The United States Congress has achieved a landmark milestone in cryptocurrency regulation with the passage of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. The legislation, which cleared the House on July 17, 2025, after passing the Senate last month, establishes the first comprehensive federal regulatory framework for payment stablecoins, marking a pivotal moment for the digital asset industry’s integration into mainstream finance.
President Donald Trump is expected to sign the bill into law within days, fulfilling his campaign promise to make the United States the “crypto capital of the world.” The GENIUS Act represents the first major crypto-related legislation to pass both chambers of Congress, signaling growing bipartisan recognition of digital assets’ importance in the modern financial system.
Comprehensive Regulatory Framework Emerges
The GENIUS Act creates a robust regulatory structure that addresses consumer protection, financial stability, national security, and anti-money laundering compliance for payment stablecoins. The legislation defines payment stablecoins as digital assets designed for payment or settlement purposes, where issuers are obligated to redeem them for a fixed monetary value and maintain stable value relative to that amount.
Under the new framework, only “permitted payment stablecoin issuers” can issue payment stablecoins in the United States. These permitted issuers can operate through dual federal and state licensing pathways, providing flexibility while maintaining regulatory oversight.
Dual Licensing System for Issuers
The legislation establishes a sophisticated dual-track system for stablecoin issuers:
Federal Issuers: Subsidiaries of insured depository institutions, nonbank entities, federal branches of foreign banks, and uninsured national banks can obtain federal licensing. The appropriate federal banking agency will serve as the primary regulator for subsidiaries of insured depository institutions, while the Office of the Comptroller of the Currency will regulate other federal issuers.
State Issuers: Issuers with $10 billion or less in outstanding stablecoins may opt into state-only regulation, provided their state regulatory framework is “substantially similar” to federal requirements. However, state-qualified issuers exceeding $10 billion in outstanding stablecoins must transition to federal oversight within 360 days.
This hybrid approach allows smaller issuers to maintain state-level oversight while ensuring that larger, systemically important stablecoin operations fall under federal supervision.
Strict Requirements for Foreign Issuers
The GENIUS Act imposes significant restrictions on foreign payment stablecoin issuers operating in the U.S. market. Foreign issuers must demonstrate technological capability to comply with lawful orders to seize, freeze, burn, or prevent the transfer of outstanding stablecoins. They must also be subject to a “comparable” regulatory regime as determined by the Treasury Secretary.
Foreign issuers are required to register with the OCC, hold reserves in U.S. financial institutions sufficient to meet U.S. customer liquidity demands, and cannot be domiciled in jurisdictions subject to comprehensive U.S. economic sanctions or identified as primary money laundering concerns.
Robust Reserve Requirements
The legislation establishes stringent reserve requirements for payment stablecoins, mandating at least a one-to-one backing ratio. Eligible reserve assets include:
- U.S. cash and currency held at Federal Reserve Banks
- Demand deposits at insured depository institutions
- Short-term Treasury securities with 93 days or less maturity
- Money received under repurchase agreements on short-term Treasuries
- Securities from registered investment companies or government money market funds investing only in approved assets
- Tokenized versions of the above assets
Critically, the legislation prohibits issuers from pledging, rehypothecating, or reusing these reserves except in limited circumstances, ensuring that stablecoin holders maintain first claim on these assets.
Consumer Protection and Compliance Measures
The GENIUS Act maintains strong consumer protection provisions while not preempting state consumer protection laws. It prohibits marketing products as payment stablecoins unless issued under the GENIUS Act framework and bars individuals convicted of financial crimes from serving as officers or directors of payment stablecoin issuers.
The legislation also incorporates comprehensive anti-money laundering and sanctions compliance requirements. Payment stablecoin issuers are treated as financial institutions under the Bank Secrecy Act and must maintain effective AML programs, customer identification procedures, and suspicious activity monitoring systems.
Capital and Risk Management Standards
Federal and state regulators must impose tailored capital, liquidity, operational, compliance, and information technology risk management requirements on payment stablecoin issuers. These requirements are designed to be proportionate to each issuer’s business model and risk profile.
Importantly, the legislation prohibits federal banking agencies and the SEC from reintroducing requirements similar to Staff Accounting Bulletin 121, which had required banks to hold custodied digital assets on their balance sheets. This provision removes a significant barrier to traditional financial institutions’ involvement in the digital asset ecosystem.
Bankruptcy Protections for Stablecoin Holders
The GENIUS Act provides significant protections for stablecoin holders in issuer bankruptcy proceedings. Holders’ claims against the issuer’s reserves receive priority on a ratable basis with other holders, ranking above other claims in the issuer’s insolvency. This treatment mirrors the priority given to bank depositors, providing enhanced security for stablecoin users.
The legislation also applies the Bankruptcy Code’s automatic stay to stablecoin reserves while allowing certain relief mechanisms to permit issuers to satisfy customer redemptions quickly during insolvency proceedings.
Industry Impact and Market Response
The passage of the GENIUS Act has been met with enthusiasm from the cryptocurrency industry, which has long sought regulatory clarity for stablecoin operations. The framework provides a clear pathway for stablecoin issuers to operate legally in the United States while maintaining appropriate consumer protections and financial stability safeguards.
Traditional financial institutions, which had been cautious about engaging with stablecoins due to regulatory uncertainty, may now be more willing to explore partnerships and integrations with stablecoin issuers. This could accelerate the mainstream adoption of digital assets for payments and settlement purposes.
Implementation Timeline and Next Steps
The GENIUS Act takes effect on the earlier of 18 months after enactment or 120 days after primary federal payment stablecoin regulators issue final implementing regulations. Prohibitions on digital asset service providers offering non-compliant stablecoins begin three years after enactment, subject to any safe harbor established by the Treasury Secretary.
Federal regulators will have one year after enactment to promulgate detailed regulations through notice and comment rulemaking, providing further clarity on specific compliance requirements.
Part of “Crypto Week” Legislative Success
The GENIUS Act’s passage capped off what industry observers have dubbed “crypto week,” during which the House also passed the Digital Asset Market Clarity (CLARITY) Act and the Anti-CBDC Surveillance State Act. The CLARITY Act would establish jurisdictional boundaries between the SEC and CFTC regarding digital assets, while the CBDC ban would prohibit the Federal Reserve from issuing a central bank digital currency.
These legislative achievements reflect growing bipartisan recognition of the need for comprehensive crypto regulation and mark a significant departure from the enforcement-heavy approach of previous administrations.
Global Competitive Implications
By establishing a clear regulatory framework for stablecoins, the United States positions itself to compete more effectively in the global digital asset market. Other jurisdictions, including the European Union and Singapore, have already developed comprehensive stablecoin regulations, and the U.S. risked falling behind without similar frameworks.
The GENIUS Act provides a model that balances innovation with appropriate oversight, potentially influencing regulatory approaches in other countries and establishing U.S. leadership in digital asset policy.
The successful passage of this landmark legislation demonstrates that cryptocurrency has moved beyond the fringe and is increasingly recognized as an integral part of the mainstream financial system. As President Trump prepares to sign the GENIUS Act into law, the United States takes a significant step toward realizing its ambition of becoming the global leader in digital asset innovation and regulation.
This analysis reflects legislative developments as of July 18, 2025. The regulatory landscape for stablecoins continues to evolve, and implementation details will be clarified through forthcoming rulemaking processes.
