President Trump signed the "Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025" (the "GENIUS Act" or the "Act") into law on July 18, 2025, providing a comprehensive framework for regulating the issuance, sale, exchange, and oversight of stablecoins used for payments. Enacted by bipartisan vote, this legislation is a significant step in establishing a regulatory framework for payment stablecoins in the United States including reserve requirements, issuer disclosures, and consumer protections. The Act defines payment stablecoins, spells out who may issue stablecoins, sets requirements and permitted activities for issuers, clarifies federal and state oversight, and establishes new bankruptcy protections for holders.
The Act defines a "payment stablecoin" as a digital asset 1) used for payments or settlement, 2) issued with a promise to redeem for a fixed monetary value, and 3) maintained at a stable value relative to a fiat currency. The Act specifically excludes national currencies, insured deposits, securities, and commodities from the definition of a payment stablecoin and removes Securities and Exchange Commission and Commodities Future Trading Commission regulatory authority. Tying these cryptocurrencies to a reserve asset maintains a stable value and offers a stable medium of exchange and a store of value enabling smoother digital transactions and potentially wider blockchain adoption.
Only Permitted Payment Stablecoin Issuers ("PPSIs") will be authorized to issue stablecoins under the Act. PPSIs include subsidiaries of insured depository institutions, federally qualified issuers approved by the Office of the Comptroller of the Currency ("OCC"), and state approved issuers (if the state regulatory regime meets the federal requirements). Issuance of stablecoins by any person who is not a PPSI carries up to a $1 million fine per violation and up to 5 years imprisonment. Foreign issuers will only be allowed if the foreign issuer is regulated under a comparable foreign regime, registered with the OCC, and not based in a sanctioned or high-risk country.
Under the Act, PPSIs must 1) fully back stablecoins with 100% reserves, 2) disclose redemption policies and monthly reserve details, 3) segregate and not rehypothecate reserves, 4) comply with capital, liquidity, anti-money laundering, and sanction rules, and 5) designate a compliance officer responsible for maintaining records. PPSIs are only permitted to issue and redeem stablecoins, manage reserves and custody services, and support related operational functions. Beginning July 18, 2028, digital asset service providers in the United States (cryptocurrency exchanges, custodians and wallet providers and payment apps) may only use stablecoins issued by PPSIs, except for peer-to-peer transfers without intermediaries, transfers between same-owner accounts, and self-custodial wallet transactions.
The Act also resolves conflicts between federal and state regulation of stablecoins. PPSIs with greater than $10 billion in stablecoins must comply with federal regulators, such as the OCC, Federal Reserve Board, FDIC, and the National Credit Union Administration. For PPSIs with less than or equal to $10 billion in stablecoins, the provider may either operate under federal supervision or under state supervision if the state regime is certified by the newly created Stablecoin Certification Review Committee. To be certified, state regulators must enact regimes substantially similar to the federal rules. State-chartered depository institutions issuing stablecoins will be subject to joint regulation by both federal and state regulators. For the most part, the Act preempts any conflicting state law except for certain state consumer protection laws.
Finally, the Act provides enhanced bankruptcy protection for holders. Stablecoin reserves will be excluded from an issuer's bankruptcy estate, holders will receive priority claims over reserves and enhanced priority for any shortfalls, and holders will enjoy relief from the automatic bankruptcy stay when making redemptions. All of these changes will take effect on the earlier of January 18, 2027 or 120 days after final federal rulemaking. Digital asset service providers will be required to comply by July 18, 2028.
Having a clear regulatory structure for cryptocurrency is expected to allow investors to confidently price risk in the crypto space and encourage investment. Stablecoins enable individuals and businesses to bypass traditional banking by facilitating direct, peer-to-peer transactions on decentralized blockchain networks, eliminating banking intermediaries.
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