The adoption by the U.S. Congress of stablecoin legislation is
likely to become a reality in the coming weeks following action by
the Trump administration to establish U.S. leadership in digital
assets as a priority.1 The U.S. House of Representatives
and the U.S. Senate continue to advance federal stablecoin
legislation in two similar bills: the STABLE Act (or the Stablecoin
Transparency and Accountability for a Better Ledger Economy Act of
2025, in the House) and the GENIUS Act (Guiding and Establishing
National Innovation for U.S. Stablecoins Act of 2025, in the
Senate). These bills, which emerged on the basis of bipartisan
support for federal regulation of the issuance of stablecoins,
would serve to establish a novel federal regulatory framework for
this particular form of digital asset. Although the two bills aim
to achieve similar objectives, they differ in certain key
details.
This Advisory (1) summarizes what the bills would do if adopted as
proposed; (2) highlights differences between the two bills; (3)
discusses important outstanding legislative and policy
considerations; (4) places the bills in perspective by explaining
the political dynamics that gave rise to this legislative
initiative and continue to shape the path to enactment; and (5)
discusses the opportunities that a federal stablecoin law might
provide for banking and other financial institutions.
This Advisory is part of a series by Arnold & Porter covering
the evolution of the digital asset landscape in the
U.S.2 It is the second in a pair of Advisories covering
stablecoins. The first Advisory provided an Introduction to Stablecoins, explaining use
cases, current approaches and structures, and associated risks.
Analyzing the STABLE and GENIUS Acts
How are stablecoins currently regulated?
With no comprehensive federal regulatory framework, issuers and intermediaries of stablecoins are not currently subject to uniform regulatory requirements. Instead, they are regulated under state laws and regulations — principally state money transmitter laws that vary by jurisdiction and generally apply to various forms of payment services providers. Some states, including New York, California, and Arkansas, regulate one or more aspects of stablecoin issuance and custody under state-level digital asset regulatory frameworks. Meanwhile, the status of payment stablecoins under federal securities laws has been a moving target over the past few years3 and the federal bank regulators have only recently begun to liberalize their standards for approving activities involving stablecoins and other digital assets.4
What do the STABLE and GENIUS Acts cover?
Broadly, the STABLE and GENIUS Acts create a regime for the issuance and regulation of payment stablecoins. They would allow payment stablecoins to be issued by subsidiaries of insured depository institutions, other entities approved by the Office of the Comptroller of the Currency (OCC), and entities authorized to issue stablecoins under qualifying state regimes ("permitted payment stablecoin issuers"). The acts would set forth standards for reserving practices, supervision and enforcement, Bank Secrecy Act (BSA)/Anti-money Laundering (AML), and insolvency, while striking a balance between federal and state authorities over stablecoins. By bringing regulatory clarity to the asset class, the legislation is expected to stimulate the growth of the industry.
How do the two bills define payment stablecoin?
The Senate's GENIUS Act defines a payment stablecoin as follows:
The term payment stablecoin means
(A) A digital asset —
(i) That is or is designed to be used as a means of payment or settlement; and
(ii) the issuer of which —
(I) Is obligated to convert, redeem, or repurchase for a fixed amount of monetary value
(II) Represents it will maintain or creates the reasonable expectation that it will maintain a stable value relative to the value of a fixed amount of monetary value
(B) That is not —
(i) A national currency
(ii) A security issued by an investment company registered under section 8(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-8(a))
The definition of payment stablecoin in the House's STABLE
Act is similar to the Senate's definition but differs in
certain respects. The House's bill clarifies that a payment
stablecoin must be denominated in a national currency; does not
include a "deposit" as defined in the Federal Deposit
Insurance Act5 or an "account" as defined in
the Federal Credit Union Act; and could not be a security issued by
a person that would be an investment company under the Investment
Company Act of 1940 but for paragraphs (1) and (7) of section 3(c)
of that Act.6 Finally, the House bill would further
limit instances where stablecoins could operate as securities
issued by investment companies.7
Both bills clarify that tokenized deposits are not covered by the
legislation, leaving space for banks to continue issuing that kind
of digital asset without being subject to the regulatory
requirements of these acts (most notably, the STABLE Act's
prohibition on paying interest to individuals holding stablecoins,
discussed in further detail below).
