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GENIUS Act explained: How it will affect the crypto industry
The GENIUS Act creates a regulatory framework for stablecoins in the U.S., requiring issuers to meet strict standards while balancing innovation with oversight.
Cryptocurrency is often thought of as being an unregulated form of currency. But that's not necessarily accurate -- especially in the U.S.
The Guiding and Establishing National Innovation for U.S. Stablecoins Act -- commonly referred to as the GENIUS Act -- is a U.S. federal law designed to create a regulatory framework for stablecoins. A stablecoin is a type of cryptocurrency designed to maintain stable value by being pegged to a real asset, such as the U.S. dollar.
Sen. Bill Hagerty (R-Tenn.) first introduced the GENIUS Act on May 21, 2025. It was passed in the U.S. Senate on June 17, 2025, and in the House of Representatives on July 17, 2025. On July 18, 2025, President Donald Trump signed the GENIUS Act into law.
Prior to the GENIUS Act, the regulatory landscape for stablecoins in the U.S was limited. The lack of a formal set of federal regulations led to concerns about consumer protection, financial stability and compliance with anti-money laundering (AML) laws. The GENIUS Act aims to address those concerns by setting regulatory compliance requirements for issuers -- balancing innovation with oversight.
Key provisions of the GENIUS Act
The GENIUS Act establishes a regulatory framework built around three core pillars:
- Licensing requirements.
- Reserve standards.
- Consumer protections.
The legislation creates a category of permitted payment stablecoin issuers who are the only entities authorized to issue payment stablecoins in the U.S. This exclusive licensing regime ensures all stablecoin issuers meet stringent federal or state standards before entering the market.
Overall, the GENIUS Act introduces several key provisions to regulate stablecoin issuance and management, detailed as follows:
| Provision |
Description |
| Permitted issuers |
Only permitted payment stablecoin issuers can issue or sell stablecoins, including subsidiaries of insured depository institutions, federally qualified nonbank issuers and state-licensed entities certified by the U.S. Treasury. |
| Backing requirements |
Stablecoins must be fully backed by high-quality liquid assets – such as U.S. dollars, treasuries and Federal Reserve deposits -- for 1:1 redemption. |
| Transparency |
Issuers must publish clear redemption policies, disclose monthly reserve compositions and submit monthly certifications. For issuers with more than $50 billion in market capitalization, annual audits are required. |
| Compliance |
Permitted issuers are treated as financial institutions under the Bank Secrecy Act and are required to comply with AML regulations. |
| Regulatory oversight |
Establishes a dual model: issuers with more than $10 billion in circulation fall under federal oversight, and smaller issuers can choose state supervision if the state is Treasury-certified. |
| Consumer protections |
Requires custodians to isolate customer assets, prioritize stablecoin holders in insolvency and ensure full backing to protect users. |
| Legal classification |
Payment stablecoins are explicitly not classified as securities, deposits or bank liabilities and cannot pay interest or dividends. |
What is a stablecoin?
A stablecoin -- also sometimes referred to as a pegged cryptocurrency -- is a type of cryptocurrency that is intended to have a stable value in that its value is directly linked 1:1 to the price of an asset -- such as the U.S. dollar or another fiat currency. The pegging of the stablecoin makes it different from other cryptocurrency -- such as Bitcoin or Ethereum -- where the value can fluctuate significantly without any direct link to an underlying asset. Among the most widely used stablecoins at the time of the GENIUS Act passage are Tether (USDT) and Circle (USDC).
There have been notable failures in the stablecoin market in recent years as well, which were part of the motivation for the GENIUS Act. In 2022, the TerraUSD stablecoin collapsed, leading to a decline in the confidence of stablecoins in an unregulated market.
Stablecoins have become increasingly popular because of their linked value, enabling their use in decentralized finance and payments. The GENIUS Act has significant implications for stablecoins in that it will reinforce the integrity of cryptocurrency for use in financial transactions. With regulations in place that define permitted issuers and require regulatory compliance, it is likely that adoption among less risk-averse organizations and individuals will accelerate.
Stablecoins exist on a spectrum between centralized and decentralized systems. Popular stablecoins -- including USDT and USDC -- are issued by centralized entities that control supply and can freeze tokens. However, they operate on public blockchains with decentralized transaction validation.
There are other more decentralized stablecoins including DAI and Liquidity USD that are managed by protocols and smart contracts, making them resistant to centralized control.
Regulatory implications
The GENIUS Act defines a regulatory framework that integrates both federal and state levels of jurisdiction.
Federal regulatory implications
At the federal level, the GENIUS Act makes the U.S. Office of the Comptroller of the Currency (OCC) the primary regulator for federal qualified nonbank issuers. Subsidiaries of insured depository institutions are regulated by their parent institution's primary federal regulator, which could be the Federal Deposit Insurance Corporation (FDIC), OCC or Federal Reserve -- depending on the bank's charter type. Credit union subsidiaries fall under the National Credit Union Administration supervision.
