The GENIUS Act: All you need to know about it

The GENIUS Act has just reshaped the U.S. stablecoin market. Signed into law in July 2025, it sets out the first national rulebook for who can issue dollar-backed stablecoins, how they must be managed, and who oversees them. Issuers now have to keep full reserves, publish monthly reports, and answer directly to banking regulators.

This is not a small regulatory; it replaces long years of uncertainty with a rulebook that lets mainstream finance and fintech build with confidence, if they meet the rules. At the same time, the Act forces industry choices: go through heavy supervision or remain in the gray market with limited reach. For anyone building, regulating, or investing in digital payments and crypto, the GENIUS Act is now the operating manual.

What is the GENIUS Act?

The GENIUS Act, formally known as the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025, is U.S. federal legislation that creates a regulated framework for payment stablecoins (digital tokens pegged to a fixed value such as the U.S. dollar). It defines who may issue stablecoins, the required reserve rules, supervisory responsibilities, consumer protections, and cross-border considerations. The bill passed Congress in July 2025 and was signed into law by the president that same month.

GENIUS Act:

• Establishes a federal licensing and supervisory regime for permitted payment stablecoin issuers (PPSIs).
  
• Requires 1:1 reserve backing in safe, liquid assets (e.g., U.S. dollars, short-term Treasuries/cash equivalents) and monthly public disclosures about reserves.

• Clarifies that “payment stablecoins” are not, generally, securities or commodities for purposes of SEC/CFTC regulation, shifting primary oversight to banking regulators.

• Sets rules on insolvency priorities (holder protections) and restricts certain corporate issuers from becoming PPSIs.
  

Why does the GENIUS Act matter?

Stablecoins already run much of the on-chain economy: trading, lending rails, DeFi settlement, and some payments rely heavily on dollar-pegged tokens. Until now, the U.S. had regulatory uncertainty: some regulators treated tokens as securities, others as commodities, and banks and fintechs feared enforcement and unclear capital/reserve expectations. The GENIUS Act brings clarity. That matters because clarity reduces transaction friction, invites bank and institutional participation, and can scale stablecoin adoption beyond crypto-native users into mainstream payments, payroll, and corporate treasury use.

However, clarity comes with strings: the Act’s reserve, disclosure, and supervisory requirements mean a heavy compliance bar for issuers. That will favor large banks and well-capitalized firms that can build compliant operations, custody, and audit systems. Smaller outfits may stay onshore in alternative structures (ETPs in other jurisdictions, non-payment tokens) or pursue state regimes where permitted.

1. Who can issue stablecoins?

Only Permitted Payment Stablecoin Issuers (PPSIs), a specific, licensed class, can issue payment stablecoins in the U.S. These include insured depository institution subsidiaries, federally licensed nonbanks supervised by the OCC (Office of the Comptroller of the Currency), and entities that meet state or federal certification standards. Non-qualified companies cannot simply decide to mint a payment stablecoin without approval.

2. Reserve rule: 1:1 backing and safe assets

The Act requires full (1:1) reserves: every unit of a payment stablecoin must be backed by safe, liquid assets such as U.S. dollars or short-term Treasuries. Issuers must hold reserves in qualified institutions and publish the composition of those reserves monthly.

3. Supervision and who enforces the rules

Depending on the issuer’s structure, supervision falls to an appropriate federal banking regulator (e.g., OCC for federally chartered nonbank PPSIs; primary regulators for insured banks). The law also establishes review committees and procedures for state regimes to be deemed “substantially similar” to federal rules.

4. Consumer protections and disclosure

Issuers must periodically disclose reserve composition and relevant risks. The Act also provides for prioritized claims for holders of payment stablecoins in the event of issuer insolvency, improving the recovery prospects for users. 