What are the reserve requirements for stablecoins?
The bills have similar, but not identical, requirements for
stablecoin reserves. Under both bills, a "permitted payment
stablecoin issuer" would be required to maintain reserves
backing all outstanding payment stablecoins on at least a
one-to-one basis. Under both bills, such reserves must be held in
safe assets, such as U.S. currency; bank deposits; deposits held at
a Federal Reserve bank;8 Treasury securities with a
maturity of 93 days or less; certain repurchase agreements backed
by Treasuries;9 or money market funds that are invested
in safe assets such as Treasuries or repos on
Treasuries.10
Also under both bills, stablecoin issuers would be required to
publish monthly reports on their websites disclosing the total
number of outstanding payment stablecoins issued by the issuer, and
the amount and composition of the reserves underlying the issued
stablecoins. In addition, in the subsequent month, these reports
would be required to be examined by an independent public
accounting firm, and the issuer's CEO and CFO would be required
to attest to their accuracy in submissions to their relevant
federal or state regulator.
Notably, both bills are silent on whether stablecoin issuers would
be permitted to access Federal Reserve master accounts. This
silence is likely to leave these judgments to the discretion of the
Federal Reserve, a subject that has been a matter of some
controversy over the past several years.11
Who may issue a stablecoin?
Stablecoin issuance would be restricted to (1) subsidiaries of insured depository institutions approved under applicable federal or state regulatory regimes to issue stablecoins, (2) nonbank entities approved by the OCC, or (3) issuers approved by a state regulatory agency (more details below). Permitted payment stablecoin issuers would have their businesses restricted solely to the issuance, redemption, management, and safekeeping of stablecoins, along with other functions that directly support the work of issuing and redeeming stablecoins or are otherwise permitted by the primary federal payment stablecoin regulator. The ability of nonbanks to issue stablecoins is notable; payment stablecoins bear a lot of similarities to banking products, and there is a historically strong barrier in U.S. law between banking and commerce.
What federal agencies would regulate payment stablecoin issuers?
In general, stablecoin issuers that are subsidiaries of
depository institutions would be regulated by the respective
federal prudential regulators of the parent depository institution.
Accordingly, for national banks, the primary federal regulator
would be the OCC; for insured state-chartered banks that are
members of the Federal Reserve system, the primary federal
regulator would be the Federal Reserve; and for insured
state-chartered banks that are not members of the Federal Reserve
system, the primary federal regulator would be the Federal Deposit
Insurance Corporation (FDIC). Subsidiaries of credit unions would
be regulated by the National Credit Union Administration
(NCUA).
In addition, nonbank entities would be able to apply to the OCC for
permission to issue stablecoins as a "federal qualified
nonbank payment stablecoin issuer" and, for these entities,
the OCC would be the primary federal regulator.
Federal stablecoin regulators would be required to promulgate a
regulatory regime governing stablecoin issuance, including capital,
liquidity risk, interest rate, operational risk, and other risk
management standards tailored to the business of issuing
stablecoins. Under the STABLE Act, these standards would apply to
all permitted payment stablecoin issuers, and the federal
authorities are required to consult with state authorities in
developing the standards; under the GENIUS Act, the federal
standards apply to federally permissioned issuers, while state
standards apply to state-permissioned issuers.
How would entities apply to become federally permitted stablecoin issuers?
Under both bills, prospective stablecoin issuers that are subsidiaries of depository institutions would be required to file an application with their respective federal regulator to become a permitted stablecoin issuer. Nonbank entities seeking to become federal qualified nonbank payment issuers would file applications with the OCC. Federal regulators12 would be required to develop and implement an application process for approving stablecoin issuers.
What role would state regulators play?
Both the STABLE and GENIUS Acts would allow states to regulate
stablecoin issuers through the state-level regulatory regimes.
States would be required to certify to the Secretary of the
Treasury that their regulatory regime met certain standards. A
state regulatory regime must either be "substantially similar
to" (under the GENIUS Act) or "meets or exceeds"
(under the STABLE Act) the requirements of the applicable federal
regulatory framework. The Secretary of the Treasury may reject the
certification by the states in certain circumstances. Under the
GENIUS Act, states would be required to recertify on an annual
basis; under the STABLE Act, a state would be required to update
their certification if it had made material changes to its
regulatory regime.