The act grants these federal agencies enforcement powers like those already in place for insured depository institutions under the Federal Deposit Insurance Act. Available enforcement tools include civil money penalties, license revocation and cease-and-desist orders.
State regulatory implications
The GENIUS Act also provides for state-regulated stablecoins.
States may regulate stablecoin issuers with less than $10 billion in outstanding tokens, provided their regulatory regimes are certified by the Stablecoin Certification Review Committee as substantially similar to federal standards. That committee includes the Treasury secretary, Federal Reserve chairman or vice chairman, and FDIC chairman.
Preemption and consumer protection laws
The GENIUS Act includes preemption provisions that balance federal authority with state interests.
One such preemption is that stablecoin issuers approved through the federal regulations are exempt from state licensing requirements. This preemption eliminates the burden of complying with multiple state licensing regimes, which currently require separate licenses in each state where a company operates.
The GENIUS Act still explicitly preserves the applicability of state consumer protection laws. Permitted stablecoin issuers must still comply with various state regulations and consumer protection laws -- particularly regarding marketing, fee disclosures and redemption processes.
International implications
While the GENIUS Act is U.S. legislation, its effects extend beyond the U.S. border due to the global nature of digital assets and the dominance of the U.S. dollar in international finance.
The GENIUS Act does have provisions that enable foreign stablecoin issuers to access U.S. markets, but under stringent conditions that effectively extend U.S. regulatory authority internationally. Foreign stablecoin issuers looking to serve U.S. customers must meet comparability standards determined by the Stablecoin Certification Review Committee.
Key criticisms
Though the bill was passed with bipartisan support in Congress, it has faced criticism from various stakeholders, including progressive lawmakers, consumer advocacy groups, financial reform organizations and certain segments of the crypto community.
Key criticisms include the following:
- Presidential conflict of interest. Sen. Elizabeth Warren (D-Mass.) was among the critics who alleged a conflict of interest for Trump. The primary controversy centers on Trump's family owning a majority stake in World Liberty Financial, which launched the USD1 stablecoin.
- Missing federal insurance protection. The GENIUS Act does not include federal insurance protection for stablecoin holders. Unlike traditional bank deposits, which have some protection in the U.S. under the FDIC, stablecoin holders lack that protection.
- The dual state-federal system creates issues. Some are concerned that the combination of state and federal regulations could weaken oversight. The dual-track system allows states to oversee issuers if their frameworks are deemed substantially similar to federal standards -- potentially undermining consistent national protection.
The future of cryptocurrency regulation
The GENIUS Act and its implementation will affect the cryptocurrency landscape in different ways for years to come.
"This legislation represents far more than just stablecoin regulation -- it's essentially the regulatory framework blueprint for how the U.S. will approach digital asset oversight going forward," said Jagdeep Singh Sahota, managing director of Luminary Advisors.
Sahota said the GENIUS Act's framework approach suggests future cryptocurrency regulation will be use-case specific rather than technology-specific. Payment tokens get banking-like oversight, while investment products would likely remain with the SEC.
"The next 18 months will be crucial as other crypto sectors look to this model for their own regulatory clarity," Sahota said. "This isn't about controlling crypto -- it's about integrating it into the existing financial system with appropriate oversight."
More coins on the way
Matt Green, chief scientist at Cryptography Engineering LLC and associate professor at Johns Hopkins University, also sees more oversight coming to cryptocurrency and digital assets.
"It seems obvious to me that we're going to have a lot more bank involvement in digital assets, particularly stablecoins," Green said."
That means instead of a small handful of coins issued by traditional crypto companies, this law seems to open the door to asset issuance by major traditional banks.
Future clarity to come
Nathan Dean, senior policy analyst at Bloomberg Intelligence, sees the GENIUS Act as setting up the backbone for future cryptocurrency regulation -- especially as this debate over regulatory clarity for the cryptocurrency sector has played out over the past few years.
"There was general bipartisan agreement that stablecoins operated within a regulatory gap, that regulators didn't have the tools to properly oversee the space," Dean said. "But with the GENIUS Act, stablecoin issuers now have regulatory clarity -- something sought by the entire industry -- to move forward and begin to grow a product."
Dean said that while that's good for companies such as Circle and other stablecoin issuers, there's a bigger challenge with the crypto market structure bill. That's why the House of Representatives passed the CLARITY Act on July 17, 2025. The Senate Banking Committee is currently reviewing a discussion draft in the Senate. This act would establish a regulatory framework for digital assets and create a standard for determining when an asset should be classified as a security or commodity, and who is subject to overseeing each.
"The reason why this is key for the rest of the industry is because platforms like Coinbase and Robinhood now seek similar regulatory clarity for their operations similar to stablecoin issuers and the GENIUS Act," Dean said.
Sean Michael Kerner is an IT consultant, technology enthusiast and tinkerer. He has pulled Token Ring, configured NetWare and been known to compile his own Linux kernel. He consults with industry and media organizations on technology issues.
