The GENIUS Act: Key Developments for Digital Assets

The Guiding and Establishing National Innovation for U.S. Stablecoins Act (the GENIUS Act) is the first comprehensive federal statute to regulate payment stablecoins in the United States. 

A payment stablecoin is a digital asset designed for use as a medium of payment or settlement, whose issuer commits to redeem or repurchase it at a fixed monetary value and maintains a stable peg to that value. It excludes national currencies, bank deposits and securities.

Introduced in the Senate on May 1, 2025, the GENIUS Act establishes detailed requirements around issuer eligibility, reserve composition and disclosures, custody standards and anti–money-laundering controls for any entity minting stablecoins redeemable at a fixed value. The Senate passed the bill by a bipartisan vote of 68 – 30 on June 17, 2025, the House followed with a 308 – 122 vote the same day, and President Donald Trump signed it into law on July 18, 2025.

Here are some key aspects of the GENIUS Act:

Issuer eligibility:

• Prohibits any entity not specifically authorized from issuing payment stablecoins
• Permits only subsidiaries of insured depository institutions, federally qualified non-bank entities or state-qualified issuers to apply for minting payment stablecoins for U.S. persons

Regulatory choice:

• Permitted issuers may elect oversight by either federal or state regulators.
• State-qualified issuers under $10 billion in consolidated outstanding stablecoin issuance may remain state-regulated; once they exceed $10 billion, they must either transition to the federal regime, obtain federal permission to stay state-regulated or pause issuance.

Reserve requirements and disclosures:

• Must maintain a 1:1 backing with U.S. dollars or equally liquid assets
• Must publish monthly reserve reports that are examined by an independent registered public accounting firm and include monthly CEO/CFO certifications to the regulator
• Must clearly disclose redemption policies

Reserve reuse and custody services:

• Prohibits rehypothecation of reserves except for narrowly prescribed purposes
• Sets standards for safekeeping services and grants supervisory, examination and enforcement authority over federally chartered issuers

Limitation on interest and yield:

• Prohibits permitted payment stablecoin issuers from paying any interest or yield on their tokens

Foreign issuer participation:

• Allows stablecoins issued abroad to be offered or sold in the U.S. via registered digital-asset service providers only if the issuer has both:
  • The technological capability to comply with U.S. lawful orders
  • A Treasury determination of a comparable foreign regulatory regime

Legal treatment and AML compliance:

• Exempts permitted payment stablecoins from being treated as securities or commodities under U.S. law
• Requires all permitted issuers to comply with tailored Bank Secrecy Act anti-money-laundering provisions, including recordkeeping, sanctions screening and suspicious-activity reporting

Transparency and disclosure for large issuers:

• Issuers with more than $50 billion in consolidated outstanding stablecoins must:
  • Prepare an annual financial statement in accordance with GAAP
  • Have that statement audited by a registered public accounting firm (implicitly PCAOB-registered)
  • Publish the audited report on their website and submit it annually to their primary federal regulator

Name restrictions:

• Issuers may not use terms implying U.S. government endorsement (e.g., “Federal,” “Treasury,” “USA”)

Corporate governance and approval process:

• Bars individuals convicted of certain financial felonies from serving as officers or directors
• Federal-qualified issuers apply through a 180-day review process; failure by regulators to act results in automatic approval

Significance for legal and finance:

• Provides legal certainty around stablecoin classification and issuer obligations, reducing enforcement and litigation risk
• Boosts market confidence through standardized disclosure, audit, and reserve requirements
• Eases integration of payment stablecoins into traditional banking, payments and lending frameworks by aligning them with established financial safeguards

At its core, the GENIUS Act isn’t just about carving out who can issue stablecoins—it’s about making sure those coins truly behave like cash. Its consumer-protection guardrails include:

• Full 1:1 backing: Every token is matched dollar-for-dollar (or in equally liquid assets), so holders never face a “run” risk.
• No rehypothecation: Reserves can’t be lent out or reused, except in narrowly defined liquidity facilities.
• Transparent redemption: Clear, publicly disclosed redemption terms—and monthly reserve reports with CEO/CFO sign-offs—mean users always know where their money is.
• Independent audits: Large issuers (>$50 billion) publish annual GAAP-based financials, audited by a registered public accounting firm.
• Strict AML/KYC: Tailored Bank Secrecy Act rules ensure bad actors can’t hide behind stablecoin labels.
• Naming limits: Prohibiting “Federal” or “Treasury” in coin names prevents misleading claims of government backing.

Key Takeaways for Clients
The GENIUS Act ushers in a new era of U.S. stablecoin regulation. Companies in or adjacent to the digital-asset ecosystem should:

• Assess issuer eligibility and readiness: Determine if your organization qualifies as a federal or state-chartered issuer and identify any structural or registration steps required.
• Evaluate oversight options: Choose between state or federal supervision, and model the compliance impact of surpassing the $10 billion issuance threshold.
• Review token design: Ensure your stablecoin lacks interest-bearing or yield features and maintains a strict 1:1 reserve backing with U.S. dollars or equivalent liquid assets.
• Enhance reporting and certification: Establish or strengthen processes for monthly reserve disclosures, independent audits and CEO/CFO sign-offs, plus annual GAAP-based financial reports for large issuers.
• Adapt reserve management practices: Update treasury and custody arrangements to prohibit rehypothecation (outside narrow liquidity facilities) and meet prescribed safekeeping standards.
• Plan for cross-border compliance: For foreign issuers targeting U.S. markets, confirm your technology can respond to lawful orders and prepare for a Treasury comparability determination.
• Bolster AML/KYC frameworks: Integrate tailored Bank Secrecy Act requirements—sanctions screening, suspicious-activity reporting and recordkeeping—under either a state or federal charter.

Next Steps:
Reach out with any questions or to begin planning and working on implementation under the new federal framework.