What does the US GENIUS Act mean for stablecoins?
The US GENIUS Act, signed into law on July 18, 2025, fundamentally transforms the stablecoin landscape by establishing the first comprehensive federal regulatory framework for payment stablecoins in the United States.
This legislation mandates that payment stablecoins—digital assets pegged to national currencies like the US dollar and backed by low-risk assets such as cash or Treasuries—can only be issued by approved US-based or comparably regulated foreign entities known as "permitted payment stablecoin issuers" .
The Act addresses crucial issues of financial stability by requiring stablecoins to be backed 100% by high-quality, liquid assets, thus minimizing risks of devaluation or "bank runs" on stablecoin reserves. It imposes stringent safeguards including custodial protections, monthly reserve disclosures, redemption policies, and audit requirements. In case of issuer bankruptcy, stablecoin holders gain priority claims over reserve assets, enhancing consumer protection beyond typical bankruptcy procedures.
By imposing licensing and oversight requirements that differentiate based on the issuer's scale—federal regulation for issuers over $10 billion and potential state-level oversight for smaller ones—the Act introduces regulatory clarity that was previously absent in the US stablecoin market. This clarity aims to foster innovation and adoption by reducing legal uncertainty, attracting a broader range of participants such as banks, fintech firms, and retailers, and enabling stablecoins to become efficient, low-cost payment methods, especially in cross-border transactions.
The GENIUS Act also enforces parity between US and foreign stablecoin issuers by requiring foreign entities issuing stablecoins to US holders to comply with US anti-money laundering (AML) and sanctions laws, thus leveling the competitive field and ensuring market integrity.
Importantly, the Act restricts the issuance and trading of stablecoins to regulated entities and sets a deadline (18 months from enactment or 120 days after final regulations) for compliance. Unauthorized stablecoins will generally be prohibited from US secondary markets after three years, reinforcing this regulatory regime’s robustness.
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