The Senate's GENIUS Act would permit only those stablecoin
issuers with total market capitalization of less than $10 billion
to opt for regulation under a state-level regulatory regime and
would create a transition mechanism if such issuers exceeded this
threshold.
Would the bills preempt existing state licensing and approval regimes for stablecoin issuers?
The House's STABLE Act states that the act's provisions regarding federal approval of payment stablecoin issuers would preempt any conflicting state law and supersede any state licensing requirement for any nonbank entity or subsidiary of an insured depository institution or credit union that is approved under the STABLE Act to be a permitted payment stablecoin issuer. The Senate's GENIUS Act does not include this language.
What do the bills say about safeguarding custody of stablecoins?
Under both bills, a person may only engage in the business of providing custodial or safekeeping services for stablecoins or private keys13 if they are (1) subject to supervision or regulation by (i) a federal payment stablecoin regulator or (ii) a state bank or credit union supervisor (that makes certain information available to the Federal Reserve), and (2) segregate and avoid commingling customer funds according to applicable federal law or regulations.
What do the bills say about BSA/AML requirements?
Under the House's STABLE Act, the Financial Crimes Enforcement Network (FinCEN), in consultation with federal stablecoin regulators, would be required to issue regulations to apply the BSA to permitted payment stablecoin issuers. These regulations would be required to be tailored to the size and complexity of the regulated issuers.
The Senate's GENIUS Act, however, would not involve FinCEN in the implementation of stablecoin-specific BSA regulations. Instead, the GENIUS Act includes BSA and sanctions compliance requirements in the more general list of issues that both federal and state regulators would be required to address in their respective stablecoin regulatory regimes.
What is the enforcement regime prescribed by the bills?
Under the STABLE and GENIUS Acts, federal stablecoin regulators
would have several enforcement mechanisms available (all similar to
the traditional enforcement methods available to federal banking
regulators) that would enable them to enforce the acts or any
regulation or order issued under the acts. Regulators would be able
to revoke the registration of permitted stablecoin issuers, pursue
cease-and-desist proceedings, remove institution-affiliated parties
from their position or office, and prohibit further participation
in the stablecoin industry.
In addition, under both bills, any person14 who issues a
payment stablecoin and who is not a permitted payment stablecoin
issuer, and any institution-affiliated party of such a person who
knowingly participates in issuing such a payment stablecoin, shall
be liable for a civil money penalty of up to $100,000 for each day
such payment stablecoins are outstanding. Further, any person who
materially violates the acts or any regulation or order promulgated
under the acts shall be liable for a civil money penalty of up to
$100,000 per day that the violation continues, and up to $200,000
per day if the violation were committed knowingly.
The bills provide limited federal back-up enforcement authority
against state qualified stablecoin issuers. Under the GENIUS Act,
the Federal Reserve would be able to pursue an enforcement action
against a state issuer insofar as the issuer's associated
violation is "exigent in nature," and only after
providing prior notice to the state stablecoin regulator. The OCC
would have the same authority over OCC-regulated entities (such as
nonbank issuers) subject to state regulatory oversight. Under the
STABLE Act, the applicable federal banking agencies would have
certain backup enforcement authority over state issuers that are
subsidiaries of insured depository institutions or
institution-affiliated parties of such entities, and the OCC would
have backup enforcement authority with respect to nonbank entities
or institution-affiliated parties to the extent that the state
authority has not commenced an action to correct a violation and
failure to take such action would "create a material risk of
loss to holders of such issuer's stablecoins or create a
material threat to U.S. financial stability."
What do the bills say about insolvency?
Under both bills, in any insolvency proceeding, claims against reserves of a payment stablecoin issuer from persons holding payment stablecoins issued by the payment stablecoin issuer would have priority over all other claims (other than for administrative expenses, under the STABLE Act) against the payment stablecoin issuer.
Can stablecoin issuers pay interest on the assets they receive in exchange for issuing stablecoins?
