LawFlash

GENIUS Act Passes in US Congress: A Breakdown of the Landmark Stablecoin Law

2025年07月17日

The US House of Representatives passed the Guiding and Establishing National Innovation for US Stablecoins Act, or the “GENIUS Act,” on July 17, 2025, sending the landmark legislation to President Donald Trump for his signature. The act will establish a comprehensive and sweeping federal-state supervision and enforcement regime over payment stablecoin issuers.

There were disagreements between members of Congress who supported the GENIUS Act and those who believed the House’s bill, the STABLE Act, had provisions that should be incorporated into the GENIUS Act.

This LawFlash provides a detailed timeline of key milestones that begin on the date of enactment, a description of the GENIUS Act as passed, and the main points where it diverges from the STABLE Act. This LawFlash also highlights the tasks and deadlines for institutions that are interested in issuing payment stablecoins or providing payment stablecoin custodial services.

TIMELINE OF KEY MILESTONES

With the passage of the GENIUS Act (the Act), the timing of key milestones are solidified. First, the Act prohibits issuing payment stablecoins, but that prohibition will not take effect until the “effective date” of the Act, which we estimate will be in November 2026.[1] During this time, bank regulatory agencies, state stablecoin regulators, and the Secretary of the Treasury will be required to issue rules and reports to implement the Act. See the full Act rollout timeline on our Stablecoin page.

In summary, the key dates and deadlines of the Act are as follows:

  • Effective Date of the Act: The Act and its amendments will generally take effect on the earlier of two dates: 18 months after the date of enactment of the Act, or 120 days after the primary federal payment stablecoin regulators issue any final regulations implementing the Act.[2] After this date, issuers of payment stablecoins in the US must abide by the obligations in the Act, most importantly being approved by an appropriate regulator to issue payment stablecoins.
  • Anti-Money Laundering Innovation: Within 30 days of the date of enactment, and for a period of 60 days thereafter, the Secretary of the Treasury shall seek public comment to identify innovative or novel methods, techniques, or strategies that regulated financial institutions use, or have the potential to use, to detect illicit activity, such as money laundering, involving digital assets.[3] No later than three years after the date of enactment of the Act, the Financial Crimes Enforcement Network (FinCEN) shall issue public guidance or notice and comment rulemaking, based on the results of research of public comments related to innovative methods to detect illicit activity, such as money laundering, involving digital assets.[4]
  • Rulemaking and Regulations:[5] Each primary federal payment stablecoin regulator, the Secretary of the Treasury, and each state payment stablecoin regulator are required to promulgate regulations to carry out the Act through appropriate notice and comment rulemaking no later than one year after the date of enactment of the Act. A report confirming and describing the regulations promulgated to carry out the Act must be submitted to the relevant Senate and House committees no later than 180 days after the effective date of the Act (approximately one year after final rules are promulgated).[6]
  • Exception for Foreign Payment Stablecoin Issuers: Within one year of enactment, the Secretary of the Treasury must issue rules for determining whether a foreign stablecoin regulatory regime is compatible with the US federal regime, and thus whether stablecoin issuers from that foreign jurisdiction are exempt from the requirement to be a permitted payment stablecoin issuer under US regulations.[7] Once those regulations are issued, foreign payment stablecoin issuers (or a foreign regulator) may request a determination from the Secretary of Treasury of compatibility, and the Secretary must render a decision within 210 days of the request as to compatibility (and thus exemption from US application requirements).[8]
  • Certification and Review: State payment stablecoin regulators must submit an initial certification that their state-level regulatory regime meets the criteria for substantial similarity to the federal framework no later than one year after the effective date of the Act (or approximately two and a half years after enactment).[9] The Stablecoin Certification Review Committee must approve or deny such certifications within 30 days of submission.[10]
  • Prohibition on Offers or Sales of Non-Approved Payment Stablecoin: While the requirement that issuers of payment stablecoins must come into compliance with the Act on the Effective Date (approximately one and a half years after enactment), for custodians or other entities that sell or transact in payment stablecoins, the Act gives a longer grace period. No later than three years after the enactment of the statute, any person that transacts or provides custody of payment stablecoins must restrict their activities to only payment stablecoins that have been issued by an approved issuer under the Act.

