On July 18, 2025, President Trump signed into law Public Law No: 119-27, the Guiding and Establishing National Innovation for U.S. Stablecoins Act, commonly referred to as the GENIUS Act. This landmark legislation establishes the first comprehensive federal regulatory framework for payment of stablecoins, which are a type of cryptocurrency that has a value which is tied to an underlying asset, such as precious metals or fiat currency. The GENIUS Act seeks to set clear guidelines for stablecoin issuance, operation, and oversight within the United States. Balancing the desire for innovation against the need for consumer protection, the crux of the GENIUS Act is to provide a working regulatory framework to advance digital assets, and stablecoins specifically.
Importantly, the GENIUS Act carves out stablecoins from the definition of a "security" or "commodity," that would otherwise implicate regulatory oversight by the Securities Exchange Commission or Commodity Futures Trading Commission. Instead, Congress delegated the oversight authority to the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Federal Reserve Board. The GENIUS Act provides stablecoin issuers with a regulatory path for the imposition of authorization, reserve requirements, audits and consumer disclosure requirements, as needed. It also contains amendments to the U.S. Bankruptcy Code to include protections for payment stablecoin holders in the event of a permissible payment stablecoin's issuer's insolvency, and conditions for priority claims.
Regulations are currently being drafted and will likely be rolled out in phases through 2026, with full effect by early 2027. Some notable provisions that will likely take effect include:
- Requirements of stablecoin issuers to make monthly public disclosures of the composition of its underlying asset reserves;
- Enforcement of marketing rules to protect customers from deceptive and fraudulent practices, such as making misleading claims about the stablecoin being federally insured.
- Subjecting stablecoins to the Bank Secrecy Act (BSA), effectively obligating stablecoins to enact anti-money laundering and government sanction compliance programs
- Prohibition of the issuance of stablecoins by unapproved sources. Currently, the permitted payment stablecoin issuers include: (1) approved bank subsidiaries, (2) federally approved non-banks or OCC-chartered uninsured banks or federal branches, and (3) state-chartered issuers approved by state regulators.
Additionally, while the GENIUS Act will greatly increase the federal government's involvement in the regulation of stablecoins, states may also enact a regulatory regime. The GENIUS Act will allow non-bank stablecoin issuers to opt in to a state's regulatory regime so long as the non-bank issuer has an outstanding stablecoin value of under $10 billion. States will thus have the option to create stablecoin legislation themselves, should they choose to. However, it is important to note that a non-bank that grows above the $10 billion threshold would need to transition to the federal regime.
The regulation will have a large impact on U.S. companies as stablecoins have been increasing in popularity in recent years. Unlike other cryptocurrencies, which may fluctuate in value wildly, stablecoins seek to maintain a controlled value by pegging its value to an underlying asset, such as the U.S. dollar. This is often achieved by maintaining a 1:1 ratio of stablecoin to the underlying asset. Because of this, companies may be more comfortable accepting stablecoin as payment in transactions or holding stablecoins in reserve. This may be particularly useful in cross-border transactions if the stablecoins have a lower transaction fee than traditional methods. Large financial institutions have indicated a desire to create a stablecoin.
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