On July 18, 2025, the GENIUS Act was signed into law, introducing the first federal regulatory framework for stablecoins in the United States. The legislation represents a turning point in the regulation of digital assets. It aims to address consumer protection, financial stability, and anti-money laundering concerns.
Consumer Protection
A central focus of the GENIUS Act is safeguarding stablecoin users. Issuers must now maintain 100% reserve backing in the form of U.S. dollars or short-term treasuries. They must publish monthly public disclosures:
- Detailing the composition of reserves
- Providing transparency and accountability to the market
The Act also imposes strict marketing restrictions. Issuers may not claim that their stablecoins are backed by the U.S. government, federally insured, or legal tender. These provisions are designed to prevent misleading practices.
In cases of insolvency, the Act provides that stablecoin holders have priority claims over all other creditors. This creates a defined backstop of consumer protection, ensuring that end-users are not left at the back of the line in the event of failure.
Regulatory Alignment
The GENIUS Act aligns state and federal frameworks for stablecoin oversight. By harmonising these regimes, the Act aims to create a consistent regulatory environment and reduce the patchwork approach that has historically characterised digital asset supervision in the U.S.
Anti-Money Laundering and Sanctions Compliance
Stablecoin issuers are explicitly brought under the scope of the Bank Secrecy Act (BSA). This subjects them to the same obligations as traditional financial institutions, including:
- Customer identification and verification
- Risk assessments
- Sanctions list screening
- Anti-Money Laundering (AML) program requirements
Issuers must also maintain the technical capacity to seize, freeze, or burn stablecoins when legally required, ensuring compliance with lawful orders and enhancing enforcement capabilities against illicit activity.
Implications of the GENIUS Act
By requiring full reserve backing, public disclosures, marketing restrictions, and BSA compliance, the GENIUS Act introduces a comprehensive federal framework for stablecoins. For legal and compliance professionals, the Act establishes clear obligations where previously there was uncertainty. It marks the formal integration of stablecoins into a regulated framework, setting parameters for their issuance, operation, and supervision.
FAQs
What is the GENIUS Act?
The GENIUS Act is U.S. federal legislation, signed into law on July 18, 2025, that establishes the first comprehensive regulatory framework for payment stablecoins. It sets rules for who can issue them, what reserves back them, how they must behave under insolvency, consumer protections, and the relationship between federal and state regulators.
Which entities are allowed to issue stablecoins under the GENIUS Act?
Only Permitted Payment Stablecoin Issuers (PPSIs) may issue ‘payment stablecoins’ in the U.S. These include:
- Subsidiaries of insured depository institutions and credit unions, and federally licensed non-bank issuers.
- State-licensed issuers whose state regulatory framework is certified as “substantially similar” to the federal standard (if their outstanding issuance is under $10 billion).
How does the GENIUS Act protect consumers?
Key consumer protections include:
- Obligations of issuers to redeem stablecoins for a fixed monetary value with clear procedures and disclosed fees.
- Reserve transparency involving monthly public disclosures of reserve composition, for large issuers (over $50 billion in outstanding stablecoins), annual audited financials.
- Strong legal status for stablecoin holders in case of issuer insolvency. In bankruptcy, reserves excluded from the issuer’s general estate and stablecoin holders get priority over other creditors with respect to the reserves.
When does the Act take effect?
The GENIUS Act takes effect upon the earlier of (i) 18 months after enactment (which puts it around January 18, 2027), or (ii) 120 days after the primary federal stablecoin regulators issue final implementing regulations.
How does the law treat foreign stablecoin issuers?
Foreign payment stablecoin issuers may still offer their coins to U.S. persons, but only if they meet certain compliance requirements set by U.S. regulators. Unpermitted foreign issuers who fail to comply may be designated as noncompliant, and U.S.-based digital asset service providers may be prohibited from facilitating their secondary trading.
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