What Is the GENIUS Act

AuthorPrince WhiteheartUpdated on CategoriesBlog

What Is the GENIUS Act

  • Full name: Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (GENIUS Act).
  • It’s the first comprehensive U.S. federal law specifically to regulate payment stablecoins.
  • Signed into law by President Trump on July 18, 2025.

Key Provisions & Requirements

Here are the main regulatory, licensing, reserve, and disclosure obligations under the GENIUS Act:

AreaWhat the Law Requires / Establishes
Issuer qualificationOnly “permitted payment stablecoin issuers” may issue payment stablecoins in the U.S. Includes subsidiaries of insured depository institutions (banks or credit unions), or federally licensed non-bank stablecoin issuers. Smaller issuers can also be regulated at the state level under certain conditions.
Federal vs State oversightIf a stablecoin issuer has ≤ $10 billion in total outstanding payment stablecoins, they may opt into a state regulatory framework that is “substantially similar” to the federal standard. If they exceed that threshold, they must come under federal regulation.
Reserve backing / asset requirementsMust maintain 1:1 reserves for stablecoins issued. Reserves must be in low-risk, highly liquid assets, e.g. US dollars, short-term U.S. Treasuries, or similarly specified instruments. No rehypothecation (i.e. re-pledging or re-using collateral) except limited cases for liquidity / redemption needs.
Transparency & auditIssuers must disclose monthly the reserve composition (what assets are backing the stablecoins), and larger issuers (e.g. over $50 billion in outstanding issuance) must publish annual audited financial statements. Top executives (CEO/CFO) must certify the accuracy.
Redemption & disclosure rulesIssuers must offer redemption (or conversion) of stablecoins for their face monetary value, with clear, publicly disclosed, and fair procedures. Any fees related to redemption / issuance must be made clear in plain language.
Classification / JurisdictionPayment stablecoins under this law are not treated as securities (so not under SEC) or commodities (so not under CFTC) for those aspects covered by the Act. Instead, regulation comes via agencies like the Federal Reserve, FDIC, OCC, etc.
Bank Secrecy / AML / SanctionsIssuers are treated as “financial institutions” under the Bank Secrecy Act, meaning they must comply with anti-money laundering (AML), sanctions, customer identification, and “freeze/seize/burn” capabilities when legally required. Foreign issuers may be designated noncompliant if they don’t meet lawful orders.
Timing / ImplementationThe law becomes effective either: (i) 18 months after enactment (i.e. Jan 18, 2027), or (ii) 120 days after the primary federal regulators issue final implementing regulations, whichever is earlier. Digital asset service providers (wallets, custodians, exchanges) get a 3-year transition period to comply, especially to ensure they only offer or sell stablecoins that are issued by permitted issuers by a specified time (July 18, 2028).

What It Means / Implications

  • Clarity and Legitimacy: The act provides much clearer rules for stablecoin issuers, which many in the crypto industry have been wanting. It aims to reduce regulatory uncertainty.
  • Consumer protection: With reserve requirements, auditing, disclosures, and rules around redemption, the law is built to protect stablecoin holders from reserve mismanagement, fraud, or failure of stablecoins to maintain their peg.
  • Shifts in regulatory power: SEC & CFTC will have less direct oversight over stablecoins that comply; those powers shift to banking regulators and other financial agency authorities. This is a meaningful change.
  • Barrier to entry: Smaller issuers will need to meet fairly strict requirements. Entities thinking of issuing stablecoins will likely need legal/regulatory advice; failing to be a “permitted issuer” or operating outside the requirements is made illegal.
  • Foreign stablecoins: There are provisions for foreign issuers, but they must meet compliance with U.S. law in certain respects, or risk being noncompliant (restricting their usability in the U.S.)
  • Innovation vs restriction tension: On one hand, regulatory clarity may encourage investment. On the other, the strict reserve and oversight rules, plus limitations (e.g. no interest payments directly from issuers) could limit some business models or shift how yield-generating stablecoin ecosystems operate.

Criticisms / Potential Weaknesses

  • Some critics argue that the law doesn’t go far enough on illicit finance, or that enforcement mechanisms may lag. There’s concern over how easily domestic and foreign issuers can evade parts of the regime.
  • The prohibition on paying interest (directly from issuers) may push issuers or service providers to use workarounds (e.g. via “rewards” programs) to provide yield, undermining the intent in some eyes.
  • Risks of regulatory overreach or cost burden for smaller players who must meet strict state/federal standards if they grow or cross thresholds. Compliance costs, audits, legal overhead, etc.

  • Implementation complexity: rulemaking, supervision, coordination between federal and state authorities, certifying state regimes as “substantially similar”, etc, will take time and be complicated. There may be gaps in supervision early on.


What Is / Was The Timeline

  • Enactment: July 18, 2025.
  • Effectiveness: The law takes effect 18 months after enactment (so around January 2027), or sooner if regulators issue final rules within 120 days of enactment.
  • Transition Period: Digital asset service providers have up to 3 years to fully comply in certain respects; also issuers must meet permitted status, etc.

How It Compares to Other Approaches / Global Context

  • Similar in spirit to regulatory frameworks in other jurisdictions trying to treat stablecoins more like financial instruments or payments systems, rather than unregulated crypto tokens.

  • The reserve requirement and transparency obligations are stronger than in many earlier stablecoin proposals in the U.S. or elsewhere.

  • Has features designed to align federal and state roles, so state regulatory structures still matter but must meet “substantial similarity” to the federal standard.