The House's STABLE Act would prohibit stablecoin issuers from paying "interest or yield" to individuals holding stablecoins. This prohibition would more clearly distinguish stablecoins from bank deposits. Since the House's STABLE Act (as well as the Senate's GENIUS Act) would still permit depository institutions to tokenize their deposits without becoming covered as a payment stablecoin for purposes of the legislation, this provides an advantage for tokenized deposits over stablecoins. Some have argued that this is necessary to prevent the erosion of deposits held at depository institutions.
How would the bills affect foreign stablecoin issuers?
The STABLE and GENIUS Acts would make it unlawful for any person other than a permitted payment stablecoin issuer to issue a payment stablecoin in the U.S. The STABLE Act would also make it unlawful, after an 18-month period, for any custodial intermediary to offer or sell in the U.S. a payment stablecoin that was not issued by a permitted payment stablecoin issuer. The STABLE Act would permit stablecoins issued by foreign payment stablecoin issuers to be offered and sold in the U.S., but only if (1) the foreign payment stablecoin issuer is subject to regulation by a foreign payment stablecoin regulator with a regulatory regime determined by the Secretary of the Treasury to be comparable to U.S. requirements, and (2) the foreign payment stablecoin issuer consents to be subject to U.S. reporting and examination requirements. The GENIUS Act would require the Federal Reserve and Treasury to conduct a study on reciprocity with respect to foreign stablecoins.
How would the bills impact the existing banking authority of banking institutions?
Both bills include provisions stating that nothing in the bills
may be construed to limit the authority of a depository
institution, credit union, or trust company to engage in activities
otherwise permissible under applicable state and federal law,
including issuing digital assets that represent deposits, utilizing
a distributed ledger for the books and records and to affect
intrabank transfers and providing custodial services for payment
stablecoins, private keys of payment stablecoins, or reserves
backing stablecoins.
Further, the bills both forbid federal banking regulators, the
NCUA, and the U.S. Securities and Exchange Commission (SEC) from
requiring institutions to include assets held in custody, including
against issued stablecoins, as a liability on their balance sheet.
Both bills would also generally forbid regulators from requiring
institutions to hold additional regulatory capital against these
assets in custody, except where additional capital requirements are
necessary to "mitigate against operational risks inherent with
the custody or safekeeping services."
Both bills would also forbid regulators from requiring institutions
to recognize a liability for any obligations related to services
performed with respect to digital assets that the entity does not
own if that liability would exceed the expense recognized in the
income statement as a result of the corresponding obligation.
How would the bills interact with existing securities regulations?
Both bills would carve out stablecoins from the scope of certain existing securities laws (including the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act, the Investment Company Act of 1940, and the Securities Investor Protection Act of 1970) by inserting provisions to those laws clarifying that a security, as defined in those laws, would not include a payment stablecoin issued by a permitted stablecoin issuer.
When would the bills become effective if passed?
Under the Senate's GENIUS Act, the effective date would be the earlier of either 18 months after the enactment of the act, or 120 days after federal regulators issue any final regulations implementing the act. The House's STABLE Act would put the effective date on a slightly shorter timeline — the earlier of either 12 months after the enactment of the act, or 120 days after federal regulators issue final regulations implementing the act.
Political Dynamics and the Path to Law
Bipartisan consensus on the benefits of creating a clear regulatory framework for stablecoins has emerged in both chambers of Congress. Reflecting this dynamic, both the House and Senate have advanced stablecoin bills out of the relevant committees in each chamber early in the legislative calendar. There is broad general agreement on the need to establish regulatory certainty around the issuance and use of stablecoins, and to impose certain uniform requirements for the asset, such as clear standards for the assets backing stablecoins. Differences remain, however, including regarding the breadth of federal preemption, transaction monitoring processes and know-your-customer requirements, and the need for consumer protections. The political will to make law governing stablecoins suggests that the differences between the two bills are surmountable.
Senate
On May 20, 2025, the Senate voted 66-32 to advance a modified
version of the GENIUS Act following weeks of bipartisan
negotiations. Democrats had initially opposed the legislation,
citing issues with the bill's consumer protection provisions,
but extended their support after several amendments to the
proposal. The updated text reflects a number of concessions from
Republicans, including broadening consumer protection provisions,
preventing preemption of state law, and limits to the issuance of
stablecoins by nonbank publicly traded companies, among others. Two
Republicans, Sens. Rand Paul (R-KY) and Jerry Moran (R-KS), opposed
the proposal.
