What Is the GENIUS Act?
Signing and scope
The Guiding and Establishing National Innovation for U.S. Stablecoins Act was signed into law on July 18, 2025. It is the first federal framework regulating payment stablecoins in the United States. The law sets enforceable standards for digital tokens that are pegged to monetary value and intended for payments, replacing years of regulatory ambiguity.
Defining payment stablecoins
Under the Act, a payment stablecoin is a digital asset used as a means of payment, where the issuer is obligated to keep its value stable against a fixed monetary amount. The definition excludes three things: central bank money, bank deposits, and traditional securities.
Who Can Issue Stablecoins?
The three permitted issuers
The GENIUS Act limits issuance to three categories of permitted issuers:
Subsidiaries of insured depository institutions: Bank-affiliated entities supervised by their parent institution’s federal regulator (OCC, FDIC, or NCUA). Banks and credit unions cannot issue stablecoins directly. They must establish a subsidiary.
Federal qualified issuers: Nonbank entities and uninsured national banks that the Office of the Comptroller of the Currency (OCC) approves to issue stablecoins under federal oversight.
State qualified issuers: Entities operating under state-approved regulatory regimes that have been certified as substantially similar to federal standards. This path is open only to issuers with less than $10 billion in outstanding stablecoins.
The shared restriction
One restriction applies to all of them: permitted issuers cannot pay holders any yield or interest on their payment stablecoins.
How does the dual-track system work?
The Federal Path
Issuers of any size can seek federal approval through the OCC (for nonbank entities) or their primary federal regulator (for bank subsidiaries). Federal oversight covers capital, liquidity, reserves, and operational risk management.
The State Path
Issuers with less than $10 billion in outstanding stablecoins may operate under a state regulatory regime, but only if that regime is certified as “substantially similar” to federal standards. A Stablecoin Certification Review Committee makes that call, with representatives from Treasury, the Federal Reserve, and the FDIC.
The $10 Billion Transition
A state-qualified issuer that exceeds $10 billion in outstanding stablecoins has 360 days to transition to federal oversight, or it must obtain a waiver to continue under state supervision. Systemically significant issuers end up under direct federal authority.
What Are the Reserve Requirements?
Permitted reserve assets
Issuers must hold identifiable reserves backing outstanding payment stablecoins on at least a 1-to-1 basis. Permitted reserve assets include:
- U.S. currency and Federal Reserve notes
- Demand deposits at insured depository institutions
- Treasury bills and notes with 93-day maximum maturity
- Overnight repurchase agreements backed by short-term Treasury securities
- Money market funds investing in government-issued assets
- Tokenized reserve assets compliant with applicable law
Managing and disclosing reserves
Reserves cannot be commingled with operational funds or rehypothecated. Issuers must publish monthly reserve disclosures and submit to regular audits by registered public accounting firms.
What consumer protections apply?
Customers hold a clear, enforceable right to redeem stablecoins for the reference currency on demand. Issuers must publish redemption policies in plain language, with disclosed fees capped at specified levels. Any fee change requires seven days’ advance notice.
What Is the Legal Classification?
The Act settles a longstanding ambiguity: compliant payment stablecoins are neither securities nor commodities. That puts them outside SEC and CFTC jurisdiction and places their regulatory home within the banking supervision framework. Non-compliant stablecoins get no such treatment: they cannot be counted as cash equivalents or used for margin, collateral, or banking settlement.
What Is the Implementation Timeline?
The Act takes effect at the earlier of two dates: 18 months after enactment, or 120 days after implementing regulations are finalized. Exchanges and custodians may keep selling non-compliant stablecoins through a transition period that ends in July 2028, three years after enactment.
The Coinbax Perspective
Paul Hastings’ analysis maps the full regulatory architecture that financial institutions must now navigate. The dual-track system, reserve requirements, and consumer protections create a clear framework and a demanding set of operational requirements.
For banks and credit unions, the subsidiary model means building dedicated infrastructure for stablecoin operations: reserve management, 1:1 backing verification, redemption processing, and compliance monitoring. The ban on commingling reserves and the requirement for monthly audited disclosures demand real-time asset tracking and segregation. Programmable escrow, built-in reversibility, and real-time compliance are not optional in this environment. They are the operational foundation the GENIUS Act requires.
Frequently Asked Questions
Can any company issue stablecoins under the GENIUS Act?
No. Only three categories are permitted: subsidiaries of insured depository institutions (banks and credit unions), federal qualified issuers approved by the OCC, and state qualified issuers operating under certified state regimes with less than $10 billion outstanding.
Why can’t stablecoin issuers pay interest or yield?
The ban on yield or interest separates payment stablecoins from deposit products and investment securities. It keeps them outside SEC and CFTC jurisdiction and stops them from competing with insured bank deposits on yield.
What happens if a state-regulated issuer grows past $10 billion?
The issuer has 360 days to transition to federal oversight, or it must obtain a waiver to continue under state supervision. The threshold puts large, systemically significant issuers under direct federal authority.
Are existing stablecoins like USDC and USDT affected?
Yes. Every stablecoin issuer must meet the GENIUS Act’s requirements by the end of the transition period in July 2028. Exchanges may keep listing non-compliant stablecoins during this window, but issuers that fail to comply lose their legal status.
How does the GENIUS Act affect foreign stablecoin issuers?
Foreign issuers may operate in the U.S. under specified circumstances, but must meet comparable regulatory standards. Treasury determines whether a foreign regulatory regime satisfies the Act’s requirements.