U.S. Passes Historic Stablecoin Framework With GENIUS Act

On July 18, 2025, the U.S. enacted the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS Act), marking a pivotal moment in the regulation of digital assets [1]. The law creates the first federal framework for payment stablecoins—cryptographic tokens pegged to the U.S. dollar—ensuring their safety, transparency, and full backing [2]. This regulatory shift comes amid increased adoption by fintech innovators and corporate treasuries, alongside rising concerns over consumer protection and financial stability [3].

The GENIUS Act mandates that only permitted payment stablecoin issuers (PPSIs) may operate within the U.S. These include federally insured bank subsidiaries, nonbanks with state or federal licenses, and qualified foreign issuers [1]. Notably, anonymous or decentralized entities must comply with the new rules or exit the market within a three-year transition period [3]. To become a PPSI, entities must apply to either a state or federal regulator, with a 120-day review period. If no decision is reached within that window, the application is automatically approved [1].

The Act positions stablecoin issuers as financial institutions under the Bank Secrecy Act (BSA), requiring robust anti-money laundering (AML) and sanctions compliance programs, including the appointment of a dedicated compliance officer [1]. Compliance rules are tailored based on the issuer's size and complexity, with the power to block or freeze transactions that violate federal or state laws [1].

Reserve requirements are another key component of the Act. All stablecoins must be backed on a 1:1 basis with high-quality, liquid assets such as U.S. dollars, Treasury bills, overnight repurchase agreements, and shares in registered money market funds [1]. The Act explicitly prohibits the use of commercial paper, algorithmic stabilization mechanisms, and interest payments to stablecoin holders [1].

To ensure transparency, stablecoin issuers must maintain reserves in separate, bankruptcy-remote accounts and submit monthly reports on reserve composition [1]. Independent third-party audits are required, with publicly accessible reports detailing the amount, composition, and total supply of outstanding stablecoins [1]. Issuers with over $10 billion in assets must undergo annual audits and enhanced oversight by federal regulators [1].

The legislation is expected to enhance regulatory clarity and open the door for broader institutional adoption of stablecoins [1]. However, it also imposes significant compliance and operational burdens on businesses, requiring upgrades to financial controls and reporting systems [1]. The GENIUS Act legitimizes stablecoin usage in corporate and financial contexts, offering a path for banks, startups, and established institutions to explore digital payment solutions [1].

According to market observers, the stablecoin market has already surpassed $250 billion following the enactment of the GENIUS Act, with clearer guidelines boosting confidence among participants [2]. Experts suggest that the 1:1 backing requirement and federal licensing will help stabilize the market, although full implementation is still pending regulatory rulemaking, which is due within one year of enactment [3].

Regulatory implementation is set to begin by November 2026, 18 months after the Act’s passage [3]. During this transition, state regulators may also qualify and oversee stablecoin issuance within their jurisdictions, provided the issuer holds no more than $10 billion in assets [3]. This dual federal-state oversight model reflects a balanced approach to fostering innovation while maintaining stability [3].

The GENIUS Act, alongside the STABLE Act, is reshaping the risk landscape of the crypto industry by establishing clearer lines of accountability and operational standards [3]. While challenges remain in terms of compliance costs and implementation timelines, the Act represents a foundational step in aligning stablecoin activity with broader financial regulations.

Source: [1] GENIUS Act: New Rules for Stablecoin Issuers [https://www.cbh.com/insights/articles/genius-act-new-rules-for-stablecoin-issuers/](https://www.cbh.com/insights/articles/genius-act-new-rules-for-stablecoin-issuers/)

[2] Stablecoins Get a Federal Framework: Will the US GENIUS Act [https://blogs.law.ox.ac.uk/oblb/blog-post/2025/08/stablecoins-get-federal-framework-will-us-genius-act-deliver-stability-or](https://blogs.law.ox.ac.uk/oblb/blog-post/2025/08/stablecoins-get-federal-framework-will-us-genius-act-deliver-stability-or)

[3] The GENIUS and STABLE Acts Are Rewriting Crypto Risk [https://www.vouch.us/insurance101/genius-stable-acts-crypto-risk-management-tips](https://www.vouch.us/insurance101/genius-stable-acts-crypto-risk-management-tips)