INTRODUCTION

The President signed into law the Guiding and Establishing National Innovation for U.S. Stablecoins of 2025’or ‘‘GENIUS Act of 2025’” (the Act) on July 18, 2025.  The new law establishes a basis for regulators to permit a variety of bank and non-bank entities to issue payment stablecoins that will be used for payments and reserves for a variety of purposes. This analysis covers the major provisions of the new law.

STABLECOIN BACKGROUND: WHAT THEY ARE AND HOW THEY ARE USED

Stablecoins are digital assets designed to maintain a stable value relative to another asset, typically a fiat currency like the U.S. dollar.  Stablecoins function as a “type of digital dollar on the blockchain” with a structure that “resembles a money-market fund … they are tradeable stable-dollar value instruments backed by safe collateral (e.g., U.S. treasury bills) … but their purpose is for digital payments.” (June 2025: Stablecoin Summer, Grayscale, July 1, 2025. Pg. 1-2).

The stablecoin market has demonstrated remarkable growth and adoption since its inception. Current estimates suggest stablecoins are used for approximately $800 billion in digital transactions per month, a figure that compares to Visa’s processing of $1.1 trillion volume per month in 2024 (Stablecoin Summer , pg. 2).   This level of transaction volume occurred prior to the passage of the GENIUS act, underscoring the real-world utility that stablecoins have already achieved in global commerce and serving as a prelude to the growth potential that they enable.

The largest stablecoins by market cap include Circle’s USDC and Tether’s USDT, with Circle’s recent public offering in June 2025 highlighting the sector’s maturation. Circle went public at $31 per share and saw its stock price surge to $181 by month end, demonstrating strong investor confidence in the stablecoin business model. The company’s valuation of more than 150 times its 2024 EBITDA suggest that investors see significant growth prospects in the sector.  

Cryptocurrencies like Bitcoin, Solana, and Ethereum are notoriously volatile, which presents challenges for individuals and businesses looking to use blockchains for their various benefits. Stablecoins aim to provide these benefits, including: borderless payments, near-instantaneous settlements, micro-transactions, lower costs per transaction, and a high degree of transparency, while maintaining price stability that makes them suitable for everyday transactions and as a store of value.    Stablecoins serve multiple critical functions in the digital economy:

Payment Infrastructure: Stablecoins enable instant, low-cost cross-border payments without the need for traditional banking intermediaries. The technology is already widely adopted in emerging market economies, allowing individuals and businesses to bypass inflationary pressure and intermediary red tape with their fiat currencies. International trade settlement, remittance, peer-to-peer payments, and supply chain payments are already in use. Any business owner can also begin using stablecoins within their existing business, allowing them to essentially utilize the U.S. dollar payment’s infrastructure directly and simply in any country in the world with only a mobile phone.

Commercial and Enterprise Adoption: A diverse mix of leading firms have recently announced investments or exploratory work related to stablecoins, including commercial banks (JPMorgan and SocGen), market infrastructure providers (the Depository Trust & Clearing Corporation), fintechs (Shopify, Fiserv, and Revolut), and major retailers (Amazon and Walmart). These companies recognize the potential benefits of stablecoins for efficiency and cost reduction in digital payments (Stablecoin Summer, pg. 2-5).

DeFi Integration: Beyond the benefits stablecoins offer in of themselves in existing payment infrastructures, they also offer adopters instant access to decentralized finance protocols. Stablecoins serve as the primary medium or exchange and collateral, enabling lending, borrowing, and trading activity across thousands of decentralized applications. DeFi integration enables adopters to earn yield on different varieties of implementation using their stablecoins, allowing significant flexibility in the benefits and earning potential adopters have.

Alternative to Traditional Payment Networks: Stablecoins have the potential to disrupt leading incumbents among traditional payment processors like Visa and MasterCard. Legacy payment networks don’t have the same ability to tap into the benefits stablecoins provide without adopting stablecoins themselves, which presents a compounding opportunity as more firms begin to utilize stablecoins in transactions.

