GENIUS Act Introduces Federal Oversight for Stablecoins

The GENIUS Act, officially known as the “Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025,” was signed into law by President Donald Trump on July 18, 2025. This landmark legislation introduces a comprehensive regulatory framework for stablecoins, aiming to provide clarity and oversight for the emerging crypto asset ecosystem. The Act mandates federal oversight and compliance standards for all issuers, impacting regulatory frameworks and market operations significantly.

The GENIUS Act introduces a two-tier licensing system for stablecoin issuers. Entities with a market capitalization of less than $10 billion can opt for state-level licensing, provided that the states adhere to federal standards. Conversely, issuers with a market capitalization exceeding $10 billion must obtain a federal license, with oversight from the Office of the Comptroller of the Currency (OCC) or their relevant federal banking regulator. This dual licensing pathway ensures that both small and large issuers are held to high standards of compliance and transparency.

Another critical aspect of the GENIUS Act is the requirement for stablecoins to be fully backed by high-quality, liquid assets. Eligible assets include U.S. dollars, short-term Treasuries, repos, reverse repos backed by Treasuries, money market funds invested in eligible assets, and central bank reserve deposits. Issuers are mandated to disclose their reserves monthly, with large issuers also required to file annual financial statements. This provision aims to enhance trust and stability in the stablecoin market by ensuring that issuers maintain sufficient reserves to back their digital assets.

The Act also places a strong emphasis on anti-money laundering (AML) and sanctions compliance. Issuers are now classified as financial institutions under the Bank Secrecy Act, obligating them to implement AML and Know Your Customer (KYC) programs, monitor for suspicious activity, and submit Suspicious Activity Reports (SARs) where appropriate. Additionally, issuers must comply with Office of Foreign Assets Control (OFAC) sanction screening and have the technological capability to seize, freeze, burn, or prevent the transfer of outstanding stablecoins as required by law. The GENIUS Act further calls for a study and guidance from the Financial Crimes Enforcement Network (FinCEN) within three years of its enactment, focusing on innovative methods for detecting illicit finance and establishing risk management standards for financial institutions interacting with decentralized finance protocols.

The GENIUS Act is part of a broader regulatory push to integrate crypto firms and intermediaries into the U.S. regulatory system. Alongside the GENIUS Act, the House also passed the CLARITY Act, which aims to provide a functional market structure framework for the digital asset sector. The CLARITY Act assigns exclusive jurisdiction over digital commodities to the Commodity Futures Trading Commission (CFTC) and authority over digital securities to the Securities Exchange Commission (SEC). It also introduces criteria to distinguish between digital commodities, investment contract assets, and payment stablecoins, reducing ambiguity and providing a more reliable taxonomy for classification.

The passage of the GENIUS Act and the progress of the CLARITY Act position the United States as a leader in digital asset regulation. This regulatory clarity is expected to foster innovation and growth in the stablecoin market, while also ensuring that issuers and financial institutions operate within a robust and transparent framework. As the U.S. joins other regions in establishing clear regulatory guidelines for digital assets, the global landscape for stablecoins is poised for significant transformation.

Major U.S. stablecoin issuers face compliance mandates, impacting operational costs and oversight. Potential regulatory changes could enhance legal clarity but demand accountability in the digital asset market. As noted in the SEC Statement on Stablecoins and Cryptocurrency Regulations, such frameworks may improve market stability. The GENIUS Act does not designate specific funding, but compliance costs could rise for payment entities. Ripple and RLUSD have not been officially connected to these changes, showing limited market impact immediately. Experts anticipate financial outcomes from strict regulatory adherence. Stablecoin markets adjust to the new legal framework. There are no statements from Ripple Labs executives, including Brad Garlinghouse and David Schwartz, regarding the GENIUS Act and its implications for XRP or RLUSD. Ripple and others still await further regulatory instructions for definitive market participation. For those interested, the full legislative text provides additional details.