The GENIUS Act and stablecoins: what the US law changes

What is the GENIUS Act and which stablecoins does it cover?

The GENIUS Act became law when President Donald Trump signed it on 18 July 2025, the day after the House passed it, according to Wikipedia. It covers payment stablecoins, meaning digital assets used for payments or settlement whose issuer promises redemption for a fixed amount of money. The Act sets federal conditions under which such tokens may be issued and offered in the United States.

Compliant payment stablecoins are excluded from the federal definitions of security and commodity, which an Oxford Business Law Blog analysis, cited by Wikipedia, describes as a jurisdictional carve-out from SEC and CFTC oversight. The rest of this guide reads the enrolled text, section by section, and keeps to what the text says.

Who may issue a payment stablecoin under the GENIUS Act?

Section 2(23) of the enrolled text defines a permitted payment stablecoin issuer as a US-formed person that is a subsidiary of an approved insured depository institution, a federal qualified issuer, or a state qualified issuer. The definition ties issuance to supervised entities, so a holder can ask which of the three categories applies to a given token.

A foreign payment stablecoin issuer is one organised or domiciled outside the United States that is not a permitted issuer. Under section 3(b)(2), digital asset service providers may offer such a token in the United States only if its issuer can comply with lawful orders and any reciprocal arrangement. US venue access can therefore depend on the issuer category.

What reserves must back a payment stablecoin under the GENIUS Act?

Section 4(a)(1)(A) requires issuers to keep identifiable reserves that back outstanding stablecoins at a 1-to-1 ratio. Permitted reserves include US currency, deposits at insured institutions, Treasury bills with maturities of 93 days or less, certain overnight repurchase arrangements, and government money market funds. The list favours assets that convert to cash quickly, which suits redemption in a rush.

Section 4(a)(2) restricts the reuse or pledging of these reserves, with limited exceptions. That limit addresses a quiet risk: reserves that earn extra return by lending them out can disappear when the borrower fails. Compare this list with the mixes that other issuers publish, such as bonds, deposits, and secured loans, to see how each would measure up.

What redemption and disclosure rules protect holders of payment stablecoins?

Under section 4(a)(1)(B), issuers must publicly disclose a redemption policy with clear and conspicuous procedures for timely redemption. Discretionary limits on redemptions can come only from specified regulators. Issuers must disclose fees, and changes require at least 7 days’ prior notice to consumers. The sections reviewed for this page set no fixed redemption deadline in days, so holders should watch how regulators define timely.

Sections 4(a)(1)(C) and 4(a)(3) require monthly publication of reserve composition, including total outstanding stablecoins and the average tenor and custody location for each reserve category. A registered public accounting firm must examine the prior month’s report, and the CEO and CFO must certify it, with criminal penalties for knowingly false certifications. Monthly rhythm gives holders a fresher picture than a quarterly report.

What does the GENIUS Act say about yield and issuer failure?

Section 4(a)(11) bars permitted and foreign issuers from paying holders any interest or yield, in any form, solely for holding, using, or retaining a payment stablecoin. The rule separates the stablecoin as a payment tool from yield products. It matters for crash analysis because high yields have drawn demand that vanished when payments stopped, as the Anchor case of 2022 showed.

Section 4(a)(7)(B) ranks holders’ claims on reserve assets ahead of claims by non-stablecoin creditors, consistent with section 11, which this page leaves aside. Seniority gives holders a clearer place in the queue if an issuer fails. It does not create deposit insurance: Brookings analyses, cited by Wikipedia, note that these tokens lack FDIC insurance and direct Federal Reserve access.

How do state issuers and the three-year deadline fit the GENIUS Act?

Section 4(c) lets a state qualified issuer with no more than $10 billion in consolidated outstanding issuance opt for a state regime that is substantially similar to the federal framework. The Treasury Secretary sets the similarity principles by rulemaking, states certify compliance, and a Stablecoin Certification Review Committee reviews those certifications. Smaller issuers may therefore stay under state supervision.

Issuers above $10 billion must transition to federal oversight or stop issuing new coins until they fall below that threshold, under section 4(d). Section 3(b)(1) sets a 3-year deadline, after which digital asset service providers may offer or sell payment stablecoins in the United States only if the issuer is a permitted issuer. The deadline gives the market a runway to move tokens into the new categories.

What does the GENIUS Act change for crypto crash risk?

The Act narrows two known weak points: reserve quality and disclosure. A 1-to-1 rule with liquid assets, monthly examined reports, and limits on reuse reduce the chance that a run finds reserves missing. These features address the type of doubt seen in past depegs, and they may make peg risk easier to price for holders.

Gaps remain. Critics, including New York Attorney General Letitia James, argued that the Act lacks requirements for issuers to return stolen funds to fraud victims, and Consumer Reports argued it lacks sufficient consumer protections, according to Wikipedia. Other risks, such as smart contract flaws and tokens issued abroad, need their own review. This page is general information, not investment advice. The EQOS Asia method page explains the scoring that helps weigh these gaps, and a 30-minute pre-diagnostic applies it to your stablecoin exposure.

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About the author

Stéphane Jambu

President, EQOS Forecast Asia

Stéphane Jambu leads EQOS Forecast Asia and works as a consultant in e-commerce, search visibility, and AI. LinkedIn profile