House Leadership has not indicated whether or not they plan to hold
a floor vote on the measure, a prospect that may be complicated by
the House's work on the STABLE Act, which we detail below.
House leadership may choose to adopt the GENIUS Act, foregoing work
on the STABLE Act completely. More likely, House Republicans will
continue to advance the STABLE Act and attempt to force the Senate
to adopt it, which may prove challenging and delay progress on the
bill. House and Senate financial services policy leaders have not
indicated publicly how they plan to settle the differences between
these two approaches. With the budget reconciliation process
expected to continue to dominate House activity in the coming
weeks, we expect further consideration of the GENIUS Act to be
delayed by several months at a minimum.
House
In the House, the STABLE Act has followed a similar path to the
GENIUS Act; winning support from Republicans and dividing
Democrats. On April 2, 2025, the House Financial Services Committee
voted 32-17 to advance the STABLE Act, with Democrats Josh
Gottheimer (D-NJ), Sam Liccardo (D-CA), Ritchie Torres (D-NY), Jim
Himes (D-CT), Greg Meeks (D-NY), and Janelle Bynum (D-OR) voting in
favor of the legislation. The bill advanced following a grueling,
13-hour markup in which Democrats, including Ranking Member Maxine
Waters (D-CA), criticized the Trump administration's
involvement in the digital asset industry and House
Republicans' failure to include provisions banning officials
affiliated with the Trump administration from issuing stablecoins.
Committee Republicans described the proposal as unnecessary.
Democrats also criticized the bill's lack of mandatory FDIC
insurance or refund mechanisms for stablecoin issuers, and the
bill's preemption of state regulatory frameworks.
Ranking Member Waters' opposition to the proposal also stems
from Chair French Hill's (R-AR) decision to abandon a prior
bipartisan proposal to regulate the stablecoin industry, which she
co-authored with previous Chair Patrick McHenry (R-NC). Like in the
Senate, House Leadership has not detailed plans to bring the STABLE
Act to the House Floor. The legislation would likely face similar
criticism from a broader range of House Democrats but would likely
pass the House given the Republican majority and additional
Democratic support.
Path to Final Passage
Despite the similarities between the GENIUS Act and STABLE Act, compromise is not guaranteed. The path forward is for either the House or Senate Leadership to prioritize moving its respective position across the floor. The Senate, in particular, has a tough floor schedule that is easily bogged down by processing nominations, making it less likely to be the first mover. However, when there is a House or Senate-passed position and a statement from the president expressing support, or support with changes, the wheels of compromise start moving.
Opportunities for Banking Industry Participation
Financial institutions looking for new ways to engage with
digital assets will find ample opportunities in the proposed bills.
Both bank and nonbanks may want to consider becoming stablecoin
issuers themselves, through stablecoin subsidiaries, utilizing the
proposed regulatory framework as a new means of bringing funding
into their institutions or serving customers in innovative ways.
Some banks, reportedly, are exploring participating in stablecoin
consortiums.15 Other opportunities include tokenization
of deposits and paying interest on such instruments; establishing a
digital asset payment network or platform built around stablecoins;
or creating a digital wallet service for customers. Banks might
also consider serving as custodians for the reserves of bank or
nonbank stablecoin providers, or engaging in cryptocurrency custody
services, including for stablecoins. The bank regulators have been
liberalizing their formerly restrictive policy toward bank
engagement in cryptocurrency activities, and there is every reason
to think this trend will continue. For further information about
how bank regulators have clarified their approach to cryptocurrency
activities, see Arnold & Porter's April 2025
Advisory.
In all of these arenas, banks and nonbanks will compete, and the
question of whether federal and state standards are actually
equivalent figures to be a live question for years to come. Even
where banks, nonbanks, and state charters would be subject to
equivalent stablecoin issuance regulatory regimes, banks and bank
holding companies would be starting from a place of heightened
regulatory restrictions — with supervision, capital,
liquidity, management, activity, and affiliate transaction
requirements that nonbanks do not have. However, banks have
advantages of their own — some may find that their existing
positions as reputable, trustworthy institutions give them a prime
position to operate in a novel industry where new customers may be
looking for trusted partners with more robust regulatory
safeguards. And, of course, banks, as depository institutions, may
operate as service providers to stablecoin issuers, for example, as
providers of deposit reserves and custody services.