SUMMARY OF THE GENIUS ACT

Key Definitions in GENIUS Act

As highlighted in our overview of the GENIUS Act’s insolvency provisions, the Act establishes a comprehensive regulatory scheme for payment stablecoin in the US. As the Act nears enactment, it is important for interested parties to be aware of certain key definitions in the Act, which offer insights into what is within—and outside—its scope.

Definition of Payment Stablecoin

The central definition in the GENIUS Act is “payment stablecoin,” which is defined both by how it is used as well as what it represents. The Act states that a payment stablecoin is a digital asset (i.e., a digital representation of value that is recorded on a cryptographically secured digital ledger) that is used or designed to be used as a means of payment or settlement (rather than investment), and that can be exchanged or redeemed in the future for a stable, fixed amount of monetary value of national currency or deposit. The definition of payment stablecoin excludes any digital assets that are a national currency or deposit or that are a security, and elsewhere the statute clarifies that payment stablecoins are also not commodities.

Institution Definitions

To accomplish the scope of regulated institutions, the GENIUS Act defines institutions, including the following:

  • Permitted Payment Stablecoin Issuer (PPSI): The primary regulated entity under the GENIUS Act is the issuer of payment stablecoins. Under the GENIUS Act, an entity becomes a PPSI via three potential routes, all of which require application from the issuer and approval by a regulator: (1) insured depository institutions can issue payment stablecoins through a subsidiary that has applied and been approved by the appropriate federal payment stablecoin regulator; (2) nonbanks, uninsured national banks, and federal branches of foreign banks can become PPSIs by applying to and receiving approval from the OCC; and (3) nonbanks that issue payment stablecoin in aggregate amounts equal to less than $10 billion can alternatively opt to apply to the relevant state payment stablecoin regulator.
  • Digital Asset Service Provider: The GENIUS Act also defines the category of entity that transfers and provides custodial services for digital assets. A digital asset service provider is any entity that, for compensation or profit, transacts in or acts as custodian of digital assets (including but not limited to payment stablecoins). The Act excludes from the definition the distributed ledger protocols or those entities that develop such protocols, certain custodial software interfaces, or merely participating in a liquidity pool.

Government Definitions

The GENIUS Act establishes a framework for regulation and oversight by the appropriate federal or state banking agency. “Appropriate Federal Banking Agency” is defined as having the same meaning as that term in Section 3 of the Federal Deposit Insurance Act (12 USC 1813). The following federal banking agencies are defined terms: Federal Reserve Board of Governors (“Board”); Office of the Comptroller of the Currency (“Comptroller”); and the Federal Deposit Insurance Corporation (“Corporation”). The National Credit Union Administration is defined as the primary federal payment stablecoin regulator with respect to an insured credit union or a subsidiary of an insured credit union.

The Act also defines specific government entities that will oversee stablecoin issuers: (1) the Primary Federal Payment Stablecoin Regulator, which, for credit unions, would include the National Credit Union Administration, the Stablecoin Certification Review Committee composed of the Secretary of the Treasury, the Chair of the Board, and the Chair of the Corporation; and (2) the state payment stablecoin regulator, defined as a state agency that has primary regulatory and supervisory authority over payment stablecoin issuers. States are not required to issue regulations establishing a state payment stablecoin regulator to oversee state PPSIs, but if they do, they are required to do so within the same one-year period as the primary federal payment stablecoin regulators.

Excluded from these definitions of regulatory agencies overseeing payment stablecoin issuers are the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), or the Consumer Financial Protection Bureau (CFPB), none of which have roles to play in regulating of payment stablecoin under the GENIUS Act.

Substantive Obligations for Institutions Issuing and Transacting Payment Stablecoins

Issuance and Treatment of Payment Stablecoins

The primary provision of Section 3, Section 3(a), makes it unlawful for any person other than a permitted payment stablecoin issuer to issue a payment stablecoin in the US.

However, the GENIUS Act establishes a long lead time before certain other obligations become effective. Section 3 of the Act states that parties can only transact in or provide custodial services for payment stablecoin that has been issued by a PPSI, but this requirement does not go into effect until three years after the Act is signed. This moratorium is potentially in recognition of the fact that payment stablecoins are already an established and growing segment of financial services, with some estimates ranging as high as $70 billion in transaction volume per day in the US.

