A bill to provide for the regulation of payment stablecoins, and for other purposes.
Passed on 7/18/25
The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act establishes the first comprehensive federal regulatory framework for payment stablecoins in the United States. The legislation creates a dual federal-state regulatory system that permits only approved entities to issue payment stablecoins, defined as digital assets designed for payment or settlement that maintain stable value through reserve backing without offering yield or interest. The Act prioritizes financial stability, consumer protection, and prevention of illicit financial activities while providing clear pathways for innovation in digital asset payments. By establishing strict reserve requirements, compliance standards, and oversight mechanisms, the legislation aims to legitimize and standardize the stablecoin industry while protecting consumers and the broader financial system from risks associated with unregulated digital assets.
The Act prohibits any entity from offering or selling payment stablecoins without approval as a permitted payment stablecoin issuer, with this prohibition taking effect three years after enactment. Permitted issuers fall into three categories: subsidiaries of insured depository institutions, federal qualified payment stablecoin issuers approved by the Comptroller of the Currency, and state qualified payment stablecoin issuers approved by state regulators. All issuers must maintain reserves on a one-to-one basis with outstanding stablecoins, holding only specified liquid assets including U.S. coins and currency, Federal Reserve account credits, U.S. Government securities, and other highly liquid government-issued assets. The legislation strictly prohibits rehypothecation of reserve assets except for specific settlement purposes and requires separate accounting and segregation of customer assets from issuer funds. Issuers are limited to core activities of issuing payment stablecoins, redeeming them, managing reserve assets, and providing custodial services. The Act establishes a Stablecoin Certification Review Committee consisting of the Secretary of Treasury, Federal Reserve Chair, and FDIC Chair to evaluate state-level regulatory regimes. State-level regulation is permitted for issuers with total outstanding issuance under ten billion dollars, while larger issuers must transition to federal oversight within 360 days of exceeding this threshold. Foreign payment stablecoin issuers must register with the Comptroller, maintain technological capabilities to comply with lawful orders, hold reserves in U.S. financial institutions sufficient for U.S. customer liquidity demands, and consent to U.S. jurisdiction for enforcement purposes.
The Comptroller of the Currency serves as the primary federal regulator for federal qualified payment stablecoin issuers, with exclusive licensing, regulatory, and supervisory authority that preempts state licensing requirements. State payment stablecoin regulators maintain authority over state qualified issuers meeting federal standards, with the Stablecoin Certification Review Committee evaluating state regulatory regimes for equivalence. Federal banking agencies including the Federal Reserve Board, FDIC, and National Credit Union Administration share oversight responsibilities depending on the issuer's structure. Primary federal payment stablecoin regulators must promulgate implementing regulations within one year of enactment through notice-and-comment rulemaking. The Financial Crimes Enforcement Network (FinCEN) must evaluate improvements in detecting illicit digital asset activity and issue guidance within two years of enactment. Regulators conduct ongoing examinations and supervision of permitted issuers, with authority to issue cease-and-desist orders, suspend or revoke registrations, and impose capital and liquidity requirements tailored to specific business models and risk profiles. Enforcement mechanisms include civil monetary penalties up to one hundred thousand dollars per day for unauthorized stablecoin issuance by digital asset service providers, up to one million dollars per day for foreign issuers continuing U.S. operations after non-compliance, and criminal penalties of up to one million dollars in fines and five years imprisonment for knowing violations. Regulators can refer violations to the Attorney General for prosecution and seek injunctions blocking financial transactions with non-compliant issuers. The Act requires annual reporting to Congressional committees and the Office of Financial Research on stablecoin activity trends, application approvals and rejections, and potential financial stability risks. Issuers must submit initial compliance certifications within 180 days after approval and provide monthly certifications thereafter, with financial reports examined by registered public accounting firms.
