What does the GENIUS Act mean for stablecoins?

Author: Beam Source: medium Translation: Shan Ouba, Golden Finance

This briefing is based on the enacted “GENIUS Act” (Public Law 119-27), related White House fact sheets, the House-passed “CLEAR Act” (H.R. 3633 EH), relevant Congressional Research Service reports, the Senate legislative advisor's draft “2025 Responsible Financial Innovation Act” (EHF 25866 4MH), and the Senate decentralized finance proposal report.

Following the previous legal briefing on the “EU Artificial Intelligence Act” and its contractual implications, we now focus on another significant regulatory development – new regulations from the United States. The recently enacted “GENIUS Act” establishes a comprehensive federal regulatory framework for stablecoins for the first time, setting the tone for the regulation of digital assets in the world’s largest financial market.

Although the regulatory disputes surrounding the broader digital asset market continue, the GENIUS Act has clarified the core parameters for stablecoin regulation.

If you issue, list, custody, trade, or use stablecoins within the United States or for U.S. clients, here are the key points you need to know.

GENIUS Act: New Rules for Stablecoins

licensing requirements

Soon after, only companies holding a federal license will be able to provide stablecoin services to U.S. customers. This aligns with the regulatory logic that only licensed banks can accept deposits, with the core goal being to ensure that stablecoin issuers are financially sound and subject to appropriate regulation. After July 18, 2028, any exchange, custodian, or other digital asset intermediary (including custodial wallet providers) offering services to Americans may only list or facilitate trades of stablecoins issued by licensed issuers under the GENIUS Act.

This means that mainstream platforms like Coinbase and Kraken need to delist all unlicensed stablecoins in their U.S. versions.

The impact on foreign issuers of ###

If foreign companies want to serve American customers, they must meet the following conditions:

• Recognized by the U.S. Department of the Treasury, proving that its home country's regulatory rules are strict enough;
• Register with U.S. regulatory authorities and accept ongoing supervision;
• Funds of US clients must be deposited in US banks and may not be transferred overseas.

If foreign companies violate the above rules, they will be prohibited from accessing U.S. trading platforms and may face hefty fines. If some widely used stablecoin issuers do not obtain a license under the GENIUS Act, their market circulation may be affected.

Stablecoin Issuer Compliance Checklist

1. Full Reserve and Proof Requirements: For every issued 1 USD stablecoin, the issuer must hold 1 USD in cash or ultra-safe investments such as U.S. Treasury bonds as reserves. A detailed report audited by an independent auditing firm and signed by executives must be published monthly.
2. Follow banking-like rules:

• Verify customer identity, anonymous accounts are prohibited;
• Retain detailed records of all transactions;
• Screen customers against the government watch list;
• Report suspicious activities to regulatory authorities;
• Comply with the same anti-money laundering rules as banks.

• Technical Requirements: The system must have the capability to freeze or intercept specific stablecoins when ordered by a court or law enforcement agency.
• Marketing Restrictions: Customers must not be misled through the following false advertising:

• Claims that the stablecoin is backed by the U.S. government;
• Claims to have Federal Deposit Insurance Corporation deposit insurance;
• Falsely claims to be legal tender in the United States.

• Customer Fund Protection: In the event of bankruptcy of the stablecoin issuer, customer funds shall be prioritized for repayment over other creditors. The stablecoins held by customers and their reserve funds must be completely isolated from the company's own funds.
• Focus on core business: The main business of a licensed stablecoin issuer is limited to issuing stablecoins, redeeming for USD, and managing reserve assets. Without special approval, it is prohibited to engage in high-risk businesses that may affect the stability of stablecoins (such as trading and speculation).

Interest and Returns: Key Restrictions

Another important provision is that the GENIUS Act explicitly prohibits issuers from paying interest on stablecoin deposits. This ban aims to prevent deposit-like products that could undermine the stability of the banking market.

However, the bill did not specify regulations for cryptocurrency service providers such as exchanges, custodians, and lending platforms. This means that, before subsequent rules are issued, service providers may still launch interest-bearing products. In fact, before regulatory clarity, centralized platforms may still attempt to design yield products.

