On July 18, President Donald Trump signed into law the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), creating the first federal framework for U.S. dollar stablecoins. Beginning on the earlier of 18 months after enactment or 120 days after final rules, only “permitted payment stablecoin issuers” (PPSIs) may mint or circulate payment stablecoins in the United States. PPSIs must (i) maintain 1:1 reserves in cash, demand deposits or short-dated Treasuries, (ii) refrain from paying any yield solely for holding a coin, and (iii) comply fully with Bank Secrecy Act and sanctions programs. The GENIUS Act also grants priority (and, if necessary, superpriority) bankruptcy claims to stablecoin holders and imposes a three-year secondary-market sunset for noncompliant tokens.
The GENIUS Act fundamentally reshapes the stablecoin landscape by restricting issuance to three categories of "permitted payment stablecoin issuers":
The legislation makes it unlawful for any other entity to issue payment stablecoins, with violations carrying criminal penalties of up to $1 million per day and potential imprisonment. Digital asset service providers face a three-year transition period before the prohibition on offering non-compliant stablecoins takes full effect, providing time for existing issuers to obtain proper authorization or wind down operations.
The GENIUS Act mandates that permitted issuers maintain reserves backing their stablecoins on at least a 1:1 basis, with reserves limited to highly liquid, low-risk assets including U.S. currency, demand deposits at insured institutions, Treasury securities with maturities of 93 days or less, and overnight repurchase agreements backed by short-term Treasuries. Issuers must publish monthly reports detailing their reserve composition and undergo monthly third-party audits, with CEOs and CFOs personally certifying accuracy under penalty of perjury. The legislation explicitly prohibits paying interest to stablecoin holders and restricts rehypothecation of reserves, ensuring these assets remain available for redemptions.
The law furthermore designates payment stablecoin issuers as financial institutions subject to the Bank Secrecy Act.
The GENIUS Act establishes a dual regulatory system that preserves a role for state oversight while ensuring federal standards. States seeking to maintain regulatory authority over stablecoin issuers must update their laws to meet federal standards and obtain certification from the Stablecoin Certification Review Committee within one year of the act's effective date, demonstrating that their regulatory frameworks are substantially similar to federal requirements. The act creates a Stablecoin Certification Review Committee, chaired by the U.S. Treasury Secretary, to evaluate state regulatory frameworks and ensure consistent national standards.
State-qualified payment stablecoin issuers with less than $10 billion in outstanding stablecoins may operate under state regulatory regimes that have been certified as substantially similar to federal requirements. However, crossing the $10 billion threshold triggers mandatory transition to joint federal-state oversight, with the relevant federal banking regulator assuming primary supervisory responsibility.
By clarifying that payment stablecoins are neither securities nor commodities, the GENIUS Act removes these instruments from the jurisdiction of the Securities and Exchange Commission and Commodity Futures Trading Commission, streamlining compliance obligations for issuers. The legislation includes special provisions addressing large technology companies, requiring unanimous approval from the Stablecoin Certification Review Committee for any public company not predominantly engaged in financial activities to issue stablecoins, along with strict data use limitations and anti-tying provisions. Foreign stablecoin issuers gain a pathway to U.S. markets through registration with the OCC, provided their home country maintains a comparable regulatory regime and the issuer meets strict operational requirements including maintaining U.S.-based reserves.
The GENIUS Act takes effect 18 months after enactment or 120 days after regulators issue final implementing rules, whichever comes first. This transition period provides critical time for existing stablecoin issuers to restructure operations, obtain necessary approvals, or partner with qualified institutions. Market participants should begin immediately evaluating their current stablecoin activities and developing strategies to comply with the new regulatory regime.