I. Introduction
This bulletin summarizes the key provisions of the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) (the "GENIUS Act"), an U.S. federal bill establishing the first comprehensive regulatory framework for the issuance and supervision of payment stablecoins in the U.S. The legislation introduces a tiered oversight model, codifies prudential standards, and confirms that payment stablecoins are not to be treated as securities or deposit liabilities.
II. Legislative Context and Outlook
On June 17, 2025, the U.S. Senate passed the GENIUS Act with a bipartisan vote of 68–30, signaling broad political support for stablecoin legislation. The GENIUS Act now proceeds to the U.S. House of Representatives, which is concurrently advancing its own bill—the STABLE Act (Stablecoin Transparency and Accountability for a Better Ledger Economy Act of 2025).
While both chambers pursue similar objectives through different legislative texts, the House shows even stronger bipartisan backing for stablecoin legislation than the Senate. A reconciliation process is expected in the coming weeks, with the aim of converging both bills into a final text for passage—a milestone many experts believe is likely to occur before year-end, given strong bipartisan support and prioritization by the executive branch. The GENIUS Act is expected to form the structural backbone of the compromise.
III. Summary of Key Provisions
1. Issuance, Offers of Sales of Payment Stablecoin
Pursuant to Section 3, it is unlawful for any person to issue, or to offer or sell in the United States, a payment stablecoin unless the coin is issued by a "permitted payment stablecoin issuer". This includes:
- Entities approved by the Office of the Comptroller of the
Currency, including:
- Subsidiaries of insured depository institutions (banks and credit-unions); and
- Federally qualified nonbank payment stablecoin issuers;
- State-licensed entities operating under a state regime that the Secretary of the Treasury has certified as meeting or exceeding federal requirements.
Foreign entities may also offer or sale stablecoins in the U.S., provided they are regulated under a comparable foreign regime and consent in writing to U.S. regulatory oversight, including examination and disclosure obligations.
2. Definition and Backing of Payment Stablecoins
Stablecoins are defined as fiat-pegged digital assets redeemable 1:1 in U.S. dollars or high-quality liquid assets such as U.S. Treasuries or Reserve bank deposits.
3. Prudential Standards
Pursuant to Section 4, permitted payment stablecoin issuers must:
- Fully back all issued stablecoins with eligible liquid assets;
- Publish clear redemption policies;
- Disclose the monthly composition of their reserves;
- Avoid rehypothecation of reserve assets;
- Submit monthly reserve certifications, with false certifications subject to criminal penalties; and
- Satisfy capital, liquidity, and operational risk standards, including those to be prescribed by the primary federal payment stablecoin regulators.
Pursuant to Section 10, entities providing custodial or safekeeping services for stablecoins must:
- Be subject to regulatory oversight and submit operational and asset protection information;
- Treat customer assets as customer property;
- Segregate customer assets from proprietary assets; and
- Grant priority to customer claims over custodian creditors for stablecoin assets held in custody.
Pursuant to Section 11, holders of payment stablecoins are granted senior creditor priority over reserve assets in insolvency proceedings.
4. Dual Regulatory Model Based on Issuer Size
Issuers with over $10 billion in circulation fall under mandatory federal oversight.
Issuers with $10 billion or less in circulation may choose to remain under qualified state supervision. States must submit their supervisory regimes to the Secretary of Treasury for certification to retain jurisdiction over smaller issuers.
5. Enforcement Powers
Pursuant to Section 5, each primary Federal payment stablecoin regulator must issue regulations and, thereafter, process issuer applications and are empowered to supervise issuers, issue cease-and-desist orders, revoke licenses, and impose civil penalties for noncompliance.
For subsidiaries of insured depository institutions (banks and credit unions), the relevant primary Federal payment stablecoin regulators are the Office of the Comptroller of the Currency for national banks, the Federal Reserve Board for state-member banks, the Federal Deposit Insurance Corporation for state non-member banks, and the National Credit Union Administration.
For nonbank entities, the relevant primary Federal payment stablecoin regulator is the Comptroller of the Currency.
6. Legal Classification
Pursuant to Section 14, payment stablecoins are not classified as securities, deposits, or bank liabilities.