Like commercial bank money, stablecoins are issued by private sector entities that earn revenue through the difference between the interest on their assets (such as Treasury bills) and the currently zero interest paid on their liabilities (the stablecoins themselves), creating a profitable business model.

Despite their widespread adoption and growing corporate interest, stablecoins have operated in a regulatory gray area in the United States. Different agencies have taken varying approaches to oversight, creating uncertainty for issuers, users, and the broader financial system (Stablecoin Summer, 2-6).

The lack of clear federal regulation has resulted in a patchwork of state-level frameworks and varying approaches by federal agencies. This regulatory uncertainty has limited institutional adoption and created compliance challenges for businesses seeking to integrate stablecoins into their operations. The GENIUS Act represents the first comprehensive federal framework specifically designed to address these challenges while preserving the innovation and efficiency benefits that have driven stablecoin adoption.

The new law provides for a framework for payment stablecoins that will enable their use in the current financial system on a regulated basis. This article provides an overview of key provision, including:

• definitions of key terms and players in the new framework;
• requirements for issuing payment stablecoins and the roles of the players;
• approaches for customer protection and interoperability of systems;
• several studies and reports to Congress about the system of regulations; as well as
• clarification that payment stablecoins are neither “equities” nor “commodities” under the law.

DEFINITIONS PROVIDE LEGAL CERTAINTY 

The law provides a framework for the issuance of payment stablecoins, for the first time.  To understand the requirements, it is necessary to understand the definitions of key terms used in the Act.  

Digital Asset: The Act defines “digital asset” as “any digital representation of value which is recorded on a cryptographically-secured distributed ledger” (Sec. 2(6) of the Act). This broad definition could apply to most types of cryptocurrencies, including non-fungible tokens (NFTs).  

Payment Stablecoin: Fundamental to understanding the Act is the term, ‘‘payment stablecoin”’ which means a digital asset that is or is designed to be used as a means of payment or settlement. The issuers of payment stablecoins are also obligated to convert, redeem, or repurchase them for a fixed amount of monetary value. The issuer must represent it will maintain or create the reasonable expectation that it will maintain a stable value relative to the value of a fixed amount of monetary value. Payment stablecoins are not a national currency or a security issued by a registered investment company (Sec. 2(14) of the Act).

Primary Federal Payment Stablecoin Regulators: The law identifies several federal agencies who will act as “primary Federal payment stablecoin regulators” (Sec. 2(17) of the Act).  The regulators of the payment stablecoin regime include:

• The Comptroller of the Currency (Comptroller)
• The Board of Governors of the Federal Reserve (Board)
• The Federal Deposit Insurance Corporation (FDIC)
• The National Credit Union Administration (NCUA).  

The duties of each regulator are spelled out in the various laws governing their current operations.  They will all develop regulatory provisions for issuance of payment stablecoins.

Permitted Payment Stablecoin Issuer: Fundamental to the regulatory scheme is the role of ‘‘permitted payment stablecoin issuer’’ (Sec. 2(15) of the Act), which is defined as:

• A subsidiary of an insured depository institution that has been approved to issue payment stablecoins
• A Federal qualified nonbank payment stablecoin issuer that has been approved to issue payment stablecoins or 
• A State qualified payment stablecoin issuer

Of critical importance to the operation of the regime is the limitation on issuance of payment stablecoins only to those entities that are permitted payment stablecoin issuers.  “It shall be unlawful for any person other than a permitted payment stablecoin issuer to issue a payment stablecoin in the United States.” (Sec. 3, Limitation on Who May Issue a Payment Stablecoin).

Effective Date in 2026: It is important to recognize that the Act will take effect on the earlier of 18 months after the date of enactment of this Act or 120 days after regulators issue any final regulations implementing the Act.  Therefore, the actual issuance of payment stablecoins will not occur until sometime in 2026 or 2027.  The primary Federal payment stablecoin regulators are required to notify Congress when they begin to process applications under the Act. 

