GENIUS Act Passes House 308-122 Awaits Trump Signature

The GENIUS Act, an acronym for “Guiding and Establishing National Innovation for US Stablecoins Act,” is poised to become law after receiving approval from the US House. The bill, which originated in the Senate, now awaits President Donald Trump's signature to be enacted. The signing ceremony is scheduled for 2:30 pm Friday in Washington, DC.

The law will take effect 18 months after Trump signs it, or 120 days after the primary federal payment stablecoin regulators, including the Treasury and Federal Reserve, issue final regulations implementing the GENIUS Act. The House voted 308-122 to pass the GENIUS Act on Thursday after multiple delays.

One of the key changes introduced by the GENIUS Act is the creation of an incentive for stablecoin issuers to seek a banking license. Logan Payne, a crypto-focused lawyer at Winston & Strawn, noted that the new stablecoin license under the GENIUS Act limits a company’s activities to “purely stablecoin issuance.” However, most stablecoin issuers engage in activities beyond this scope. This limitation, combined with the need for state-level money transmission licenses to operate nationally, encourages issuers to apply for a national trust bank charter with the Office of the Comptroller of the Currency (OCC). This charter allows for a wider range of activities without the need for state-to-state licenses.

A contentious aspect of the bill is the ban on stablecoin issuers, both foreign and regulated under US law, from offering interest or yield to holders and users. This provision is expected to significantly impact the marketing strategies of stablecoins, which often use yield offerings to attract users. Some stablecoins offer yield natively, while others, like Circle’s USDC, reward holders on exchanges such as Coinbase and Kraken. Payne suggested that these arrangements may change or be modified in response to the new regulations.

The GENIUS Act also introduces uncertainty into decentralized finance (DeFi) regarding how platforms should handle stablecoins. Payne noted that the bill does not fully address DeFi, leaving room for uncertainty. However, he expects additional legislation and regulation over the next few years to fill in the gaps and provide clearer guidance. One such bill is the CLARITY Act, which classifies types of digital assets and specifies which authorities will regulate them. The House passed this bill to the Senate on Thursday.

The GENIUS Act mandates that permitted stablecoin issuers back their tokens 1:1 with reserves of US dollars or other monetary products such as Treasury bills. Issuers must publish the composition of these reserves publicly and have them examined by a registered public accounting firm. They must also submit a certification of the accuracy of the reports to their federal or state regulatory body.

Three years after the bill is signed, it will outlaw any stablecoins that do not come from an approved issuer from being offered in the US. Foreign-issued stablecoins will also be barred from the US market unless the issuer complies with the bill’s legal requirements. The bill provides exemptions for foreign stablecoin issuers if the Treasury determines that their home country has a comparable regulatory regime. In such cases, foreign issuers can serve the US market if they successfully register with the OCC and hold sufficient reserves in a US financial institution to cover their US customers.

The GENIUS Act establishes a dual federal and state legal framework to regulate stablecoins in the US. Multiple types of regulated entities, such as banks, credit unions, and nonbanks, will be allowed to issue stablecoins. These entities will be regulated by various federal agencies, including the National Credit Union Administration, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Treasury, or the Federal Reserve. Entities with less than $10 billion in issued stablecoins can choose to be regulated at the state level, provided the state has a stablecoin regulator.