Requirements for Issuing Payment Stablecoins

Section 4 details numerous requirements for a payment stablecoin to be valid for issuance. Issuers must maintain reserves on a 1:1 basis, publicly disclose redemption policies, and provide monthly reporting of reserve compositions. Section 4 prohibits the rehypothecation of reserves except under certain conditions. The Act also sets requirements for capital, liquidity, and risk management tailored to the issuer’s business model and risk profile. Additionally, it prohibits paying interest or yield to stablecoin holders.

Requirements for Custodians of Payment Stablecoins, Reserves, or Associated Property

Entities may provide custodian services of payment stablecoins, even if the custodian is not a PPSI, so long as the custodian: (1) is subject to federal or state financial supervision; (2) treats the custodial assets as assets belonging to the customer who holds the stablecoin rather than as assets of the custodian; and (3) segregates the custodial assets from the other assets of the custodian.[11]

For custodians that are depository institutions, the GENIUS Act states that the depository institution does not have to list custodial payment stablecoin assets as a liability on the financial statement or balance sheet of the depository institution.[12]

Federal and State Supervision of Permitted Payment Stablecoin Issuers

Sections 4 through 7 of the GENIUS Act set forth a detailed supervision and enforcement regime for covered stablecoin issuers that includes reports on financial condition and compliance with violations resulting in possible suspension or revocation of registration. Subsidiaries of insured depository institutions and federal qualified payment stablecoin issuers must submit applications to issue payment stablecoins to the primary federal payment stablecoin regulator. The Act sets out detailed timing requirements for review and action on applications with rights to review denial of applications.

State qualified payment stablecoin issuers are subject to supervision and enforcement authority by the appropriate state payment stablecoin regulator if the state has implemented a regulatory regime that has been certified to the Certification Review Committee under the Act. An issuer can opt to be supervised by a state regulator rather than a federal regulator if it meets the following criteria: (1) it is an entity established under state law; (2) it is not an insured depository institution, uninsured national bank, federally licensed branch of foreign bank, or subsidiary of one of those entities, and (3) it has issued payment stablecoins in aggregate value equivalent to less than $10 billion.[13]

Non-financial services public companies may not issue stablecoins unless they obtain a unanimous vote of the Stablecoin Certification Review Committee that the company does not pose a risk to the safety and soundness of the US banking system and that the company will comply with data use limitations and the Act’s tying prohibitions.[14]

Consumer Protection and Anti-Money Laundering Provisions

To prevent deceptive advertising practices, PPSIs are prohibited from using any combination of terms relating to the US government in the name of the payment stablecoin. PPSIs may not advertise a payment stablecoin that would lead a reasonable person to conclude it to be legal tender, issued by the US, or guaranteed or approved by the US government.[15]

As for anti-money laundering protections, PPSIs shall be treated as a financial institution and thus subject to the Bank Secrecy Act. As a result, PPSIs will need to comply with all laws applicable to financial institutions, including those requiring customer identification, due diligence, and an effective anti-money laundering program.[16]

Priority of Claims for Payment Stablecoin Holders in Insolvency

Because we provide a more detailed examination of, and the issues associated with, the insolvency provisions in the GENIUS Act in our previous LawFlash, we discuss the issue only briefly below. In general, in the event of insolvency of either a custodian or an issuer of payment stablecoins, the GENIUS Act provides for holders of payment stablecoins to have first-priority claims.

A custodian holding required payment stablecoin reserves must take appropriate steps to protect the reserves from the claims of other creditors of the custodian. In the event of the insolvency of the custodian, holders of payment stablecoins have priority claims of the reserves over claims of other creditors of the custodian, including claims of depositors.[17]

If a PPSI becomes insolvent, the GENIUS Act specifies that holders of payment stablecoins have priority claims over any other claims against the PPSI as to the required payment stablecoin reserves. Additionally, the GENIUS Act amends the Bankruptcy Code in various ways to safeguard the priority of claims of payment stablecoin holders whose claims have not been fully satisfied out of the reserves. For example, the Bankruptcy Code is amended to provide that payment stablecoin reserves cannot be considered part of the estate of a bankrupt PPSI, and claims from payment stablecoin holders that were not satisfied from the reserves are given first priority over claims of other creditors of the PPSI.[18]