REQUIREMENTS FOR ISSUING STABLECOINS

The key requirement for permitted payment stablecoins issuers is that they must maintain reserves equal to the issuers’ outstanding payment stablecoins comprised of: 

• US currency, coins or Federal Reserve notes;  
• Funds held as demand deposits at insured depository institutions; 
• Treasury bills, notes or bonds with 93 days or less to maturity, 
• Repurchase agreements with a maturity of 7 days or less that are backed by Treasury bills with a maturity of 90 days or less; 
• Reverse repurchase agreements with a maturity of 7 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 tri-party; centrally cleared through a clearing house; or bilateral with a counterparty that the issuer has determined to be adequately creditworthy even in the event of severe market stress; 
• Money market funds, invested solely in underlying assets described in the Act; and
• Central Bank reserve deposits.

Permitted payment stablecoin issuers must:

• Publicly disclose their redemption policy
• Establish procedures for timely redemption of outstanding payment stablecoins,
• Publish the monthly composition of the issuer’s reserves on the website of the issuer, (Sec. 4(a)(1) of the Act).

To further strengthen these requirements, reserves may not be “pledged, rehypothecated, or reused, except for the purpose of creating liquidity to meet reasonable expectations of requests to redeem payment stablecoins, such that reserves in the form of Treasury bills may be pledged as collateral for repurchase agreements with a maturity of 90 days or less”(Sec. 4(a)(2)) subject to the prior approval of the primary payment stablecoin regulators, or to clearance by a central clearing counterparty approved by the primary regulators.  

Permitted payment stablecoin issuers will also be required to issue monthly reports that must be examined by registered public accounting firms.  The CEO and CFO of issuers must also certify the monthly audited report to the federal and state regulators.

CONTENT OF REGULATIONS

Federal and state payment stablecoin regulators must issue regulations to establish: 

• Capital requirements for permitted payment stablecoin issuers sufficient to cover ongoing operations;
• Appropriate liquidity and interest rate risk management standards sufficient to ensure the financial integrity of issuers and their ability to meet their financial obligations, including redemptions; 
• Appropriate operational, compliance, and information technology risk management standards, including Bank Secrecy Act and sanctions compliance, tailored to the business model and risk profile of the permitted payment stablecoin issuer;
• The Comptroller will supervise and issue regulations, along with other regulators, for Federal nonbank payment stablecoin issuers to ensure the safety and soundness of those issuers;
• All of the various regulators at the Federal and State level must issue regulations not later than 180 days from enactment, by on or about January 14, 2026; and
• The primary Federal regulators must also issue regulations to establish the process for approving subsidiaries of insured depository institutions and nonbank entities based upon the same factors outlined above. 

The only activities permitted payment stablecoin issuers may undertake are to:

• Issue and redeem payment stablecoins
• Manage related reserves assets including purchasing and holding the assets
• Providing custodial and safekeeping services for payment stablecoins, required reserves, or private keys, and 
• Perform other activities that directly support issuance and redemption of payment stablecoins.  
• Issuers may engage in other activities if they are explicitly allowed by the relevant regulator.

Standards:  The payment stablecoin regulators have considerable authority to prescribe standards for permitted payment stablecoin issuers to tailor or differentiate among issuers on an individual basis or by category taking into consideration their capital structure, riskiness, complexity, financial activities (including financial activities of their subsidiaries), size, and any other risk related factors that the primary Federal regulator or the supervisory, regulatory, or enforcement authority of an appropriate Federal banking agency deems appropriate.  The standards must further the safe and sound operation of an institution under the supervision of the appropriate Federal banking agency.  

The payment stablecoin regime will be integrated into the current regulatory system, so issuers will be treated as “financial institutions” under the Bank Secrecy Act but will be exempted from the existing capital standards of the Financial Stability Act of 2010.  

The Act provides a framework for the suspension or revocation of registrations or permitted payment stablecoin issuers along with the various actions to deal with violations.  The process extends to denial of applications.

A process is also established for the primary Federal regulators to receive, review and approve applications from any subsidiary of an insured depository institution and for any nonbank entity that seeks to issue payment stablecoins.  The Act sets mandatory deadlines for issuing such regulations.  It also outlines a process for approval or denial and requires grounds for denial with an explanation and potential for appeal and final determination.  

