What Is the GENIUS Act?
John.H·Sep 23, 2026·8 min read
The GENIUS Act, signed into law on July 18, 2025, created the first federal licensing and reserve framework for payment stablecoins in the United States.
The GENIUS Act is the first federal law to establish a licensing and reserve framework for payment stablecoins in the United States. Formally the Guiding and Establishing National Innovation for U.S. Stablecoins Act, the bill was introduced as S. 1582 in the 119th Congress and signed into law by President Trump on July 18, 2025. The law requires any entity issuing a stablecoin inside the United States to register as a permitted payment stablecoin issuer, hold reserves equal to at least 100 percent of coins outstanding, and submit to anti-money laundering supervision. Full compliance is required by January 18, 2027, and the agencies writing the implementing rules are still finalizing them as of September 2026.
What Does the GENIUS Act Require of Stablecoin Issuers?
A payment stablecoin is a digital token pegged to a fiat currency, typically the US dollar, and used to move value without the price swings of assets like bitcoin. Under the GENIUS Act, only a permitted payment stablecoin issuer, or PPSI, may legally issue one inside the United States. A PPSI must maintain reserves backing its outstanding stablecoins on at least a 1:1 basis, publish reserve composition on a monthly basis, and undergo an independent audit of those reserves. The issuer's chief executive and chief financial officer must personally certify the accuracy of each disclosure, and a public accounting firm registered with the Public Company Accounting Oversight Board must conduct the monthly attestation. The framework replaces a patchwork of state money transmitter licenses that previously governed stablecoin issuance with a single national standard, the first of its kind for this asset class.
Which Reserve Assets Satisfy the Act's Backing Requirement?
The GENIUS Act does not allow issuers to back stablecoins with just any asset. Section 4 of the law permits six categories of reserve holdings: physical US currency, demand deposits at insured depository institutions, Treasury bills, notes, or bonds with a remaining maturity of 93 days or less, repurchase agreements collateralized by those same short-dated Treasury securities, shares in money market funds invested solely in the assets above, and deposits held directly at Federal Reserve Banks. Longer-dated Treasury bonds, corporate debt, and other stablecoins do not qualify. The 93-day maturity ceiling is designed to keep reserves liquid enough to meet redemption requests without forced selling into a falling market. For market makers and institutional traders evaluating counterparty risk in stablecoin liquidity, the reserve composition an issuer publishes each month is now the clearest signal of how quickly that issuer could honor redemptions during a stress event.
Who Regulates an Issuer, the States or the Federal Government?
The GENIUS Act splits supervisory authority by issuer size. A state-qualified issuer with $10 billion or less in stablecoins outstanding may remain under state regulation, provided the state's regime is judged substantially similar to the federal framework. The Department of the Treasury published its proposed standard for that substantially similar determination in the Federal Register on April 3, 2026, with a comment period that closed June 2, 2026. Once an issuer's outstanding stablecoins exceed $10 billion, it has 360 days to transition to federal supervision or obtain a waiver to remain under state oversight. Federal supervision itself splits further: an issuer that is a subsidiary of an insured depository institution answers to the Federal Reserve, while a non-bank issuer answers to the Office of the Comptroller of the Currency.
Why Are Issuers Barred From Paying Yield to Holders?
Section 4(a)(11) of the GENIUS Act prohibits a permitted payment stablecoin issuer from paying any interest or yield to a holder solely for holding, using, or retaining the stablecoin, whether the payment comes as cash, tokens, or another form of value. Congress wrote the restriction to keep stablecoins positioned as a payment instrument rather than a deposit substitute that could pull funds out of the banking system. The prohibition applies directly to issuers such as Circle and Paxos, which do not pay interest on their tokens. It does not clearly reach affiliated platforms: Coinbase continues to offer yield on USDC balances and PayPal continues to offer yield on PYUSD balances through arrangements that sit outside the issuer relationship itself. The Office of the Comptroller of the Currency proposed closing that gap in its March 2, 2026 rulemaking by extending the prohibition to affiliates and third parties, not issuers alone.
Are Algorithmic Stablecoins Covered by the GENIUS Act?
