The GENIUS Act has been passed, regulating the issuance of stablecoins and promoting industry transparency.
Author: SuperEx
Translated by: Baihua Blockchain
On May 19, 2025, the U.S. Senate passed the motion to end debate on Bill 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 create a national regulatory framework for stablecoins. The bill aims to balance innovation and regulation, providing clear guidance for market participants and addressing the growing influence of digital assets in the global financial system. Below is a breakdown of the key provisions of the bill and their significance.
What is a "payment stablecoin"?
The GENIUS Act defines "payment stablecoins" as the following digital assets:
- Issued for the purpose of payment or settlement;
- Redeemable at a fixed par value (e.g., $1).
Unlike algorithmic or highly volatile cryptocurrencies, these stablecoins must be backed by qualified reserve assets at a 1:1 ratio to ensure redemption stability and minimize systemic risk.
Reserve Requirements: Strictly Limited Asset List
Entities issuing payment stablecoins must hold reserve assets equivalent to 100% of the issued amount, but not all assets qualify.
The bill restricts qualified reserve assets to:
- U.S. currency and cash;
- Insured deposits at banks or credit unions;
- Short-term U.S. Treasury securities;
- Government-backed repurchase and reverse repurchase agreements;
- Money market funds limited to government securities;
- Central bank reserves;
- Other government-issued instruments approved by regulators.
Reserve assets can only be used for redemption, as collateral for repurchase operations, or for other activities approved by regulators. The goal is to eliminate speculative behavior and prohibit the use of customer funds to chase profits.
This legislation clearly states that payment stablecoins are intended to maintain stability, not to generate profits. The separation of commercial risk from monetary 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 circulating stablecoins;
- 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—more stringent scrutiny 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 for digital asset activities.
FinCEN must also:
- Develop new tools to detect illegal crypto activities;
- Review compliance programs;
- Require issuers to formally attest to having effective AML and sanctions frameworks.
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 can be issued by:
- Banks or credit unions (through subsidiaries);
- Non-bank entities, including tech companies and fintech startups.
All issuers must register with the relevant federal agency. 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 a circulation below $10 billion may opt for state-level regulation, provided that the Secretary of the Treasury, the Chair of the Federal Reserve, and the Chair of the Federal Deposit Insurance Corporation (FDIC) determine that the state's regulatory framework is "substantially equivalent" to federal standards. This provision reserves space for state-level regulatory experimentation for smaller, startup companies.
Federal Regulation and Enforcement
Issuers opting for federal regulation or those with a circulation exceeding $10 billion will be overseen by:
- Their primary federal banking regulator (if a bank);
- The Office of the Comptroller of the Currency (OCC) for non-bank issuers.
These regulatory agencies will review issuers':
- Financial health;
- Risks to institutions and systemic stability;
- Risk management agreements.
Federal regulators may conduct examinations and require reports. In the event of violations, they have the authority to suspend issuance or take other enforcement actions.
State-Level Regulation: Providing a Flexible Framework for Startups
Non-bank issuers with a circulation below $10 billion may adhere to state-level regulation, provided that the state's regulatory system meets federal equivalency standards.
Once an issuer's circulation exceeds $10 billion, they must transition to the federal regulatory system unless granted an exemption. States may delegate enforcement authority to the Federal Reserve, and in "special emergencies," 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 bill establishes a three-year transition period for stablecoins issued abroad. Within three years of the bill's enactment, only compliant U.S. domestic entities may issue or sell stablecoins in the U.S.
Foreign stablecoins may continue to operate only if:
- Issued by a jurisdiction 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 such as the EU, UK, Singapore, or Japan.
Custody, Tokenized Deposits, and Bankruptcy Protection
The GENIUS Act establishes rules for stablecoin custodians:
- Custodians may be banks, credit unions, broker-dealers, or other regulated entities;
- They must not mix customer funds with their own;
- They are allowed to use blockchain infrastructure and issue tokenized deposits.
Notably, stablecoin holders have priority over other creditors in bankruptcy proceedings. This legal clarity marks a turning point in user protection and liability definition.
Stablecoins Are Not Securities or Commodities
The bill explicitly states:
- Payment stablecoins are not securities;
- They are not commodities;
- They are not 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 Significance of the GENIUS Act
The GENIUS Act is not perfect. Critics argue that it favors large institutions and consolidates federal power. Others believe it may stifle innovation due to compliance burdens or conflicts between federal and state agencies.
However, in a broader context, the GENIUS Act signifies three key shifts in U.S. policy:
- Constrained digital dollarization: The bill legalizes dollar-backed stablecoins as a permanent part of the financial ecosystem—provided they adhere to strict rules.
- Large-scale regulatory clarity: For the first time, stablecoin issuers can operate within a clear, written framework and have enforceable expectations.
- A strategic response to global cryptocurrencies: The law positions U.S. stablecoins as reliable, interoperable payment channels in a multipolar financial world.
Whether the GENIUS Act becomes the gold standard or merely a stepping stone, its passage reflects the U.S.'s increasingly mature regulatory attitude toward cryptocurrencies.
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