COMPTROLLER REGULATED ENTITIES

The Comptroller shall report to Congress on the applications pending from subsidiaries of insured depository institutions and for any nonbank entity that seeks to issue payment stablecoins. Comptroller regulated issuers that are subsidiaries of insured depository institutions are subject to the same regulatory requests as those parent organizations and are deemed to be financial institutions that must protect the privacy of consumers’ personal financial information. Such institutions must develop and give notice of their privacy policies to their own customers at least annually.  

The Comptroller can request written reports as to the financial condition and systems for monitoring and controlling financial operating risks and compliance with the Act.  The Comptroller also has the power to examine Comptroller-regulated entities to determine the nature of the operations and financial condition of the entities and to assess the financial, operational, and other risks within the entity that may pose a threat to the safety and soundness of the entity, the financial stability of the financial system of the US, and the entity’s systems for monitoring and controlling risks.  The Comptroller must use existing reports, avoid duplication, and consider the burden of reporting, such as requesting reports at a similar pace as for other similarly situated entities. 

STATE REGULATION AND FEDERAL OVERSIGHT

The Act provides for state regulators and regulations substantially similar to the Federal framework.  Issuers with a total market capitalization less than $10 billion may opt to be regulated by a state regulatory regime rather than federal. Such state regulators must certify to the Treasury Department that the state-level regime meets the criteria for substantial similarity, subject to rejection by the Treasury Department with a right to appellate review by the District Court of DC.  There are requirements for state regulated issuers of more than $10 billion to be shifted to Federal regulation.  

State regulators will share information with the Board.  They are given the same scope for issuing orders and rules as the primary Federal regulators.  The Board may act against State regulators in exigent circumstances (urgent situations that allow law enforcement to act). The Board is required to issue rules about exigent circumstances within 180 days of enactment of the law.

CUSTOMER PROTECTION

“A person may only engage in the business of providing custodial or safekeeping services for permitted payment stablecoins or private keys of permitted payment stablecoins, if the person is subject to supervision or regulation by a primary Federal payment stablecoin regulator or a primary financial regulatory agency” under various provisions of law, depending on the purview of the regulator’s authority” (Sec. 8(a) of the Act).  

All custodial or safekeeping entities must treat payment stablecoins, cash, private keys, wallets or other property as belonging to the customer and protect that property from creditors of the customer.  Customer property must not be commingled with property of the custodian. However, customers’ property may be commingled in omnibus accounts “of more than one customer at an insured depository institution or trust company” (Sec. 8(e) of the Act).

The Act establishes a process for dealing with the insolvency or bankruptcy of permitted payment stablecoin issuers and creates a priority for the claim of a person holding payment stablecoins issued by the payment stablecoin issuer over all other claims against the payment stablecoin issuer.

The Act also requires the National Institute of Standards and Technology, other relevant standard setting organizations, and State governments, to assess and, if necessary, prescribe standards for payment stablecoin issuers to promote compatibility and interoperability.  In addition, various studies and reports are required to assist with regulating this new sector.  

The authority of banking institutions (depository institutions, State and Federal Credit Unions, or trust companies) to engage in permissible activities under applicable State and Federal laws is not limited by the Act.  It also clarifies the treatment of custody activities to not include property held in custody or for safekeeping as assets of the institution.

The Federal Reserve and the Treasury Department must “create and implement reciprocal arrangements or other bilateral agreements the United States and jurisdictions with substantially similar payment stablecoin regulatory regimes to facilitate international transactions and interoperability with United States dollar-denominated stablecoins issued overseas” (Sec. 15 of the Act).

PAYMENT STABLECOINS ARE NOT SECURITIES OR COMMODITIES

The issue of whether cryptocurrency is an equity regulated by the Securities and Exchange Commission or a commodity regulated by the Commodities Futures Trading Commission has been at the heart of the regulatory battle between those agencies and the crypto sector for at least a decade.  The Act settles that problem for payment stablecoins by amending several laws to remove payment stablecoins from the definition of “security” (Sec. 14 of the Act).  This is an important step toward bringing the crypto sector into the financial system as a whole. 

