Compiled by: Blockchain in Plain Language
On May 19, 2025, the U.S. Senate passed the motion to end debate on S.1582, paving the way for the final vote on the (2025 Guidance and Establishment of the U.S. Stablecoin National Innovation Act) (referred to as the GENIUS Act). This legislation represents a significant effort by Congress to establish a clear, unified, and practical framework for the issuance and regulation of 'payment stablecoins' within the U.S. crypto asset ecosystem.
This milestone marks the most comprehensive attempt by the U.S. federal government to date to establish a national regulatory framework for stablecoins. The act aims to balance innovation and regulation, providing clear guidance for market participants and addressing the growing influence of digital assets within the global financial system. Below is a breakdown of the key provisions of the act and their significance.
What is a 'payment stablecoin'?
The GENIUS Act defines 'payment stablecoins' as the following digital assets:
The purpose of issuance is for payment or settlement;
Redeemable at par value (e.g., $1).
Unlike algorithmic or highly volatile crypto assets, these stablecoins must be backed by qualified reserve assets at a 1:1 ratio to ensure redemption stability and minimize systemic risk.
Reserve requirements: a strictly limited list of assets
Entities issuing payment stablecoins must hold reserve assets equal to 100% of the issued amount, but not all assets qualify.
The act restricts qualified reserve assets to:
U.S. currency and cash;
Insured deposits at banks or credit unions;
Short-term U.S. Treasury securities;
Treasury-backed repurchase and reverse repurchase agreements;
Government bond-only money market funds;
Central bank reserves;
Other government-issued instruments approved by regulators.
Reserve assets may only be used for redemption, serving as collateral for repurchase operations, or other activities approved by regulators. The goal is to eliminate speculative behavior and prohibit the pursuit of profits using customer funds.
This legislation makes it clear: payment stablecoins are intended to maintain stability rather than generate profits. The separation of commercial risk from currency stability is the foundation of the GENIUS framework.
Reporting and transparency: disclosure obligations
Issuers must publicly disclose:
Redemption procedures;
Composition of reserve assets and total amount of stablecoins in circulation;
Regular attestations reviewed by public accounting firms;
Issuers with annual circulation exceeding $50 billion must submit annual audited financial reports.
These transparency requirements aim to restore trust in an industry long plagued by opaque and questionable reserve practices. The $50 billion audit threshold reflects a tiered approach to regulation—scrutiny is more stringent for larger participants.
Anti-money laundering, compliance, and executive integrity
All issuers must comply with the Bank Secrecy Act (BSA), and the Financial Crimes Enforcement Network (FinCEN) is required to develop new anti-money laundering (AML) rules targeting digital asset activities.
FinCEN is also required to:
Develop new tools to detect illegal crypto activities;
Review compliance programs;
Requires issuers to formally attest to having a valid anti-money laundering and sanctions framework.
Additionally, individuals convicted of specific financial crimes are prohibited from serving as executives or board members of stablecoin issuers.
The emphasis on executive integrity reflects lessons learned from past failures in both traditional finance and the crypto space, where unqualified or unethical leadership led to significant losses.
Who can issue stablecoins? Dual-track system
Under the GENIUS Act, stablecoins may be issued by the following entities:
Banks or credit unions (through subsidiaries);
Non-bank entities, including technology companies and fintech startups.
All issuers must register with the relevant federal agencies. If the agency does not respond within 120 days, the application will be automatically approved—this pro-innovation feature aims to prevent bureaucratic gridlock.
Non-bank issuers with less than $10 billion in circulation may opt for state-level regulation, provided that the Treasury Secretary, the Federal Reserve Chairman, and the Federal Deposit Insurance Corporation (FDIC) Chairman deem the state's regulatory framework 'substantially equivalent' to federal standards. This provision reserves space for state-level regulatory experimentation for smaller, startup enterprises.
Federal regulation and enforcement
Issuers opting for federal regulation or those with circulation exceeding $10 billion will be supervised by the following agencies:
Their primary federal bank regulatory agency (if a bank);
Office of the Comptroller of the Currency (OCC), for non-bank issuers.
These regulators will review the issuer's:
Financial health;
Risks to institutional and systemic stability;
Risk management protocols.
Federal regulators may conduct inspections and request reports. If violations occur, they have the authority to suspend issuance or take other enforcement actions.
State-level regulation: providing flexible frameworks for startups
Non-bank issuers with less than $10 billion in circulation may adhere to state-level regulation, provided that the state's regulatory system meets federal equivalent standards.
Once the issuer's circulation exceeds $10 billion, it must transition to the federal regulatory system unless an exemption is obtained. States may delegate enforcement authority to the Federal Reserve, and in 'special emergency situations', the Federal Reserve or OCC may intervene directly.
This combination of flexibility and upgrade mechanisms balances innovation with national financial integrity.
Foreign issuers: three-year transition period
The act establishes a three-year transition period for stablecoins issued by foreign entities. During the three years following the act's enactment, only qualifying U.S. domestic entities may issue or sell stablecoins in the U.S.
Foreign stablecoins may only continue operations under the following circumstances:
Issued by jurisdictions deemed 'comparable' by U.S. regulators;
Registered with the OCC;
Backed by sufficient U.S. reserve assets;
Equipped with transaction freeze capabilities and enforceable legal obligations.
This section clearly reflects concerns about the dominance of the dollar, financial sovereignty, and national security, while laying the groundwork for future bilateral agreements between the U.S. and major jurisdictions like the EU, UK, Singapore, or Japan.
Custody, tokenized deposits, and bankruptcy protection
The GENIUS Act sets rules for stablecoin custodians:
Custodians may be banks, credit unions, broker-dealers, or other regulated entities;
May not mix customer funds with their own funds;
Allow the use of blockchain infrastructure and the issuance of tokenized deposits.
Notably, stablecoin holders have a priority position over other creditors in bankruptcy proceedings. This legal clarity marks a turning point for user protection and the definition of responsibilities.
Stablecoins are not securities or commodities
The act explicitly states:
Payment stablecoins are not securities;
Nor are they commodities;
Nor are they instruments insured by the FDIC.
By doing so, the GENIUS Act avoids regulatory overlap with the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), preserving their jurisdiction over other categories of crypto assets.
The true meaning of the GENIUS Act
The GENIUS Act is not perfect. Critics argue that it favors large institutions and consolidates federal power. Others suggest it may stifle innovation due to compliance burdens or conflicts between federal and state agencies.
However, in a broader context, the GENIUS Act marks three key shifts in U.S. policy:
Constrained digital dollarization: the act legalizes dollar-backed stablecoins as a permanent component of the financial ecosystem—provided they adhere to strict rules.
Massive regulatory clarity: for the first time, stablecoin issuers can operate under a clear, written framework and have enforceable expectations.
A strategic response to global cryptocurrencies: this law positions U.S. stablecoins as reliable, interoperable payment channels in a multipolar financial world.
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Whether the GENIUS Act becomes the gold standard or merely a stepping stone, its passage reflects a maturing regulatory attitude toward cryptocurrency in the U.S.
