Executive Summary
Our Privacy, Cyber & Data Strategy and White Collar, Government & Internal Investigations Teams examine how the GENIUS Act's framework for stablecoin issuers will impact the cryptocurrency sector.
- The Act restricts the issuance of payment stablecoins within the United States to "permitted payment stablecoin issuers" (PPSIs)
- PPSIs must maintain reserves of high-quality, liquid assets that fully back their outstanding stablecoins on at least a one-to-one basis
- Regulatory oversight is divided between federal and state authorities, with joint oversight applying when state issuers exceed certain thresholds or opt into federal frameworks
On July 17, 2025, during "Crypto Week," the U.S. House of Representatives passed the landmark Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act). Signed into law by President Donald Trump the next day, the GENIUS Act establishes a comprehensive federal framework for the issuance of payment stablecoins, regulation of stablecoin issuers, and both federal and state oversight for stablecoin authorization, audits, and other obligations. Domestic and foreign issuers in the more than $250 billion stablecoin market now have a clear path to securing and maintaining regulatory compliance in the United States.
Demonstrating rare cross-aisle cooperation and a shared interest in modernizing financial regulations to match emerging blockchain and artificial intelligence (AI) technologies, the Act garnered 308 affirmative votes in the House and 68 in the Senate, surpassing the upper chamber's filibuster threshold. The GENIUS Act addresses Trump's key campaign and policy promise to bring clarity and control to the digital asset market.
Key Provisions of the GENIUS Act
Effective date
The GENIUS Act takes effect on the earlier of (1) January 18, 2027 (18 months after the date the Act is enacted into law); or (2) 120 days after the primary federal regulators responsible for stablecoins issue their final regulations to implement the Act.
Authorized issuance of stablecoins only
The Act restricts the issuance of payment stablecoins within the United States to only those entities that qualify as "permitted payment stablecoin issuers" (PPSIs). PPSIs must be either U.S.-based issuers authorized under the Act or foreign issuers that are registered and operate under a regulatory framework deemed comparable to the Act by U.S. authorities and are subject to supervision by the Office of the Comptroller of the Currency (OCC).
A domestic PPSI must meet the requirements of one of three main categories: (1) subsidiary of an insured depository institution that has received approval to issue payment stablecoins under Section 5 of the Act; (2) federal qualified payment stablecoin issuers, which encompass nonbank entities (excluding state-qualified issuers) approved by the OCC, uninsured national banks chartered and approved by the OCC, or a foreign bank that does business outside the United States and has opened one or more federally licensed branches or offices in a U.S. state ("federal branch"), approved by the OCC; or (3) state-qualified payment stablecoin issuers, which are entities legally established under state law and approved by a state payment stablecoin regulator, provided they are not an uninsured national bank, federal branch, insured depository institution, or subsidiary of any such entities.
Requirements for issuing stablecoins
PPSIs must maintain reserves that fully back their outstanding stablecoins on at least a one-to-one basis. These reserves must consist of high-quality, liquid assets such as U.S. coins and currency or credit with a Federal Reserve Bank, demand deposits at insured depository institutions, short-term U.S. Treasury securities, and other monetary securities described in Section 4(a)(1) of the GENIUS Act. Any PPSI must publicly disclose its redemption policies and publish monthly reports detailing the composition, average maturity, and custody location of its reserves. A PPSI's CEO and CFO must certify the accuracy of those monthly reports, and the Act makes knowingly false certifications punishable by up to 10 or 20 years' imprisonment under 18 U.S.C. § 1350. To ensure reserve quality and transparency, PPSIs are prohibited from pledging, rehypothecating, or reusing reserves except under limited conditions, such as meeting margin obligations for investments in permitted reserves or creating liquidity to redeem payment stablecoins.
Mitigating money laundering and illicit financing risk
The GENIUS Act designates permitted payment stablecoin issuers as "financial institutions" under the Bank Secrecy Act (BSA), requiring them to implement robust compliance programs to prevent money laundering, terrorist financing, sanctions evasion, and other illicit activity. PPSIs must annually certify that they have implemented an effective BSA/AML compliance program. False certifications are punishable by up to five years' imprisonment. To ensure regulatory parity, the Act's registration and inspection requirements for foreign issuers effectively subjects them to similar compliance standards when accessing the U.S. market. Issuers must also be technologically capable of assisting with asset freezes, seizures, and turnovers pursuant to lawful orders. The Act further strengthens enforcement by requiring both U.S. and foreign issuers to (1) maintain the technical ability to comply with such orders; and (2) comply with them. Foreign issuers that fail to do so may be designated "noncompliant" by the Treasury, triggering a ban on secondary trading of their stablecoins after 30 days. Violations of that ban carry steep penalties—up to $100,000 per day for digital asset service providers and $1 million per day for foreign issuers.