The legislation directly benefits consumers holding payment stablecoins by establishing priority claims for stablecoin holders in bankruptcy proceedings, ensuring their claims receive priority over other creditors and protecting reserve assets from issuer insolvency. Stablecoin holders gain enhanced transparency through mandatory monthly public disclosure of reserve composition, clear redemption procedures with limited discretionary restrictions, and transparent fee disclosures with seven-day advance notice of changes. The Act prohibits deceptive marketing practices and misrepresentation of stablecoins as backed by the U.S. government or having federal deposit insurance. Financial institutions and credit unions gain clear authority to engage in stablecoin-related activities under specified conditions, while digital asset service providers face significant compliance burdens including mandatory anti-money laundering programs, sanctions list verification, suspicious transaction monitoring, and customer identification protocols. Individuals with felony convictions for financial crimes are permanently barred from serving as officers or directors of stablecoin issuers. The regulatory framework imposes substantial administrative costs on issuers through monthly certification requirements, annual independent financial audits, detailed reporting on business operations and customer asset protection, and technological capabilities to comply with lawful orders. Foreign stablecoin issuers face additional burdens of maintaining U.S. financial presence, submitting to comprehensive regulatory oversight, and providing detailed financial transparency. The Act establishes extraterritorial enforcement authority for stablecoins offered to U.S. persons, potentially affecting international digital asset markets. The legislation contains no sunset provisions, establishing permanent regulatory authority over payment stablecoins.
The Act derives constitutional authority from Congress's power to regulate interstate commerce and coin money under Article I, Section 8 of the U.S. Constitution. The legislation amends multiple existing federal statutes to integrate payment stablecoins into the broader financial regulatory framework. The Investment Company Act of 1940 is modified to exclude payment stablecoins from traditional security definitions, while the Securities Act of 1933 and Securities Exchange Act of 1934 are amended to clarify regulatory treatment. The Commodity Exchange Act receives modifications to address digital asset definitions and regulatory jurisdiction. The Federal Deposit Insurance Act and Federal Credit Union Act are amended to establish authority for depository institutions and credit unions to engage in stablecoin activities. The Act modifies the Bankruptcy Code to provide special treatment for payment stablecoin reserves and establish priority for holder claims in insolvency proceedings. Payment stablecoin issuers are treated as financial institutions under the Bank Secrecy Act, subjecting them to comprehensive anti-money laundering requirements, customer identification protocols, and suspicious activity reporting obligations. The legislation establishes federal preemption of state licensing requirements for federal qualified payment stablecoin issuers, while preserving state regulatory authority for smaller issuers meeting federal standards through a certification process. Judicial review of regulatory decisions is available through the U.S. Court of Appeals for the District of Columbia Circuit, with jurisdiction extending six years after a party's separation from service. The Act provides mechanisms for extraordinary cause relief and petitions for reconsideration of regulatory decisions. Regulators maintain authority to enter bilateral agreements with foreign jurisdictions having comparable regulatory regimes, enabling reciprocal arrangements and cross-border regulatory cooperation.
The legislation faces potential constitutional challenges regarding the extent of federal preemption over state regulatory authority and whether the comprehensive regulatory framework impermissibly restricts commercial speech through marketing and naming restrictions. The prohibition on offering yield or interest on payment stablecoins may face scrutiny as an undue restriction on business models and innovation in digital finance. Implementation challenges include complex multi-agency coordination among the Treasury Department, Federal Reserve, FDIC, Comptroller of the Currency, and state regulators, requiring unprecedented cooperation and information sharing. The technological compliance requirements, particularly the mandate that issuers maintain capabilities to comply with lawful orders, raise concerns about technical feasibility, privacy implications, and potential conflicts with decentralized blockchain architectures. The 360-day transition period for issuers exceeding the ten billion dollar threshold may prove insufficient for complex organizational restructuring and regulatory compliance. The Act's extraterritorial application to foreign issuers creates potential conflicts with international regulatory regimes and raises questions about enforcement jurisdiction over entities operating primarily outside U.S. borders. The strict reserve requirements and prohibition on rehypothecation may limit issuer profitability and create competitive disadvantages compared to traditional financial institutions. The significant compliance burden, including monthly certifications, annual audits, and extensive reporting requirements, may create barriers to entry that favor large established financial institutions over innovative startups, potentially stifling competition and innovation in the digital asset space. The legislation's reliance on existing financial regulatory frameworks may prove inadequate for addressing unique characteristics of blockchain-based assets and decentralized finance protocols. Ambiguities remain regarding exact technological standards for digital asset verification, precise mechanisms for reserve asset diversification, and full scope of enforcement powers in unusual circumstances. The Act's effectiveness depends heavily on international cooperation, as non-compliant foreign issuers could continue serving U.S. customers through decentralized protocols or offshore platforms beyond regulatory reach.
308 Yea
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RRJul 14, 2025
4:00 PM
