U.S. Enacts GENIUS Act to Regulate Stablecoins with 1:1 Backing and Licensing Requirements

The U.S. government has moved to tighten oversight of stablecoins with the enactment of the GENIUS Act, signed into law by President Donald Trump on July 18, 2025 [1]. This legislation marks a significant step in the country's regulatory approach to digital assets, particularly those designed to maintain a stable value relative to the U.S. dollar. Under the Act, stablecoin issuers are now required to maintain 1:1 backing with U.S. dollars or short-term Treasury securities, a measure intended to bolster financial stability and consumer confidence [2]. The law also mandates that issuers undergo regular audits, submit monthly financial reports, and obtain federal licensing [3]. These new requirements are expected to reshape the operational strategies of major stablecoin entities and could lead to a market consolidation, favoring well-capitalized players with robust compliance infrastructure [4].

One of the most notable aspects of the GENIUS Act is the expanded regulatory authority granted to the Office of the Comptroller of the Currency (OCC). For the first time, large nonbank stablecoin issuers may now fall under the OCC’s oversight, potentially affecting entities such as the Trump family’s World Liberty stablecoin project [5]. The legislation also introduces issuance caps for state and federal banks, ranging from $10 billion to $50 billion, further narrowing the scope of stablecoin operations [6]. These changes have already drawn mixed reactions from market analysts and financial experts. While some argue that the Act brings necessary structure to a previously murky sector, others caution that the complex compliance requirements may disrupt financial stability and hinder innovation [7].

The Act’s regulatory framework leaves certain areas of uncertainty, particularly concerning foreign stablecoin issuers. While the law mandates that non-U.S. stablecoin projects comply with OCC-supervised standards, the exact requirements remain undefined, creating ambiguity for global market participants [8]. This lack of clarity could affect how international entities navigate the U.S. market, especially as a compliance deadline for foreign digital asset issuers is anticipated to be set for 2027 [9]. The legislation’s passage coincides with other efforts to clarify the regulatory landscape for digital assets, such as the CLARITY Bill, which seeks to define the classification of digital assets as either securities or commodities [10]. However, it does not address how the IRS treats cryptocurrency for tax purposes, which remains unchanged from its 2014 guidance [11].

The impact of the GENIUS Act is already being felt by major stablecoins like USDC, which must now reallocate institutional capital and adjust to the new asset-backing and compliance requirements [12]. Smaller or less capitalized stablecoin projects may struggle to meet the regulatory bar, potentially leading to a shift in the market dynamics toward larger, more established players [13]. The White House has acknowledged the importance of these legislative efforts, with recent reports emphasizing the need for federal agencies to align their policies with the new framework [14]. As the full effects of the Act begin to unfold, stakeholders across the financial and crypto sectors will be closely monitoring how compliance, innovation, and market dynamics evolve in the coming years [15].

Source: [1] Update on 2025 U.S. Stablecoin Legislation (https://www.womblebonddickinson.com/us/insights/alerts/update-2025-us-stablecoin-legislation)

[2] The GENIUS Act Enacted to Regulate Stablecoins with $10B- (https://www.ainvest.com/news/genius-act-enacted-regulate-stablecoins-10b-50b-caps-2508/)

[3] U.S. Passes GENIUS Act to Regulate Stablecoins with (https://www.ainvest.com/news/passes-genius-act-regulate-stablecoins-asset-backing-licensing-requirements-2508/)

[4] CLARITY Bill & GENIUS Act Explained - Tax Authorities (https://www.mondaq.com/unitedstates/tax-authorities/1658568/clarity-bill-genius-act-explained-crypto-classification-and-tax-impact)

[5] Warren presses new OCC chief over Trump family (https://subscriber.politicopro.com/article/2025/07/warren-presses-new-occ-chief-over-trump-family-stablecoin-business-00486251)

[6] In the era of stablecoin "compliance cleaning", how will the (https://www.panewslab.com/en/articles/jm3c15k2a347)

[7] Genius Act could disrupt financial stability, warns (https://www.cnbctv18.com/market/genius-act-could-disrupt-financial-stability-warns-economist-barry-eichengreen-19647499.htm)

[8] The GENIUS Act Seeks To Provide A Framework For (https://www.mondaq.com/unitedstates/fin-tech/1658884/the-genius-act-seeks-to-provide-a-framework-for-stablecoin-regulation)

[11] White House Releases Report on Digital Asset Market (https://www.dwt.com/blogs/financial-services-law-advisor/2025/07/white-house-report-digital-assets-framework)