US Landmark Stablecoin Regulation Signed into Law

On 18 July 2025, a new act stablishing the first comprehensive regulatory framework for payment stablecoins in the US has been signed into law by the President of the United States. The GENIUS Act (standing for Guiding and Establishing National Innovation for US Stablecoins) is considered as the most significant piece of legislation in the US in the digital assets domain to date, and it highlights the current administration’s and Congress’s commitment to the development of a regulatory framework for digital assets in the US.

The new act is prioritizing enhancing consumer protection, strengthening the US dollar’s reserve currency status, bolstering the US national security and is intended to make the US a leader in digital assets.

Below is an overview of the key provisions under the new act:

 

Scope of Application

The act creates a framework for “payment stablecoins”, i.e. digital assets that are, or are designed to be, used as a means of payment or settlement, and the issuer of which is:

• obligated to convert, redeem or repurchase for a fixed amount of monetary value, not including a digital asset denominated in a fixed amount of monetary value; and
• represents that such issuer will maintain, or create the reasonable expectation that it will maintain, a stable value relative to the value of a fixed amount of monetary value.

The definition of “payment stablecoin” under the act does not cover digital asset that is (i) a national currency; (ii) a deposit, including a deposit recorded using distributed ledger technology; or (iii) a security.

As specifically provided by the act, it is intended to have extraterritorial effect if conduct involves the offer or sale of a payment stablecoin to a person located in the US.

 

Who Can Issue Stablecoins?

Under the act, generally, payment stablecoins may only be issued by “permitted payment stablecoin issuer”. “Permitted payment stablecoin issuer” would include a person formed in the US that is:

(a) a subsidiary of an insured depository institution or an insured credit union that has been approved to issue payment stablecoins by the primary Federal payment stablecoin regulator;

(b) a federal qualified payment stablecoin issuer; or

(c) a state qualified payment stablecoin issuer (for smaller issuers and under certain circumstances).

The approval of an issuer under options (a) or (b) above supersedes and preempts any state authorization. However, the laws of the host state, including laws relating to consumer protection, shall apply to the activities conducted in the host state by an out-of-state qualified payment stablecoin issuer, to the same extent as such laws apply to the activities conducted in the host state by an out-of-state federal qualified payment stablecoin issuer.

 

The act also includes an exemption, specifying certain circumstances under which foreign issuers which meet certain requirements may also be allowed to issue payment stablecoins in the US, and digital asset service providers would be allowed to offer or sell such payment stablecoins. These requirements, to be met by the foreign issuer, include:

• it is subject to regulation and supervision by a foreign payment stablecoin that the Secretary of the Treasury determines as comparable to the regulatory and supervisory regime established under the act;
• It is registered with the US Office of the Comptroller of the Currency;
• It holds reserves in a US financial institution sufficient to meet liquidity demands of US customers, unless otherwise permitted; and
• The foreign country in which the foreign issuer is domiciled and regulated is not subject to comprehensive economic sanctions by the US or a jurisdiction that the Secretary of the Treasury has determined to be a jurisdiction of primary money laundering concern.

 

Key Requirements

Ther requirements set for the issuers under the GENIUS Act apply regardless of whether the issuer is chartered on a federal or a state level. The key requirements and standards provided under the act address the following matters:

(a) Identifiable reserves backing of the outstanding payment stablecoins of the issuer on an at least 1:1 basis. The reserves must be segregated from the issuer’s operational assets and funds, and may not be used by the issuers.

(b) Redemption policy.

(c) Audits, reports and annual financial statements requirements.

(d) Capital, liquidity and risk management requirements.

(e) Bank Secrecy Act and sanctions laws compliance.

(f) Coordination with permitted payment stablecoin issuers with respect to blocking of property and technological capabilities to comply with lawful orders.

(g) Limitation of payment stablecoin activities – under the act, the issuer is limited to conducting solely the following activities (and any activity supporting such activities):

• • issue payment stablecoins;
  • redeem payment stablecoins;
  • manage related reserves, including purchasing, selling and holding reserve assets or providing custodial services for reserve assets, consistent with state and Federal law; and
  • provide custodial or safekeeping services for payment stablecoins, required reserves, or private keys of payment stablecoins.

(h) Prohibition on tying – the act prohibits the issuer from providing services to a customer on the condition that the customer obtains an additional paid product or service from the issuer or any of its subsidiaries, or agree to not obtain an additional product or service from a competitor.

 

In addition, the act provides clarity on the treatment of stablecoin reserves in case of bankruptcy proceedings, restricts publicly traded non-financial companies from issuing a payment stablecoin (with certain exceptions) and sets a prohibition on the use of deceptive names.

Furthermore, the act directs the primary federal payment stablecoin regulators, in consultation with the National Institute of Standards and Technology, other relevant standard-setting organizations and state bank and credit union regulators, to assess and, if necessary, set standards for permitted payment stablecoin issuers to promote compatibility and interoperability with other permitted payment stablecoin issuers and the broader digital finance ecosystem.

The act also imposes a ban on digital asset service providers to offer or sell to a person in the US a payment stablecoin which had not been issued by a permitted payment stablecoin issuer. Furthermore, the act prohibits digital asset service providers from offering, selling, or otherwise making available in the US a payment stablecoin issued by a foreign payment stablecoin issuer unless the foreign payment stablecoin issuer has the technological capability to comply, and will comply, with the terms of any lawful order and any reciprocal arrangement in accordance with the act. It is noteworthy though that the definition of “digital asset services provider” under the act does not include, among others, a distributed ledger protocol or a participation in a liquidity pool or other similar mechanism for the provisioning of liquidity for peer-to-peer transactions.

 

Yield and Interest Prohibition

Under the act, permitted payment stablecoin issuers and foreign payment stablecoin issuers are prohibited from providing holders of payment stablecoins with any form of interest or yield, whether in cash, tokens or other compensation, solely for holding, using or retaining the stablecoin.

 

Enforcement and Rulemaking

The act shall generally take effect on the earlier of (1) the date that is 18 months after the date of enactment of this act (i.e., 18 January 2027); or (2) the date that is 120 days after the date on which the primary federal payment stablecoin regulators issue any final regulations implementing the GENIUS Act.

The act also imposes a separate general application date for the ban on the digital asset service providers to offer, sell or otherwise make available payment stablecoins which had not been issued by a permitted payment stablecoin issuer to a person in the US, which will become effective on 18 July 2028. The ban on the digital asset service providers offering, selling, or otherwise making available in the US a payment stablecoin issued by a non-exempt foreign payment stablecoin issuer remains effective immediately on the effective date of the act.

The act requires the Secretary of Treasury, as well as federal and state regulators to develop and implement additional regulations, through a notice-and-comment rulemaking process, with most of them required to be finalized by 18 July 2026.

Businesses that conduct or that plan to conduct stablecoin and other digital asset-related activities in the US, should prepare a path to compliance with the new regulatory framework. Feel free to contact us if you have any questions regarding the new law and its potential effects on your company’s compliance efforts.