Why It Matters
Congress designed a dual regulatory structure that splits oversight between federal and state authorities based on issuer size and type, giving regulators new supervisory tools but also creating potential jurisdictional complexity, according to a Congressional Research Service (CRS) report, published Aug. 20.
The GENIUS Act was signed into law on July 18, 2025, and establishes the first comprehensive federal framework for payment stablecoins in the United States. Payment stablecoins are digital assets pegged to a fixed value, typically $1, and used for payment or settlement. Under the GENIUS Act, issuers must hold at least $1 in permitted reserves for every $1 of stablecoins issued, with permitted reserves limited to low-risk, government-backed assets such as Treasury bills, insured bank deposits, repos backed by T-bills, and central bank reserves.
The Big Picture
Banks, credit unionsn in outstanding stablecoins fall under federal supervision by relevant banking regulators or the Office of the Comptroller of the Currency for nonbanks. Nonbank issuers with under $10 billion in outstanding stablecoins may operate under a state regime if that state’s framework is substantially similar to the federal requirements, as determined by the Stablecoin Certification Review Committee
Applications for federal issuance must be evaluated on whether applicants can meet baseline requirements. Regulators must justify denials and permit applicants to appeal.
Stablecoin issuers must disclose redemption procedures and issue periodic reports on outstanding stablecoins and reserve composition, certified by executives and examined by registered public accounting firms. Issuers are subject to the Bank Secrecy Act, and the Treasury Department’s Financial Crimes Enforcement Network must write tailored anti-money-laundering rules. Issuers must certify anti-money-laundering and sanctions compliance programs and facilitate novel methods to detect illicit activity involving digital assets.
Issuers are prohibited from paying interest to stablecoin holders, though exchanges may still pay interest to customers on stablecoins. Stablecoins are not federally insured, not classified as securities, and not classified as commodities.
The Bottom Line
The GENIUS Act leaves unresolved the tension between the prohibition on issuer-paid interest and the permission for exchange-paid interest, a divide that has created friction between crypto platforms favoring yield and traditional banks opposing it.
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