The GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins Act), is a US federal bill establishing the first comprehensive regulatory framework for the issuance and supervision of payment stablecoins in the US. The legislation introduces a tiered oversight model, codifies prudential standards, and confirms that payment stablecoins are not to be treated as securities or deposit liabilities. It is, therefore, critical legislation with global implications.
This topic has received widespread coverage, and this article draws on an overview given by a US legal practice, McMillan LLP 1.
The US Senate passed the GENIUS Act on 17 June. It now proceeds to the US House of Representatives, which is concurrently advancing its own bill – the STABLE Act (Stablecoin Transparency and Accountability for a Better Ledger Economy Act of 2025).
While both chambers pursue similar objectives through different legislative texts, a reconciliation process is expected with the aim of converging both bills into a final text for passage, possibly before year-end given strong bipartisan support and prioritization by the executive branch. The GENIUS Act is expected to form the structural backbone of the compromise.
Issuance offers of sales of payment stablecoin – a payment stablecoin offered or sold in the US will have to be issued by a ‘permitted payment stablecoin issuer’, entities approved by the Office of the Comptroller of the Currency and statelicensed entities operating under a state regime that the Secretary of the Treasury has certified as meeting or exceeding federal requirements.
Foreign entities may also offer or sell stablecoins in the US, provided they are regulated under a comparable foreign regime and consent in writing to US regulatory oversight, including examination and disclosure obligations. This explicit treatment of foreign stablecoin issuers aligns international market access with US standards, introducing a framework for reciprocity while protecting US consumers and financial integrity.
Definition and backing of payment stablecoins – are defined as fiat-pegged digital assets redeemable one to one in US dollars or high-quality liquid assets such as US Treasuries or Reserve bank deposits.
Payment stablecoins are not classified as securities, deposits, or bank liabilities. This provides much-needed certainty for institutional adoption and compliance planning.
Prudential standards – permitted payment stablecoin issuers must fully back all issued stablecoins with eligible liquid assets, publish clear redemption policies, disclose the monthly composition of their reserves, avoid rehypothecation of reserve assets, submit monthly reserve certifications and satisfy capital, liquidity, and operational risk standards, including those to be prescribed by the primary federal payment stablecoin regulators.
The prohibition on rehypothecation and requirement for one-to-one asset backing are key consumer protection measures that mitigate systemic, and liquidity risks associated with overleveraged or comingled stablecoin reserves.
Entities providing custodial or safekeeping services for stablecoins must be subject to regulatory oversight and submit operational and asset protection information, treat customer assets as customer property, segregate customer assets from proprietary assets, and grant priority to customer claims over custodian creditors for stablecoin assets held in custody. Segregation of assets, customer claim priority, and regulatory disclosures align with best practices in custody and fiduciary accountability.
Holders of payment stablecoins are granted senior creditor priority over reserve assets in insolvency proceedings.
Issuers with over $10 billion in circulation fall under mandatory federal oversight.
Issuers with $10 billion or less in circulation may choose to remain under qualified state supervision. States must submit their supervisory regimes to the Secretary of Treasury for certification to retain jurisdiction over smaller issuers. This dual regulatory model offers flexibility for smaller issuers to operate under qualified state regimes while ensuring robust federal oversight for larger, systemically important issuers.
Implementation and transition – the GENIUS Act includes an 18-month transition period or 120 days following the date which the primary Federal payment stablecoin regulators issue any final regulations implementing the GENIUS Act, or whichever is earlier.
1. Modernization of the US payment infrastructure – by supporting blockchain-based stablecoins, the GENIUS Act permits a faster, programmable, and immutable settlement layer. These technologies offer near-instant operations, on-chain auditability, and reduced counterparty risk, enabling a future where traditional financial rails are supplemented by secure, transparent digital asset systems.
2. Consumer protection and innovation enablement – this is the first major US legislation providing regulatory certainty in digital assets, combining high prudential standards with a compliance framework that encourages privatesector innovation.
3. Enhancing demand for USD and US Treasuries – by mandating stablecoin reserves to be held in US dollars or short-term Treasuries, the GENIUS Act is expected to create structural demand for US government debt and support domestic monetary sovereignty.
4. Global USD dominance – US-issued stablecoins are expected to become the de facto dollar rails globally, particularly in emerging markets with unstable local currencies.
Gateway to broader digital asset legislation The GENIUS Act was passed as part of what may end up as a three-bill ‘package deal’ – as two companion bills (or actually, three with only two likely to survive) have now cleared the House en route to consideration within the Senate chamber in the coming weeks. Even with stablecoins defined and regulations specified in the US for their issuance, backing, and reporting, there’s some confusion still on definitions, regulatory requirements, and oversight plans concerning other digital assets.
The Digital Asset Market CLARITY Act is the second piece of legislation related to the GENIUS Act, and it is also on its way to the Senate. The act has raised concerns about how it protects investors. It transfers oversight duties on certain digital assets from the Securities and Exchange Commission (SEC) to the Commodity
Futures Trading Corporation (CFTC), among other things.
The CLARITY Act ‘defines a digital commodity as ‘a digital asset that is intrinsically linked to a blockchain system, and the value of which is derived from or is reasonably expected to be derived from the use of the blockchain system.’ However, in the Senate the politicians are not aligned on how to handle crypto assets other than payments.