In contrast, the EU's Markets in Crypto-Assets Regulation has a broader regulatory scope. Like the GENIUS Act, this regulation prohibits issuers from paying interest, but it also regulates intermediaries that distribute or use these tokens. According to its fifth chapter, crypto asset service providers offering lending, staking, or other yield products must hold licenses, disclose risks, and comply with specific conduct rules. In other words, the Markets in Crypto-Assets Regulation covers the entire yield chain from issuers to platforms, whereas the GENIUS Act currently only regulates the issuance level.

Market Regulation: Still to be Clarified

The regulatory path for the broader cryptocurrency market, aside from stablecoins, remains unclear. Currently, there are three competing proposals:

1. The CLARITY Act (passed by the House in July 2025): Establishes clear thresholds for the definition of digital goods and decentralization;
2. The “Responsible Financial Innovation Act” (Senate Banking Committee Draft): Adopts the concept of auxiliary assets, granting regulatory agencies greater discretion;
3. “Democratic Party Decentralized Finance Proposal” (October 2025): Requires decentralized finance front ends to register with the U.S. Securities and Exchange Commission or the Commodity Futures Trading Commission, to be supervised by the Treasury Department and to fulfill strict KYC obligations.

The three proposals aim to apply the existing U.S. securities and commodities regulatory framework to digital assets, but there are significant differences regarding decentralized testing standards, DeFi exemption policies, and the division of powers among the SEC, CFTC, and the Treasury.

Follow-up Progress

timeline

The majority of the rules of the “GENIUS Act” will take effect on January 18, 2027, or 120 days after the federal banking regulators release the final implementation rules, whichever comes first. Exchanges serving U.S. customers must delist unlicensed stablecoins by July 18, 2028.

Currently, the legislative disputes related to market structure have not been resolved. Due to significant differences between the Democrats and Republicans, the Senate committee has paused the advancement of compromise proposals, and the final legislative timeline remains unclear.

government coordination

The Ministry of Finance will continue to take the lead in sanctions and anti-money laundering matters, collaborating with the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission, and other agencies. Under the framework of the GENIUS Act, regulators can freeze non-compliant foreign stablecoin assets or prohibit their trading.

Global Influence

These rules apply to all entities serving U.S. customers, even if they are foreign companies. Global businesses need to assess whether they have the capacity to operate in compliance or whether they should exit the U.S. market. In practice, this could trigger a round of industry consolidation: only a few well-capitalized, fully licensed issuers may remain active in the U.S. market, and other products, including some popular offshore stablecoins, may be delisted by mainstream exchanges or gradually exit circulation.

The impact of ### on decentralized finance and decentralized stablecoins

Although the “GENIUS Act” primarily targets centralized issuers and intermediaries, its impact will extend to the decentralized ecosystem. Purely on-chain or algorithmic stablecoins (which have no legal entity to apply for a “GENIUS Act” license or hold fiat currency reserves) may be effectively excluded from the U.S. market. Due to the lack of registered issuers, these tokens may be deemed non-compliant, resulting in the loss of liquidity on centralized exchanges and decentralized finance platforms. At the same time, the Senate proposal plans to extend registration and customer identification obligations to decentralized frontends serving U.S. users, increasing the pressure on decentralized exchanges to implement regional restrictions or delist unlicensed stablecoins. In the long term, these measures may push the industry toward a regulated stablecoin model, making it more difficult for unlicensed or experimental designs to access U.S.-related markets and liquidity.

Your Impact

crypto project developer

• Launch compliance planning: Meeting the requirements of the “GENIUS Act” (licensing, reserves, anti-money laundering / customer identification) as early as possible can provide a competitive advantage;
• Prepare for broader regulations: Although the market structure legislation is still under discussion, projects should anticipate that future registration or governance standards may extend beyond stablecoins.
• Institutional funds entering the market: Regulatory certainty starting with the “GENIUS Act” and supplemented by subsequent market rules is expected to attract more institutions to participate and invest for the long term.

user

• Stablecoin Integration: After the implementation of the “GENIUS Act”, the options for stablecoins will decrease, but the reliability and regulatory protection of compliant products will improve;
• Enhanced Protection: Users will gain stronger safeguards, including clearer rights to recover funds in the event of the issuer's bankruptcy;
• Mainstream adoption accelerated: As stablecoin regulations come into effect and a broader regulatory framework is introduced, the uncertainty faced by traditional institutions when integrating crypto assets will decrease.