IMPACT ON THE CRYPTO SECTOR

The GENIUS Act represents a watershed moment for the cryptocurrency industry, providing the regulatory clarity that has been sought by industry participants for over a decade. The law’s impact extends far beyond stablecoins themselves, creating ripple effects across the entire digital asset ecosystem.

Legitimization and Market Infrastructure

By establishing payment stablecoins as a distinct, regulated asset class that are neither security nor commodity, the Act provides unprecedented regulatory certainty for market participants and institutions. This clarity removes a major barrier to institutional adoption that has persisted since the early days of cryptocurrency. Banks, payment processors, and traditional financial institutions can now integrate compliant stablecoins into their operations without fear of adverse regulatory enforcement actions.

The requirement for robust reserve backing and monthly audited reporting significantly strengthens the stablecoin ecosystem’s foundation. By mandating that reserves consist of highly liquid, low-risk assets and prohibiting rehypothecation, the Act ensures that payment stablecoins maintain the stability necessary for widespread adoption while reducing systemic risk.

Practical Benefits for Users and Businesses

The regulatory framework unlocks significant practical benefits that have been limited by uncertainty. Individual users gain access to dollar-denominated digital money with just a smartphone, enabling financial inclusion without traditional banking barriers. For businesses, regulated stablecoins provide simplified treasury management, instant global settlement, lower transaction costs (avoiding 3-7% traditional fees), and programmable payment capabilities that automate operations while maintaining regulatory compliance certainty.

Competitive Dynamics and Global Implications

The Act creates a two-tiered system where large issuers (over $10 billion market cap) must operate under federal regulation, while smaller issuers can opt for state-level oversight. This structure should foster innovation among smaller players while ensuring systemic stability for large-scale issuers.

The legislation’s provision for reciprocal arrangements with foreign jurisdictions positions U.S. dollar-denominated stablecoins as a global standard. By facilitating interoperability with overseas dollar stablecoins, the Act could strengthen the dollar’s role in international commerce and potentially challenge alternative payment systems.

Long-term Sector Evolution and Challenges

The GENIUS Act likely represents the beginning of a broader regulatory framework for digital assets rather than its conclusion. By establishing a clear framework for asset-class-specific regulation that recognizes blockchain technology’s unique characteristics, the Act serves as a template for regulating other cryptocurrency categories such as decentralized exchanges, lending protocols, and utility tokens.

While the legislation provides essential clarity, implementation challenges remain. The 18-month timeline requires coordination across multiple agencies and jurisdictions. Additionally, KYC/AML requirements may limit the permissionless characteristics that have made stablecoins attractive globally, particularly in regions with limited banking access.

For the crypto sector, the GENIUS Act represents both validation and evolution. While increased regulation may constrain some activities, the industry has largely recognized that regulatory clarity is essential for sustainable growth and mainstream adoption. The Act provides this clarity while preserving core benefits: efficiency, programmability, and global accessibility. As implementation proceeds, the success of this framework will likely influence how regulators approach other aspects of the digital asset ecosystem, making this legislation a critical milestone in the industry’s maturation from experimental technology to essential financial infrastructure.

CONCLUSION

The GENIUS Act marks a pivotal moment in the evolution of digital finance, representing the first comprehensive federal framework to embrace blockchain-based financial innovation while establishing necessary consumer protections. By providing regulatory certainty for payment stablecoins, the legislation unlocks a $800 billion monthly transaction market that has operated in legal ambiguity for over a decade.

As implementation begins in 2026, the success of the GENIUS Act will likely be measured not just by compliance metrics, but by its ability to foster innovation while protecting consumers. If executed effectively, this legislation could position the United States as the global leader in digital payment infrastructure, strengthening the dollar’s international role while empowering millions of users with access to modern financial tools.

The crypto industry has long argued that regulatory clarity would unlock mainstream adoption. The GENIUS Act provides the first major test of that thesis. Its success or failure will shape not only the future of stablecoins, but the broader relationship between traditional finance and blockchain innovation for years to come.