The Responsible Financial Innovation Act of 2025 (RFIA) is also under consideration. It takes a different approach to market regulation and classification of digital assets.
The RFIA would establish a larger oversight role for the SEC, over which the Senate Banking Committee has jurisdiction.
Stablecoin regulation is widely supported across party lines and across stakeholder types (banks, fintechs, payment providers).
However, the differences between the CLARITY ACT and RFIA will need to be reconciled. It’s expected that one of these main digital asset regulatory frameworks under consideration will advance from Congress before the end of the year.
Finally, the upcoming US Digital Asset Bills include:
How long before the GENIUS Act helps your business run faster and cheaper?
The GENIUS Act doesn’t take effect until 2027, and it is moving through the legislative process alongside other legislation 2. In addition, it will operate alongside similar laws now in place or being instituted by other countries around the world. These challenges might extend its effective date as much as 120 days further into that year.
Whatever finally emerges, along with its companion pieces of legislation, these landmark digital asset laws will combine to exert a huge influence on future financial services offerings and practices in the US and abroad.
Advocates foresee dramatically reduced cross-border financial transfer timelines and dramatically lower costs for such transfers. Stablecoin providers all along the value chain – bank, nonbank, and fintech – will undoubtedly work to supplant many traditional payment rails and methods in the US and across the globe.
However, the pricing and efficiency of stablecoin payments will be proven in the ‘real world’ of daily commerce. Actual provider expenses, operational friction, client-realised costs, transaction timing, other benefits, and, of course, potential pitfalls will be revealed in due course. We’ll know, maybe within a year or two, if the claimed benefits are real.
The stablecoin market has grown to be a $250 billion sector largely in a regulatory vacuum that favours issuers over consumers. An essay analyses how the European Union’s Markets in Crypto-Assets Regulation (‘MiCAR’) and the GENIUS Act address the governance of stablecoins from a private law perspective 3.
The study looked at the major stablecoin issuers Circle and Tether. It identified four critical private law deficiencies:
The authors argue that, despite the availability of straightforward private ordering solutions, market leaders have failed to adopt adequate protections for their customers.
Both MiCAR and the GENIUS Act represent substantial regulatory advances; however, they employ markedly different approaches.
MiCAR emphasizes comprehensive conduct obligations and strict liability regimes. In contrast, the GENIUS Act focuses on operational requirements and unprecedented bankruptcy protections.
The success of these regulatory interventions will ultimately depend on how effectively they remedy private law shortcomings, the content of future agency rulemaking, and the interaction of these new rules with the evolving dynamics of the stablecoin market.
An article published by the American Economic Institute (AEI), The ‘GENIUS Act Is Not Pure Genius’ 4, casts a sceptical eye over the legislation. It argues that the GENIUS Act will have good and bad qualities for consumers and citizens.
While a ‘stablecoin’ has some of the qualities of cryptocurrency, such as rapid, internet-style borderless transacting, they are issued and managed centrally and their value is pegged to other assets, such as the US dollar. A dollar stablecoin is as stable as the US dollar, an important point that many people overlook.
Theoretically, the likes of Bitcoin have intrinsic value, transferability, acceptance, cost to transfer, deflation resistance, surveillance resistance, seizure resistance, and security (ie. theft resistance). The GENIUS Act gives stablecoins notable qualities along a couple of these dimensions. One is a complex, not entirely predictable interplay between cost and inflation resistance. Privacy is notably absent.
While stablecoins should improve speed, lower costs and prices of transferring funds are uncertain. The cost of sending stablecoins is likely to be close to zero but stablecoin issuers will get a high return at the expense of the consumer through other routes.
No interest or yield – In the US stablecoin issuers will take dollars and hold them in approved assets, such as Treasury bonds. In exchange, they will issue their dollar stablecoins to customers, or ‘holders.’ The statute prohibits stablecoin issuers from paying holders ‘any form of interest or yield.’ While, at current rates, an issuer of a billion dollars in stablecoins that puts it in three-month Treasuries will make over $40 million per year, that they cannot pass on to holders.
Anti-competitive – Secondarily, if the value of the stablecoin holdings, the holders cannot benefit, while the traditional banking model can. By denying benefits to consumers, GENIUS mutes competition for the old banking industry and the new stablecoin industry.
Only public companies that are predominantly engaged in financial activities can issue stablecoins, unless they have unanimous approval of a ‘Stablecoin Certification Review Committee.’
The effect is likely to be to lock out broader competition.
Lock out – The author sees GENIUS as a way for the US to dip a toe into cryptolike features, but only by existing financial services companies while guaranteeing them supranormal profits.
Privacy – An alternative is a central bank digital currency (CBDC), but when the House of Representatives passed GENIUS, it also passed the Anti-CBDC Surveillance State Act so that there can be no surveillance state through the money.
However, GENIUS subjects stablecoin issuers to all of the Bank Secrecy Act just as the traditional financial services industry does already. GENIUS requires that stablecoin issuers have ‘procedures to block, freeze, and reject’ transactions. The statute does though, call for a study of ‘anti– money laundering innovation.’
1 - Overview and Analysis of the GENIUS Act – McMillan LLP
2 - How long before the GENIUS Act helps your business run faster and cheaper?
4 - The GENIUS Act Is Not Pure Genius | American Enterprise Institute – AEI: Jim Harper
