Understanding the GENIUS Act: US Stablecoins Revolution

The Guiding and Establishing National Innovation for U.S. Stablecoins Act—better known as the GENIUS Act—was signed into law on July 18, 2025. It marks a watershed moment in U.S. digital asset policy: the first comprehensive federal framework specifically regulating the issuance and operation of payment stablecoins.

The following opinion editorial was written by Alex Forehand and Michael Handelsman for Kelman.Law.

As highlighted in our earlier coverage of Crypto Week, the Act passed the Senate on June 17. It received bipartisan support (68–30). The House voted on July 17 (308–122). President Trump’s signature the next day codified the bill as Public Law No. 119-27.

Key Provisions of the GENIUS Act

Definition and ScopeThe Act defines “payment stablecoins” as digital assets. They are designed to maintain a stable value relative to a fiat currency, principally the U.S. dollar. These assets are intended for transactional use. These assets are explicitly excluded from being classified as securities, bank deposits, or central bank digital currencies (CBDCs). This provides long-needed legal clarity.

Licensure FrameworkAfter a three-year transition period ending in 2028, only “permitted payment stablecoin issuers” will be allowed to operate. These can include:

• Bank subsidiaries supervised by federal agencies
• Non-bank entities licensed by the new federal framework
• State-chartered entities certified through a federal recognition process

Issuers with under $10 billion in assets may opt for state-level oversight. They must obtain parity through a forthcoming certification committee.

Reserve and Disclosure RequirementsIssuers must maintain 1:1 reserves in high-quality liquid assets such as U.S. dollars or Treasury securities. Reserves must be held in segregated accounts, without rehypothecation. The Act mandates monthly reserve attestations and requires annual audits by independent public accountants.

Consumer Protections and ComplianceThe law integrates robust consumer protection measures. It mandates compliance with anti-money laundering (AML) and know-your-customer (KYC) obligations. These obligations are under the Bank Secrecy Act. Stablecoin issuers cannot pay interest or yield on stablecoin holdings. This provision is designed to safeguard money markets and preserve the asset’s utility for payments.

Why the GENIUS Act Matters

• Regulatory Clarity: Stablecoins now have a defined legal status under federal law.
• Institutional Participation: Banks and fintechs have a clear path to enter the stablecoin market.
• Consumer Safety: New standards enhance reserve transparency and reduce systemic risks.
• Preserving Dollar Dominance: The Act strengthens the U.S. dollar’s role in digital transactions globally.
• Federal-State Balance: Smaller issuers retain a path through state regimes, subject to federal oversight.
• Interest/Yield: Stablecoins will NOT be allowed to pay holders interest or yield
• The Bank Secrecy Act: Stablecoin issuers are considered financial institutions under the BSA. They are required to maintain effective AML programs. They must retain appropriate records, including KYC information. They also need to report suspicious activity.
• Priority in Bankruptcy: Stablecoin holders will have priority over creditors in any Ch. 11 bankruptcy proceeding.

What’s Next

The law directs federal agencies—including the Federal Reserve, Treasury Department, and OCC—to begin rulemaking. They must establish operational frameworks for licensure, supervision, and enforcement. A certification process for state-supervised issuers is also underway.

Attention now turns to other digital asset legislation. The Clarity for Digital Tokens Act is advancing in the House. It would define SEC and CFTC jurisdiction over crypto tokens. Meanwhile, the Anti-CBDC Surveillance State Act—aimed at blocking a U.S. central bank digital currency—is expected to reach the Senate floor later this year.

The GENIUS Act is not a panacea. But it’s a foundational step toward a more coherent digital asset regime in the United States. For stablecoins in particular, the regulatory fog has finally begun to lift.

In addition, pursuant to the Act, FinCEN has 3 years to research new blockchain-specific methods. They need to release a report on detecting and reporting illicit activity. The report will include standards for doing so.

Staying informed and compliant in this evolving landscape is more critical than ever. Whether you are an investor, entrepreneur, or business involved in cryptocurrency, our team is here. We provide the legal counsel needed to navigate these exciting developments. If you believe we can assist, schedule a consultation here.

This article originally appeared at Kelman.law.