In a major step toward establishing regulatory clarity for digital assets, the House of Representatives passed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act on Thursday, July 17, alongside two other digital asset-focused bills, the Digital Asset Market Clarity (CLARITY) Act and the Anti-CBDC Surveillance State Act.
Unlike the other two bills, the GENIUS Act already passed the Senate in June, and the House passed the legislation without changes, meaning the bill now heads to President Trump’s desk, where he is expected to sign it into law.
The GENIUS Act marks a milestone in digital-asset regulation, offering a federally approved framework for payment stablecoins. Banks, payment companies, and stablecoin issuers must now prepare for significant changes in the regulatory landscape.
Overview: What Does the GENIUS Act Do?
The GENIUS Act creates a national regulatory framework for U.S. dollar-backed stablecoins. Stablecoins are digital assets that are intended to maintain a stable value relative to an external asset, typically fiat currency.
The Act aims to encourage innovation in the digital asset space while ensuring robust safeguards are present to protect consumers and preserve financial stability.
Regulatory Structure: Key Provisions
- Federal and State Regulatory Structure: The Act establishes a dual framework in which stablecoin issuers operate under federal supervision or, if they are issuing less than $10 billion in stablecoins, they may operate under state supervision, provided that the state has established a substantially similar regulatory framework that has been certified by the treasury secretary
- Bank and Non-Bank Issuers Allowed: Stablecoins may be issued by federally chartered banks, federal qualified non-bank entities, and smaller state-qualified entities (issuance under $10 billion)
- Pathway for Foreign Issuers: Foreign-issued stablecoins may be permitted in the U.S. if the secretary of the treasury determines that the issuer is subject to a regulatory framework in its home jurisdiction that is comparable to U.S. standards and if the issuer can comply with lawful directives from U.S. authorities
- Non-Compliant Stablecoins Prohibited: Three years after enactment, Digital Asset Service Providers (DASPs) may offer or sell payment stablecoins in the U.S. only if the stablecoins are issued by a permitted issuer (or by foreign issuers meeting equivalence standards)
- Stablecoins Are Not Securities or Commodities: The Act clarifies that stablecoins properly issued under this regulatory framework are not considered securities or commodities.
Consumer Protection: Key Provisions
- Full Reserves Required: Stablecoins must be 100% backed by highly liquid reserves. This means stablecoin issuers must maintain reserves at a 1:1 ratio for all stablecoins that are issued. Reserves must be held in the form of cash, insured bank deposits, short-term U.S. Treasury securities (bills, notes, or bonds with a remaining or issued maturity of 93 days or less), qualified repurchase agreements, qualified money market funds, or similarly liquid federal government-issued assets approved by the primary federal payment stablecoin regulator
- Rehypothecation Prohibited: Reserves cannot be pledged, rehypothecated, or reused by the payment stablecoin issuer except in very limited circumstances
- Timely Redemption: Issuers must promptly redeem stablecoins at face value upon request
- Monthly Reserve Certification: Issuers must publish monthly certifications detailing their reserve holdings and the total number of outstanding payment stablecoins that have been issued
- Annual Independent Audits: Issuers are required to undergo annual financial audits by a registered public accounting firm
- Disclosure Requirements: Issuers must clearly disclose their redemption policy, including all fees associated with purchasing or redeeming the payment stablecoins and procedures for redemption
- Bankruptcy Protections: In the event of bankruptcy or insolvency of a stablecoin issuer, claims of stablecoin holders take precedence over all other claims against the issuer
Critical Considerations for Stablecoin Issuers and Implications for the Payments Industry
The GENIUS Act pulls stablecoin issuers squarely into a rigorous supervisory lattice. Any firm that wants to continue offering dollar-backed stablecoins to U.S. users will need to qualify either as a permitted payment stablecoin issuer under federal oversight or as a state-qualified issuer operating below the Act’s $10 billion issuance cap.
State-qualified issuers enjoy the flexibility to operate within state-chartered frameworks, but only if the treasury secretary certifies that the state regime mirrors the federal floor for reserves, redemption rights, and disclosures. States also retain enforcement authority against unauthorized or non-permitted stablecoin issues, so issuers of all sizes will need a playbook for supervision.
Compliance, however, is not limited to prudential rules. Issuers remain subject to Bank Secrecy Act compliance obligations, including anti-money laundering controls, know-your-customer requirements, and suspicious-activity monitoring. Wallet providers, custodians, and payment processors that plug into an issuer’s ecosystem will likely fall under the same glare if they hold customer assets or directly touch transaction flows. Accordingly, issuers may need to expand their vendor-risk frameworks, diligence, contracts, and ongoing monitoring to cover such third-party service providers.
For payment processors, card networks, and wallet platforms, GENIUS is both an opportunity and a compliance project. By blessing a class of fully reserved, dollar-denominated tokens, Congress is effectively green-lighting a payment rail that has the potential to settle peer-to-peer and merchant payments in seconds, rather than the hours or days common to ACH and wire payments. That speed, coupled with programmable features, promises new and evolving use cases, such as micropayments, decentralized finance (DeFi), and wallet-connected devices (such as vehicles or consumer electronics equipped to make or receive payments directly). But stakeholders may need to evaluate and upgrade their risk controls and compliance frameworks as they develop integration strategies and explore new use cases.
The regulatory script will not end with enactment. Regulatory agencies will soon embark on rulemaking to detail the Act’s provisions further. Stakeholders may wish to conduct comprehensive compliance assessments, develop implementation roadmaps, identify changes necessary to align with the new regulatory framework, and participate in future rulemakings and industry outreach initiatives.
Complementary Legislative Developments: The CLARITY Act and Anti-CBDC Act
In parallel, Congress also passed the CLARITY Act and the Anti-CBDC Surveillance State Act. These bills now head to the Senate for consideration. While GENIUS sets the immediate rules for stablecoin issuance, the CLARITY Act would broadly clarify the regulatory classification of digital assets across different categories, defining digital commodities and securities, establishing registration categories for service providers, and allocating regulatory authority between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). The Anti-CBDC legislation has a narrower focus, aimed at preventing the Federal Reserve from issuing a central bank digital currency (CBDC) or using a CBDC to implement monetary policy. Together, these measures aim to provide the most comprehensive federal scaffold for digital assets to date.
Conclusion
The House’s passage of the GENIUS Act signals a turning point in digital asset regulation. Financial institutions, payment processors, and issuers now face opportunities, but also significant compliance obligations. With concurrent regulatory frameworks like the CLARITY Act under consideration, the regulatory environment for digital assets is becoming increasingly defined. Strategic preparation, robust compliance measures, and proactive regulatory engagement will be essential in navigating this new era in digital-asset regulation.