoins, cash and other property of a payment stablecoin issuer or customer and are prohibited from commingling them with assets of the custodian. The Act also provides payment stablecoin holders priority treatment in bankruptcy with respect to the reserves up to the value of the reserves required under the Act. Finally, payment stablecoins are not backed by federal deposit insurance, so permitted issuers may not make representations that payment stablecoins are backed by the federal government or federal deposit insurance.
Impact on Payments Companies
The GENIUS Act focuses on “payment stablecoins” that are designed for use as a means of payment or settlement, and so the Act brings needed clarity for how payments companies can go to market with innovative products and services based on stablecoins. This clarity and legitimization of the use of payment stablecoins in the United States should help smooth the path for development and deployment of stablecoin-based payment services that proponents believe will be faster, cheaper, more available (24/7, real-time), and offer better transparency and security. Use cases include utilizing payment stablecoins for faster and cheaper international payments, quicker settlement of B2B payments, corporate treasury services, merchant payment acceptance and settlement, and merchant to consumer payments and other consumer remittances.
However, the Act also imposes strict requirements on payments companies looking to issue payment stablecoins as part of their service offering and on digital asset service providers that plan to facilitate sales, transfers, and exchanges of payment stablecoins or custodial services for payment stablecoins. Several large US payments companies, fintechs, and financial institutions already have issued stablecoins that would meet the definition of a payment stablecoin subject to the GENIUS Act, which will require issuers to start preparing to apply for a license to be a permitted payment stablecoin issuer from the applicable federal banking regulator (or if applicable, a state payment stablecoin regulator). Payment stablecoin issuers may also have to build out the internal resources to manage compliance, supervision and examination by their applicable regulator to the extent they do not already have those resources in place. For existing payment stablecoin issuers, the Act provides that the applicable federal regulator may waive the requirements of the Act for up to 12 months from the Act’s effective date for stablecoin issuers that have applications pending on the Act’s effective date. This may provide some temporary relief for payment stablecoin issuers, but the Act does not require the federal regulator to grant the waiver.
Amendments to Federal Securities Laws and SEC Issues
SEC Chairman Atkins praised the passage of the GENIUS Act shortly after its passage, stating, “Blockchain and crypto asset technologies have the potential to revolutionize America’s financial infrastructure and deliver new efficiencies, cost reductions, transparency, and risk mitigation for the benefit of all Americans. Innovators experimenting with these exciting technologies deserve clear rules of the road, which the GENIUS Act provides for payment stablecoins.”4
One clear rule of the road established by the GENIUS Act is its amendment to the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Investment Advisers Act of 1940 to exclude “payment stablecoins” from the definition of “security.” Notably, for SEC-registered investment advisers, this exclusion will negate the ability of the SEC and its staff to apply to payment stablecoins positions historically taken by the SEC and its staff that certain instruments that are not securities for purposes of the Securities Act of 1933 or the Securities Exchange Act of 1934 may nonetheless be securities for purposes of the Investment Company Act of 1940 or the Investment Advisers Act of 1940. Examples include bank certificates of deposit, loans, certain promissory notes, and reverse repurchase agreements. One practical impact of the GENIUS Act is that transactions in payment stablecoins will not constitute securities transactions that must be reported pursuant to the Advisers Act Code of Ethics Rule (Rule 204A-1). In addition, the Act makes clear that state-chartered trust companies may provide custodial services for payment stablecoins (a position that the SEC had questioned in the past) and provides that federal agencies like the SEC may not regulate payment stablecoin custodians in substantive ways, e.g., by requiring such custodians to account for assets held in custody on their balance sheets.
For SEC-registered broker-dealers, the passage of the GENIUS Act is likely to create numerous questions given their position in the US capital markets. Depending on the nature of a broker-dealer’s business, those questions may include the capital treatment of payment stablecoins for purposes of complying with the SEC’s Net Capital Rule and the impact of current SEC regulations on customer assets comprising payment stablecoins.
Amendment to Commodity Exchange Act and CFTC Issues
The Act also amends the Commodity Exchange Act (the CEA) to exclude “payment stablecoins” from the definition of “commodity.” The term “commodity” under the CEA is very broad and has been found to encompass many other types of digital assets.5 Under the CEA, the Commodity Futures Trading Commission (the CFTC) has broad authority to regulate derivatives on commodities, such as swaps, futures and options, but it only has anti-fraud and anti-manipulation authority over commodities themselves. By excluding payment stablecoins from the definition of commodity, the Act makes clear that federal commodities laws and regulations broadly do not apply to payment stablecoin market activity, including the myriad potential registration, transaction reporting, recordkeeping and other obligations thereunder.
Notably, however, the Act’s requirements on payment stablecoins do not apply to other types of digital assets such as central bank digital currencies, tokenized deposits, or other non-payment stablecoins. As such, there are potential regulatory gaps with respect to certain types of digital assets which may potentially be subject to federal commodities laws and regulations that are better suited for regulation by federal banking regulators. To address this regulatory gap, the Act requires the Secretary of the Treasury, in consultation with the federal banking regulators, the SEC, and the CFTC, to carry out a study of non-payment stablecoins, including crypto-backed or algorithmic stablecoins, within one year of the Act’s enactment.
Effective Dates
The Act will go into effect the earlier of 18 months following the date of its passage or 120 days after final regulations are issued. The Act anticipates that the federal banking regulators will issue implementing regulations within one year of the Act’s enactment.
The passage of the GENIUS Act marks a watershed moment in the evolution of the US digital asset regulatory landscape. The Act provides a long-awaited federal standard in this space to minimize the confusion and patchwork of inconsistent state laws and regulations, thus providing legal clarity for consumers, stablecoin issuers and market participants. As the surge of innovation in digital assets continues apace, the enactment of the GENIUS Act furthers the Administration’s intent to position the United States as the global leader in digital assets.
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1 See Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law – The White House.
2 See federal banking regulators’ fourth request for comments: https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20250721a1.pdf and the White House’s AI Action Plan: https://www.whitehouse.gov/articles/2025/07/white-house-unveils-americas-ai-action-plan/. Note also that in March 2025, the White House established a strategic bitcoin reserve and US digital asset stockpile. Establishment of the Strategic Bitcoin Reserve and United States Digital Asset Stockpile – The White House.
3 See Myth v. Fact: The GENIUS Act.pdf
4 See SEC.gov | Statement on Passage of the GENIUS Act by the House of Representatives.
5 See, e.g., Order, In the Matter of Coinflip, Inc., No. 15-29 (Sep. 17, 2015) (classifying Bitcoin as a commodity).