5. Limits and prohibitions 

The Act restricts or places significant hurdles on certain entities, for example, it limits non-financial public companies from becoming PPSIs without unanimous committee approval and places a moratorium on endogenously collateralized stablecoins (those backed mostly by the issuer’s own tokens or balance-sheet exposures). It also sets rules for foreign issuers seeking to operate in the U.S. under comparable supervision.

Who gains and who loses?

Winners

• Large banks and incumbents. The framework is friendly to chartered banks and large financial institutions that can meet capital, custody, and compliance obligations. That could open revenue lines for payments, settlement, and tokenized deposits.
  
• Institutional users. Corporations, asset managers, and payment platforms gain a safer, regulated mechanism to move dollars on-chain.
  
• Regulators and consumer advocates. Clear rules and reserve requirements reduce systemic risk and improve transparency.
  

Losers 

• Unregulated stablecoin issuers and some crypto-native projects. Firms that favored high-yield, fractionalized reserves, or fully decentralized models will be squeezed or forced offshore.
  
• Smaller startups without bank partners. Compliance costs and custody standards will raise barriers to entry.
  
• Interest seekers. Issuers can no longer use reserve assets to chase yield in risky ways; profit models may shift to fees and banking services.
  

Market and technical implications

• Liquidity & settlement: Bank-backed stablecoins could deepen liquidity between traditional markets and crypto rails. Expect improved enterprise use-cases for cross-border settlement and faster payroll/treasury operations
• Custody and audits: Custody will be institutional (insured depository institutions, qualified custodians), with mandatory routine audits and public disclosures. That professionalizes the plumbing but also centralizes custody.
  
• Product design: Yield-seeking token models (staking, reserve yield) will need to be redesigned if they want to qualify as PPSIs. Some products may split functions: regulated PPSIs for payments and separate investment tokens for yield.
  
• Competition: Large banks could vertically integrate payments and custody, offering stablecoins alongside deposit and lending services, changing competition between fintechs and incumbents.
  

Criticisms and risks

1. Centralization risk. By favoring banks and large players, the Act may entrench centralized custody and push decentralized alternatives outside the U.S. ecosystem. Critics say this reduces the resiliency and innovation of decentralised finance.
   
2. Political and conflict concerns. The law includes restrictions on members of Congress profiting from stablecoins but reportedly exempts the President, a point that drew media attention and political criticism. That raises governance optics questions.
   
3. Regulatory capture worries. Big banks may capture market share in tokenized payments, raising competition and pricing concerns for fintech rivals.
   

Global context, how this fits with other countries

The U.S. joins jurisdictions that are setting rules for stablecoins: the EU’s Markets in Crypto-Assets (MiCA) regime, Canada and Switzerland’s ETP frameworks, and bespoke rules elsewhere. The GENIUS Act aligns with a global push to transition stablecoins into a supervised, banking-grade model; however, its U.S. flavor favors domestic banking incumbents and strict reserve requirements. Cross-border coordination and equivalency decisions in the Act will determine whether foreign issuers can operate in the U.S. without duplicative compliance.

Timeline & where this goes next

• July 2025: GENIUS Act signed into law. Agencies will now draft implementing rules and conduct a supervisory setup
  
• Next 6–18 months: Expect phased guidance and certification processes; a limited number of PPSIs (likely large banks and well-capitalized firms) will apply first.
  
• 2–3 years: If adoption scales, tokenized dollar use could transition from trading rails to mainstream settlement rails, depending on issuer appetite and international equivalence decisions.

Final Thought

The GENIUS Act is a big step for stablecoins. It sets clear banking rules and oversight, making them safer and more reliable for everyday payments. For banks and traditional finance, it opens new ways to use digital dollars. For crypto builders, it changes the balance between staying decentralized and meeting regulations. What matters now is how the rules are enforced, from how reserves are managed to how the U.S. works with other countries. Over the next few years, these details will decide how fast stablecoins grow. If you’re building, investing, or regulating, see the GENIUS Act as the new rulebook and plan with its limits in mind.

Read also: EFCC warns crypto ecosystem needs regulation to protect investors