Regulatory oversight
Regulatory oversight is divided between federal and state authorities, with federal regulators overseeing federally chartered or bank-affiliated issuers, state regulators supervising state-chartered issuers, and joint oversight applying when state issuers exceed certain thresholds or opt into federal frameworks. Regulators are responsible for licensing, examining, and supervising PPSIs to ensure compliance with the Act's requirements, including reserve backing, redemption policies, and risk management standards.
PPSIs with more than $50 billion in consolidated total outstanding issuance that are not subject to the reporting requirements of the Securities Exchange Act of 1934 are required to prepare an annual financial statement in accordance with generally accepted accounting principles (GAAP) and must disclose any "related party transactions," as defined under GAAP. A registered public accounting firm must audit the annual financial statement, and the audit must comply with all applicable standards set by the Public Company Accounting Oversight Board. These audited financial statements must also be made publicly available on the PPSI's website and submitted annually to the PPSI's primary federal payment stablecoin regulator.
Civil and criminal penalties
Additional civil and criminal penalties are set out throughout the Act. Notably, entities other than PPSIs that issue payment stablecoins in the United States without proper approval may face civil penalties of up to $100,000 per day for violations. Individuals who knowingly issue stablecoins in the United States without being a permitted payment stablecoin issuer face up to five years' imprisonment and fines up to $1 million for each violation. Additionally, individuals with certain felony convictions are prohibited from serving as officers or directors of a PPSI, and violations of that prohibition can result in imprisonment for up to five years. The Act expressly gives regulators discretion to refer violations of the Act to the Attorney General.
Modernizing anti-money laundering and financial crimes compliance
The GENIUS Act places a strong emphasis on leveraging blockchain technology and AI to modernize the detection of illicit financial activity involving digital assets. The Act mandates that the Secretary of the Treasury initiate a public comment period to gather insights on how regulated financial institutions are using or could use innovative tools—particularly blockchain and AI—to detect money laundering and related crimes. Blockchain technology is highlighted for its potential in transaction monitoring and transparency, especially in tracking digital asset flows and identifying suspicious patterns.
Rulemaking timeline
The Act mandates that all primary federal payment stablecoin regulators, the Secretary of the Treasury, and state payment stablecoin regulators must promulgate regulations to implement the Act within one year of its enactment (July 18, 2026). These regulations must be issued through a notice-and-comment process. Additionally, within 180 days of the Act's effective date, the OCC, Federal Deposit Insurance Corporation, and Board of Governors of the Federal Reserve System shall submit a report to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services that confirms and describes the regulations necessary to carry out this Act.
Other Impending Crypto Legislation
The GENIUS Act is momentous for stablecoin issuers, but it does not resolve a number of crypto-native issues, which are the subject of a broader market structure bill known as the Digital Asset Market Clarity Act of 2025 (CLARITY Act). The CLARITY Act passed the House with broad bipartisan support, and a version is currently under Senate consideration. While the GENIUS Act focused narrowly on regulating stablecoin issuers, the CLARITY Act seeks to establish a robust regulatory framework for all digital assets and define the roles of the Securities and Exchange Commission and Commodity Futures Trading Commission in policing the digital asset markets. Most notably, for the first time, the CLARITY Act attempts to classify digital assets based on their characteristics, such as decentralization and blockchain maturity, with a goal of reducing regulatory uncertainty and fostering innovation in the cryptocurrency industry. Senator Tim Scott (R-SC), chair of the Senate Banking Committee, has made several public statements on the timeline for consideration of the CLARITY Act, with committee markup expected in September and full Senate action possible by late fall.
Conclusion
The GENIUS Act establishes a robust framework for the issuance and oversight of payment stablecoins in the United States. It sets clear standards to ensure transparency for the backing of permitted payment stablecoins, and it requires issuers, like traditional financial institutions, to quickly establish robust compliance programs to combat illicit uses of their stablecoins. With its strong bipartisan backing and goals of financial stability, consumer protection, and global competitiveness, the Act could lay the groundwork for a more transparent and trustworthy digital asset ecosystem.
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