No. The GENIUS Act defines a payment stablecoin as a token backed by real reserve assets and excludes what it calls an endogenously collateralized stablecoin, more commonly known as an algorithmic stablecoin: a token that relies on the value of another digital asset created by the same issuer to hold its peg, rather than on cash or Treasury reserves. Instead of regulating these tokens directly, the law required the Secretary of the Treasury to complete a study of endogenously collateralized stablecoins within one year of enactment, due by July 18, 2026. A companion bill, the STABLE Act, would have imposed a two-year moratorium on issuing algorithmic stablecoins, but that provision did not carry over into the GENIUS Act as signed. The distinction matters for DeFi protocols and traders alike: a token like TerraUSD, which collapsed in May 2022 while relying on a paired token rather than dollar reserves, would not qualify as a payment stablecoin under the GENIUS Act's reserve requirements even if it resumed operating today.
How Does the Act Treat Foreign Issuers Like Tether?
A stablecoin issuer based outside the United States can only have its tokens offered to US customers through a Treasury reciprocity determination: a finding that the issuer's home country enforces a regulatory regime comparable to the GENIUS Act. Tether, the largest stablecoin issuer by outstanding supply and a British Virgin Islands entity, had not received such a determination as of May 2026. Rather than wait for one, Tether launched USA₾, a separate dollar token issued through a US-regulated entity built to satisfy the GENIUS Act directly, while continuing to operate its original USDT token offshore under the prior framework. The split illustrates how the law is already reshaping stablecoin market structure before its rules are finalized: issuers with the largest US exposure are building parallel, compliant products rather than betting on a favorable reciprocity determination for their existing token.
How Are Stablecoin Reserves Protected in a Bankruptcy?
The GENIUS Act amends Section 541 of the US Bankruptcy Code to remove stablecoin reserves from an issuer's bankruptcy estate. Reserves backing outstanding stablecoins are instead treated as the property of stablecoin holders, not as an asset available to general creditors if the issuer fails. This provision addresses a gap that surfaced in earlier stablecoin failures, where reserve assets held by an insolvent issuer became tied up in bankruptcy proceedings alongside unrelated creditor claims. Combined with the monthly reserve attestation requirement, the bankruptcy carve-out is intended to give holders a faster and more direct claim to the dollar-for-dollar assets backing their tokens, ahead of other creditors in a wind-down.
Which Federal Agencies Are Still Writing the Rules?
Four federal agencies are responsible for turning the GENIUS Act's text into enforceable rules, and none had finished as of September 2026. The Office of the Comptroller of the Currency published its proposed rule for non-bank and federally chartered issuers in the Federal Register on March 2, 2026. The Federal Deposit Insurance Corporation's board approved its own proposed rule for FDIC-supervised issuers and insured depository institutions on April 7, 2026. The Treasury Department's Financial Crimes Enforcement Network and the Office of Foreign Assets Control issued a joint proposed rule on anti-money laundering and sanctions compliance on April 8, 2026. “President Trump is strengthening American leadership in digital financial technology,” Treasury Secretary Scott Bessent said of that proposal. Treasury itself published a separate rule in the Federal Register on August 18, 2026, covering statutory limits on who may issue, offer, or sell a stablecoin, with public comments due by October 19, 2026.
What Does This Mean for the Market Going Forward?
Secretary Bessent has projected that outstanding stablecoins could grow roughly tenfold to $3 trillion by 2030, up from a total stablecoin market of $310.95 billion as of September 10, 2026, according to DeFiLlama. That growth case depends on rules agencies are still writing. Treasury's comment period on the issuance and sale provisions of the law closes on October 19, 2026, and the FDIC, OCC, and FinCEN proposals are each moving toward final rules on separate timelines. Issuers, exchanges, and liquidity providers operating in stablecoin markets have one date to track regardless of how the comment periods resolve: January 18, 2027, when the licensing requirement becomes mandatory and issuing a payment stablecoin without a federal or state license becomes unlawful in the United States. Any issuer approaching the $10 billion outstanding threshold faces an additional decision point, since crossing it triggers the 360-day clock toward federal supervision or a state waiver. Market participants should watch each agency's final rule as it is published, since the gap between proposal and final text is where most of the remaining uncertainty sits.