Rulemaking Requirements

To carry out the requirements of the GENIUS Act, the Act requires that federal and state payment stablecoin regulators must promulgate regulations in a coordinated manner, through notice and comment rulemaking.[19] This rulemaking may, in addition to implementing the prohibitions and requirements of the statute, pronounce interoperability standards for digital finance transactions in general, including blockchain standards.[20] The implementing regulations required under the Act must be promulgated no later than one year after the date of enactment of the Act.[21]

This will be a challenging timeline for the federal regulatory agencies to meet, as regulations of this complexity often take several years to move through the notice-and-comment rulemaking process. Then, approximately one year after promulgation of the regulations (and no later than 180 days after the effective date), the federal banking agencies must submit a report describing the regulations to Congress.[22]

Treatment of Non-Payment Stablecoins and Reports to Congress

The GENIUS Act only regulates “payment stablecoins” as that term is defined in the Act. It does not regulate stablecoins that are not “payment” stablecoins (for example, stablecoins that are pegged to a value other than fiat currency, such as stablecoins pegged to the value of other digital assets—what is known as “endogenously collateralized payment stablecoins”). Instead, it requires that the Secretary of the Treasury (in consultation with other federal regulators) conduct a study of such non-payment stablecoins and report on the results of that study within one year of the enactment of the GENIUS Act to Congress.[23] This is in contrast to the STABLE Act bill, which would instead impose a two-year moratorium on issuance of endogenously collateralized payment stablecoins.

Additionally, the federal payment stablecoin regulators must produce annual reports to Congress on the status of the payment stablecoin industry generally. These reports must include summaries of trends in the industry and the risks to the safety and soundness of the broader financial system.[24]

Authority of Banking Institutions

The GENIUS Act clarifies that the restrictions on payment stablecoin activities do not limit the authority of depository institutions to engage in other legally permissible banking activities. Additionally, state-chartered depository institutions that have PPSI subsidiaries are authorized to engage in money transmission, custodial services, or issue payment stablecoins in any state so long as the state depository institution is required by its home state regulator to maintain adequate liquidity and capital to engage in its PPSI activities in other states.[25]

Distinguishing Payment Stablecoins from Securities and Commodities Regulation

The GENIUS Act amends several statutes to clarify that payment stablecoins are not securities or commodities, and PPSIs are not investment companies, ensuring that the SEC and CFTC will not generally regulate payment stablecoin activities.[26]

Treatment of Foreign Payment Stablecoin Issuers

The GENIUS Act establishes a procedure by which payment stablecoin issuers that are supervised by a regulator of a foreign country can issue payment stablecoins in the United States without becoming a PPSI under the Act.

In general, the procedure requires that the Secretary of the Treasury must deem the regulatory regime of the foreign issuer’s jurisdiction to be comparable to the requirements of the GENIUS Act, and the foreign issuer must register with the Office of the Comptroller of the Currency and hold reserves in a US financial institution sufficient to meet the liquidity demands to customers in the United States.[27] If a foreign issuer is domiciled in a country that has not been determined to be comparable by the Secretary of the Treasury, there is a procedure by which the foreign issuer can request such a determination.[28]

KEY DIFFERENCES BETWEEN GENIUS AND STABLE ACTS

State-Level Regulatory Regimes

The GENIUS Act provides detailed procedures for state regime certification and appeals, while the STABLE Act allows state certifications to be valid upon submission unless rejected, with advisory opinions and opportunities to cure deficiencies. The GENIUS Act requires affirmative validation/denial by a three-agency body while the STABLE Act effectively gives the Secretary of the Treasury alone a veto but otherwise presumes the certification to be valid.

In the GENIUS Act (Section 4(c)(5)(A)) when a state regulatory body produces a payment stablecoin regulatory regime, the state certifies that the regime meets the criteria for “substantial similarity” with the federal regime, and then submits the regulation to the Stablecoin Certification Review Committee, which must review and explicitly approve (or deny) the regulation as substantially similar within 30 days.

By contrast, in the STABLE Act (Section 4(b)(2)) the state payment stablecoin regulator may submit the state’s regulation to the Secretary of the Treasury (solely to the Treasury Department instead of to the three-agency review committee) a certification that the state’s regulatory regime “meets or exceeds the standards and requirements” of the required rulemaking. Then the certification is valid upon submission and remains valid unless the Secretary of the Treasury rejects the certification (as not sufficiently meeting the federal standard).