7. Implementation and Transition
The GENIUS Act includes an 18-month transition period or 120 days following the date which the primary Federal payment stablecoin regulators issue any final regulations implementing the GENIUS Act, whichever is earlier.
IV. Observations
- The prohibition on rehypothecation and requirement for 1:1 asset backing are key consumer protection measures that mitigate systemic and liquidity risks associated with overleveraged or co-mingled stablecoin reserves.
- The dual regulatory model offers flexibility for smaller issuers to operate under qualified state regimes while ensuring robust federal oversight for larger, systemically important issuers.
- Payment stablecoins are expressly excluded from the definitions of securities, deposits, or bank liabilities. This addresses longstanding regulatory uncertainty and provides much-needed certainty for institutional adoption and compliance planning.
- The explicit treatment of foreign stablecoin issuers aligns international market access with U.S. standards, introducing a framework for reciprocity while protecting U.S. consumers and financial integrity.
- The custodian requirements including segregation of assets, customer claim priority, and regulatory disclosures align with best practices in custody and fiduciary accountability.
V. Relevance and Strategic Importance
The GENIUS Act represents a foundational step in modernizing the U.S. payment system and positioning the country as a leader in digital finance.
1. Modernization of the U.S. Payment Infrastructure
By supporting blockchain-based stablecoins, the GENIUS Act permits a faster, programmable, and immutable settlement layer. These technologies offer near-instant operations, on-chain auditability, and reduced counterparty risk, enabling a future where traditional financial rails are supplemented by secure, transparent digital asset systems.
2. Consumer Protection and Innovation Enablement
This is the first major U.S. legislation providing regulatory certainty in digital assets, combining high prudential standards with a compliance framework that encourages private-sector innovation.
3. Enhancing Demand for USD and U.S. Treasuries
By mandating stablecoin reserves to be held in U.S. dollars or short-term Treasuries, the GENIUS Act is expected to create structural demand for U.S. government debt and support domestic monetary sovereignty.
4. Global USD Dominance
U.S.-issued stablecoins are expected to become the de facto dollar rails globally, particularly in emerging markets with unstable local currencies.
The sponsors of the GENIUS Act estimates that, by 2030, stablecoin issuers may collectively become the largest holders of U.S. Treasuries, surpassing foreign central banks.
5. Gateway to Broader Digital Asset Legislation
Stablecoin regulation is seen as the lowest-hanging fruit in Washington's broader crypto legislative agenda. It is widely supported across party lines and across stakeholder types (banks, fintechs, payment providers). The Upcoming U.S. Digital Asset Bills Include:
- Digital Asset Market Structure Bill: Establishes SEC/CFTC jurisdiction lines, registers digital commodity exchanges, and codifies Decentralized Finance compliance perimeters.
- Token Taxonomy Act: Clarifies which digital assets are exempt from securities laws.
- Crypto AML Act: Tailors Anti-Money Laundering / Countering the Financing of Terrorism obligations for Decentralized Finance platforms, wallet providers, and cross-border stablecoin transfers.
- CBDC Anti-Surveillance Act: Prohibits the Federal Reserve from issuing a retail central bank digital currency.
- Digital Commodity Consumer Protection Act: Enhances consumer protection in spot crypto markets under CFTC oversight.
VI. Conclusion
The GENIUS Act is a transformative step for U.S. financial regulation in the digital age. It advances monetary modernization, promotes U.S. dollar primacy, provides clear legal guardrails, and offers a compliant structure to foster responsible innovation. As the House and Senate move toward reconciliation, the GENIUS Act is positioned to become the first cornerstone law governing digital assets in the United States.
VII. About McMillan's Perspective
While McMillan LLP does not practice U.S. law, and the foregoing is only an overview and does not constitute legal advice. Our team, however, our team closely monitors legal, regulatory, and market developments in the digital asset space globally. We remain committed to keeping our clients and audience informed about key international legislative initiatives—such as the GENIUS Act—and reflecting on how such developments may influence Canadian legislative approaches and regulatory positions on comparable digital assets and market structures. By staying ahead of digital innovation and cross-border policy shifts, McMillan supports clients in anticipating change, managing risk, and identifying new opportunities across the evolving digital economy.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