Footnotes
1 The White House, Strengthening American Leadership in Digital Financial Technology, Executive Order No. 14178, 90 Fed. Reg. 8647 (Jan. 23, 2025).
2 Please visit the Arnold & Porter Cryptocurrency & Digital Assets page to review the other Advisories in the series, including an Advisory on Federal Banking Agencies Clarify Approach to Bank-Permissible Crypto-Asset Activities.
3 See, e.g., Securities and Exchange Commission, Statement on Stablecoins (Apr. 4, 2025).
4 For further details, see Arnold & Porter's Advisory on Federal Banking Agencies Clarify Approach to Bank-Permissible Crypto-Asset Activities.
5 12 U.S.C. 1813.
6 12 U.S.C. 1752. The GENIUS Act provides, in another section of the bill, that nothing in the act would limit the authority of a depository institution to issue "digital assets that represent deposits."
7 Under the STABLE Act, a stablecoin could not be a security issued by: (1) an investment company registered under section 8(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-8(a)) or (2) a person that would be an investment company under the Investment Company Act of 1940 but for paragraphs (1) and (7) of section 3(c) of that Act (15 U.S.C. 80a-3(c)).
8 Only the Senate's GENIUS Act would permit issuers to utilize central bank reserve deposits as stablecoin reserves.
9 The Senate's GENIUS Act would permit stablecoin issuers to maintain reserves in the form of repurchase agreements with a maturity of seven days or less that are backed by Treasury bills with a maturity of 90 days or less, or reverse repurchase agreements with a maturity of seven days or less that are collateralized by Treasury notes, bills, or bonds on an overnight basis, subject to overcollateralization in line with standard market terms, that are (1) tri-party, (2) centrally cleared through a clearing house, or (3) bilateral with a counterparty that the issuer has determined to be adequately creditworthy even in the event of severe market stress. The House's STABLE Act would permit repurchase agreements to be used as reserves wherein the stablecoin issuer is acting as a seller of securities, or reverse repurchase agreements where the stablecoin issuer is acting as a purchaser of securities, with an overnight maturity and that are backed by Treasury bills with a maturity of 93 days or less, that are (1) centrally cleared through a clearing agency registered with the SEC, or (2) bilateral, settling either through delivery versus payment or through a tri-party control account, with a counterparty that the issuer has determined to be adequately credit worthy even in the event of severe market stress.
10 The Senate's GENIUS Act would permit stablecoin issuers to maintain reserves in money market funds invested only in U.S. currency, bank deposits, treasury securities with a maturity of 93 days or less, or certain repurchase agreements backed by Treasuries. The House's STABLE Act would additionally require that reserves may be held only in money market funds that are registered as an investment company under Section 8(a) of the Investment Company Act of 1940.
11 When determining whether or not to allow an entity to hold an account at a Federal Reserve bank, the Federal Reserve bank will evaluate (1) whether the entity has a sufficient statutory basis under federal law for Federal Reserve account access, and (2) what risks access by the entity would pose. See Guidelines for Evaluating Account and Services Requests, 87 Fed. Reg. 51099 (Aug. 19, 2022). These guidelines have not always been consistently applied by Federal Reserve banks to financial technology companies, and there continues to be a lack of clarity regarding in what circumstances financial technology companies will be granted master account access.
12 Under the House's STABLE Act, all of the primary federal stablecoin regulators would jointly issue rules implementing the application processes for approving stablecoin issuers. Under the Senate's GENIUS Act, only the OCC would issue these rules.
13 The House's STABLE Act would also impose these restrictions on persons engaged in the business of providing custodial or safekeeping services for reserves held against issued stablecoins.
14 Under both bills, "person" is defined as "an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity."
15 Gina Herb and Justin Baer, Big Banks Explore Venturing Into Crypto World Together With Joint Stablecoin, Wall St. J., May 24, 2025.
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