The GENIUS Act of 2025:
A New Regulatory Framework for U.S. Stablecoins
The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, signed into law on July 18, 2025, marks the first comprehensive federal legislation in the United States focused on regulating payment stablecoins.
Under the GENIUS Act, only certain qualified entities are permitted to issue payment stablecoins. These include:
• Insured depository institutions such as banks and credit unions;
• Non-bank entities chartered by the Office of the Comptroller of the Currency (OCC); and
• State-regulated issuers operating under state laws that substantially align with federal standards.
Smaller issuers—those with less than $10 billion in circulation—may be subject to state-level supervision, provided those states maintain regulatory parity with the federal framework.
Key Provisions and Restrictions
The Act prohibits non-approved issuers, including large technology companies, from issuing payment stablecoins unless they partner with a qualified issuer or secure federal approval. The legislation also extends its reach to foreign stablecoin providers offering services to U.S. consumers, enabling U.S. regulators to enforce anti-money laundering (AML), sanctions, and reserve requirements extraterritorially.
To maintain stability and credibility, issuers must:
• Fully back each stablecoin with U.S. dollars, short-term U.S. Treasury securities, or other highly liquid assets on a 1:1 basis;
• Hold reserves in segregated, audited accounts;
• Disclose reserve compositions monthly;
• Undergo third-party audits; and
• Avoid deceptive marketing, including any suggestion of federal insurance or endorsement.
Stablecoin issuers are designated as financial institutions under the Bank Secrecy Act (BSA) and must implement comprehensive AML, counter-terrorism financing, and Office of Foreign Assets Control (OFAC) compliance programs. While stablecoins themselves may not earn interest, third parties may offer rewards independently.
Implications for the Crypto Ecosystem
For digital asset users and institutions, the GENIUS Act provides long-anticipated regulatory clarity. The law establishes a compliant pathway for stablecoins to be integrated into mainstream financial services, potentially enhancing trust, reducing systemic risk, and encouraging broader adoption.
Financial institutions and major crypto platforms have largely welcomed the framework, citing its potential to spur demand for stablecoins and their underlying U.S. dollar reserves. However, concerns remain regarding depegging risks, operational failures, and liquidity challenges, particularly in times of market stress, as stablecoins still lack access to central bank support.
Timeline and Future Legislation
The GENIUS Act does not take immediate effect. Federal regulators must develop implementing rules on licensing, capital, liquidity, and risk management within 180 days. The law becomes enforceable either 120 days after the final rules are issued or 18 months after enactment, whichever comes first, likely by January 2027 if deadlines are met.
Meanwhile, additional legislation, such as the proposed CLARITY Act, aims to define digital asset market structure and classification standards, which could further refine the GENIUS framework.
As the regulatory landscape evolves, policymakers continue to debate how best to balance innovation, consumer protection, and financial system integrity.
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Quick Summary for Crypto Holders
• Stablecoin issuers must meet strict regulatory, reserve, and audit requirements.
• Only banks, OCC-chartered firms, or state-licensed entities can issue payment stablecoins.
• Non-compliant issuers and foreign providers face restrictions or must seek authorization.
• Issuers must comply with AML, KYC, OFAC regulations and the BSA.
• Stablecoins themselves may not earn interest, though third-party platforms may offer incentives.
• Stablecoins like USDC and USDT are treated as “property” for tax purposes; small gains/losses may apply.
• Foreign account reporting (FBAR/FATCA) may be required if held on non-U.S. platforms.
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Zaher Fallahi, Tax Attorney and CPA, advises clients nationwide on crypto taxation, including stolen digital asset issues. He holds a certificate in Blockchain Technologies from MIT.
Contact: (310) 719-1040,
(714) 546-4272,
or toll-free at (877) 687-7558
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Email: taxattorney@zfcpa.com