Insolvency Proceedings of Payment Stablecoin Issuers

As described above, and explored in greater depth in our previous LawFlash, the GENIUS Act provides for priority treatment for holders of payment stablecoins in payment stablecoin reserves in the event of the insolvency of a PPSI. By contrast, the STABLE Act does not include any provisions addressing the insolvency of the issuer of payment stablecoins. Both the GENIUS and STABLE Acts have similar provisions regarding the priority of payment stablecoin holder claims in an insolvency of a payment stablecoin custodian.

Treatment of Public Non-Financial Companies and Foreign Non-Financial Companies

A major point of contention and debate is how each legislation treats non-financial public and foreign companies. The GENIUS Act restricts such companies from becoming PPSIs (only upon a unanimous vote of the Certification Review Committee), whereas the STABLE Act does not offer any restrictions for these categories of companies.

Moratorium on Endogenously Collateralized Stablecoins

The STABLE Act imposes a two-year moratorium on endogenously collateralized stablecoins, whereas the GENIUS Act does not explicitly mention a moratorium but directs the Secretary of the Treasury to conduct a study on non-payment stablecoins, including endogenously collateralized stablecoins which must be completed within one year after enactment.

An “endogenously collateralized stablecoin” is defined generally as a digital asset that is pegged to the value of another digital asset (rather than pegged to a national currency as in a payment stablecoin). The primary concern posed by endogenously collateralized stablecoins is that they might be used as a means to evade regulation under the federal legislative frameworks.

For example, if an issuer can issue stablecoins pegged to a different authorized payment stablecoin, then the issuer of this endogenously collateralized stablecoin could potentially avoid having to meet all the rigorous requirements of the Act, such as adequate currency reserves, auditing, etc.

OVERVIEW OF STEPS FOR INSTITUTIONS INTERESTED IN BECOMING PERMITTED PAYMENT STABLECOIN ISSUERS OR PROVIDING CUSTODIAL SERVICES FOR PAYMENT STABLECOINS

For institutions that are interested in issuing payment stablecoin under the regime set out in the GENIUS Act, there are a series of decisions with key deadlines to consider, including submitting an application to the appropriate payment stablecoin regulator demonstrating the institution’s ability to comply with the requirements of the Act. Institutions can begin submitting these applications as early as one year after the enactment date. Following the approval of the regulator, PPSIs must then implement and follow the rigorous compliance program, including audit, reporting, and oversight of the compliance programs mandated by the Act. For foreign payment stablecoin issuers, the process is different and involves an application to the Secretary of the Treasury regarding the reciprocity of the issuer’s home-nation payment stablecoin regulatory regime.

STAY INFORMED

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Morgan Lewis Manager of Government Affairs David B. Mendelsohn contributed to this LawFlash.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following:

Authors
Alice S. Hrdy (Washington, DC)
David Wake (Washington, DC)
Stacie Hartman (Chicago / New York)
Erin E. Martin (Washington, DC / New York)
Edwin E. Smith (Boston / New York)
Rahul K. Patel (New York / Princeton)
Robert A. Schwartz (Washington, DC)
Todd P. Zerega (Pittsburgh)

[1] Section 20 of the GENIUS Act defines the “effective date” as the earlier of either 18 months after the enactment date or 120 days after primary federal regulators issue required final regulations implementing the GENIUS Act.

[2] Section 20.

[3] Section 9(a).

[4] Section 9(d).

[5] Section 13.

[6] Section 13(c).

[7] Section 18(b)(6).

[8] Section 18(b)(2-3).

[9] Section 4(c)(4)(A).

[10] Section 4(c)(5)(A).

[11] Section 10.

[12] Section 16.

[13] Section 2(31) (definition of “state qualified payment stablecoin issuer”); Section 4(c)(1) (option for state-level regulatory regime).

[14] Section 4(a)(12).

[15] Section 4(e).

[16] Section 4(a)(5).

[17] Section 10.

[18] Section 11.

[19] Sections 12-13.

[20] Section 13.

[21] Section 12.

[22] Section 12.

[23] Section 14.

[24] Section 15.

[25] Section 16.

[26] Section 17.

[27] Section 18.

[28] Id.