Overview
The Guiding and Establishing National Innovation for US Stablecoins, or "GENIUS" Act, a sweeping legal framework for stablecoins in the US, was signed into law by President Trump on July 18, 2025. The law is expected to transform the legal landscape for stablecoins in the US, both for companies that want to issue and administer stablecoins, for banks and non-bank financial institutions, and for others wishing to engage with stablecoins in various ways.
Key Takeaways:
- The GENIUS Act is the first comprehensive legislation in the United States focused on the digital asset industry. By providing greater regulatory clarity, the act is likely to spur increased interest and activity in stablecoins, including the development of transaction, custody, payments, and issuance capabilities. Its passage may also pave the way for additional digital asset legislation later this year.
- The GENIUS Act applies to "payment stablecoins" and establishes several defined pathways for entities to issue payment stablecoins under a new licensing and regulatory regime.
- Issuers of a payment stablecoin will need to become a "Permitted Payment Stablecoin Issuer" or "PPSI" subject to federal or state supervision. There are also multiple potential pathways for foreign-located issuers. Each potential pathway has a number of benefits and drawbacks, and it will be important for issuers to carefully select the pathway that makes the most sense for their business.
- Many provisions of the GENIUS Act will phase in over time, and a transition period is built into the act for existing stablecoin issuers. Specifically, its provisions take effect at different times over a three-year period, and implementing regulations could take several months or even years to be fully drafted and implemented. In the meantime, pursuing currently available pathways for issuance, while relying on existing federal financial regulatory guidance, may be the most practical approach as we wait for the GENIUS Act to be fully implemented.
- The GENIUS Act specifically addresses non-US issuers and non-US issued stablecoins. As a result, non-US entities will need to strategize effectively about entering and servicing the US market. They may also seek to encourage their national regulators to pursue an equivalency determination from the Treasury Department, which is one of the potential pathways under the act.
- The GENIUS Act affirms that payment stablecoins are neither securities nor commodities. It also excludes central bank digital currencies and tokenization deposits, or "deposit tokens," from the definition of "payment stablecoins." However, the act leaves open questions regarding stablecoins and decentralized finance; algorithmically-backed stablecoins and others that do not meet the definition of "payment stablecoin"; stablecoin-based remittances; and other issues.
- When evaluating the implications of the GENIUS Act, it is important to consider recently issued guidance from federal regulators stating that national banks, Federal Deposit Insurance Corporation (FDIC)-insured institutions, and federal savings associations may engage in certain crypto-asset activities, including those involving payment stablecoins, without first obtaining a supervisory non-objection from their prudential supervisory agency. These activities include providing custodial services for stablecoins and other digital assets, facilitating payment settlement using independent node verification networks, and holding reserve assets associated with dollar-backed stablecoins. Most recently, the Office of the Comptroller of the Currency (OCC), the FDIC, and the Board of Governors of the Federal Reserve System ("Federal Reserve") affirmed that banks may continue offering crypto-asset safekeeping services, including stablecoin custody and related activities, as long as they adhere to sound risk management principles.
For more details, please see our expanded analysis here. If you have any questions or require further legal advice, please feel free to reach out to the authors directly.
