GENIUS Act
The GENIUS Act — the Guiding and Establishing National Innovation for US Stablecoins Act, signed into law in July 2025 — is the first US federal framework for payment stablecoins: it restricts issuance to licensed issuers, requires reserves of at least one dollar in cash, insured deposits or short-term Treasuries for every token, mandates monthly reserve disclosure, prohibits paying interest to holders, and applies anti-money-laundering obligations to issuers. It gave the dollar stablecoin the status MiCA gave the euro's.
- Also known as
- Guiding and Establishing National Innovation for US Stablecoins Act, US stablecoin law, Payment stablecoin regulation
- Used at
- every US-issued payment stablecoin and, through its provisions on foreign issuers, the terms on which non-US stablecoins (Tether's USDT above all) may be offered in the US market; the payment companies and banks that announced issuance after passage
- Binding
- federal statute with implementing rules by the Treasury, the OCC and the banking agencies over the 18 months after enactment; state regimes for issuers under a threshold ($10 billion), federal supervision above it; foreign issuers must meet comparable standards and register; existing issuers had a transition period
- Typical requirements
- 1:1 reserves in specified high-quality liquid assets, segregated and not rehypothecated; monthly public disclosure of reserve composition and an executive certification; annual audits for large issuers; redemption at par with clear procedures; no interest or yield paid to holders by the issuer; BSA compliance including the ability to freeze and seize tokens on lawful order; holders' claims prioritised in an issuer's insolvency; and a prohibition on misleading names implying government backing
- Typical effects
- bank entry (announcements from large US banks of stablecoin issuance, individually or in consortia), payment-company products (PayPal's existing PYUSD, Stripe's stablecoin accounts, Visa's and Mastercard's settlement programmes), Treasury demand from reserves (a policy motive the Act's sponsors stated), and pressure on offshore issuers to meet the standard or lose US distribution
- Parties
- Congress, the Treasury and banking agencies, state regulators, issuers (Circle as the model the law resembles; Tether as the foreign issuer it addresses), banks and payment companies, and the crypto exchanges and wallets that distribute
How the GENIUS Act works in practice
A payment company decides to issue a dollar stablecoin. Under the Act it forms or licenses an issuing entity — a state-chartered issuer if its supply will stay below $10 billion, federally supervised above — with capital, governance and a compliance programme the regulator approves. Every token is minted only against reserves received and held in cash, insured deposits and Treasury bills at qualified custodians; the composition is published monthly with a certification, and audited annually. Holders can redeem at par within a stated time. The company cannot pay holders interest on the token, so its yield on the reserves is its revenue and its incentive; it cannot call the token "USD-backed by the government"; and its BSA programme screens, monitors and can freeze tokens on lawful order — implemented in the smart contract as a freeze function. Distribution through exchanges and wallets follows their own money-transmitter and BSA obligations.
For the market the Act settled questions that had kept banks and large corporates out. Issuance became a licensed banking-adjacent activity with a known cost of compliance and a known revenue (reserve yield). Foreign issuers must meet comparable standards, which pushes the largest, Tether, toward a US-compliant product. The prohibition on interest keeps stablecoins from competing with bank deposits on yield — a concession to the banks — while the exchanges' rewards programmes test its edges. And the reserve requirement channels hundreds of billions into Treasury bills, which was part of the point. For a fintech, the Act makes a US stablecoin a product it can build on with a regulated issuer behind it and a compliance framework its own regulators recognise; for a buyer, a US stablecoin business is now diligenced on its licence, reserves and BSA programme like any regulated financial firm.
Example
A US fintech processing $8 billion a year in merchant payouts adds a stablecoin payout option in late 2025: merchants can receive settlement in a GENIUS-compliant stablecoin from a federally supervised issuer, instantly and on weekends, instead of ACH the next business day. The fintech's own obligations: money-transmitter licences already held, a BSA programme extended to on-chain transfers with wallet screening and the travel rule, a counterparty assessment of the issuer (monthly reserve reports read, redemption terms tested with a $1 million round-trip), and disclosures to merchants that the token is the issuer's liability, not a deposit. Adoption: 14% of payout volume in six months, concentrated among marketplaces paying international sellers, and a 0.3-point margin improvement on that volume from ACH and FX costs avoided.
Common mistakes
- Reading the Act as legalising all stablecoins; it licenses payment stablecoins and restricts the rest. - Paying holders yield through the issuer, which the Act prohibits. - Treating a compliant stablecoin as a deposit; it is the issuer's liability with priority in insolvency, not insured. - Foreign issuers assuming existing US distribution continues without registration. - A fintech using a stablecoin without extending its BSA programme to the on-chain leg.