GENIUS Act Signed into Law; More Legislation Pending

After several weeks of negotiations, the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act was signed into law on July 18, 2025, creating the first regulatory framework for US stablecoins. The Senate passed the bill on June 17, 2025, with the House passing it one month later on July 17, 2025. The Senate vote was 68-30, with 18 Democrats joining 50 Republicans in supporting the bill. The House vote was 308-122, with 102 Democrats joining 206 Republicans.

What Is the GENIUS Act?

The GENIUS Act is the first major piece of legislation involving digital assets to gain traction and will create a regulatory framework for stablecoins. Stablecoins are digital assets that maintain a stable value by being pegged to another asset—in this case the US dollar. To date, stablecoins have been largely unregulated, leading to risks such as value instability, fraud, and lack of clarity or transparency of the underlying assets to support the peg. There have also been concerns of stablecoins being used for illicit activities and ensuring a proper legal framework to encourage innovation and competition. Another major concern this bill intends to address is maintaining US financial leadership. As other foreign governments enact stablecoin regulations, the US risks falling behind. This, in turn, could negatively impact the dollar’s global dominance.

At the same time, there have been criticisms that the GENIUS Act fails to adequately protect consumers or address conflicts of interest, such as elected officials profiting from crypto. Another criticism has come from some who compare the GENIUS Act’s structure as replicating some weaknesses of the nineteenth-century banking system by allowing diverse issuers to create stablecoins and the potential for stablecoins to destabilize the financial system. Despite these concerns, the bill passed without major changes to the overall provisions.

Key Provisions in the Bill

The GENIUS Act contains several important definitions for determining the scope of stablecoins, who can issue them, and how they will be regulated.

The bill defines a stablecoin as a payment stablecoin being a digital asset that is used as a means of payment or settlement and the issuer of which is obligated to convert, redeem, or repurchase for a fixed amount of monetary value. In this case, it means that the value of the stablecoin is equal to one US dollar. However, the bill clearly states that stablecoins are not considered legal US government tender.

Permitted payment stablecoin issuers include:

• Entities that are subsidiaries of banks or other depository institutions insured by the FDIC and must be approved by their primary federal regulator, such as the Board of Governors of the Federal Reserve for state member banks.
• Federal qualified nonbank issuers are entities that have been incorporated in the US and approved by the Office of the Comptroller of the Currency.
• State-authorized issuers if the state’s regulatory framework is certified by the Secretary of the Treasury as being “substantially similar to” the federal standards set by the GENIUS Act.

All the entities issuing stablecoins outlined above must receive approval and then are required to adhere to reserve requirements, compliance (e.g., anti-money laundering and counter-terrorism financing), capital liquidity, and regulatory reporting and oversight. In addition, redemption policies and any associated fees with purchase or redemption must be clearly stated. Any discretionary limitations on timely redemptions can only be imposed by the relevant regulatory agency overseeing the stablecoin issuer.

Specific reserve requirements include the payment stablecoin must be fully backed one-to-one by US dollars or eligible high-quality liquid assets including Treasury bills, notes, or bonds with a maturity of 93 days or less, repurchase agreements with a maturity of seven days or less that are backed by short-term Treasuries, and certain repurchase agreements. These assets are required to be held in segregated accounts for the exclusive benefit of the stablecoin holders. Issuers are also required to undergo regular independent audits or third-party attestations verifying reserves fully back the stablecoin along with public disclosure.

What’s Next for Digital Assets?

Despite concerns that a competing bill, the STABLE Act, could derail the bill, as well as some attempts to more dramatically alter the bill, there were few roadblocks to the GENIUS Act’s overall passage.

In addition to the GENIUS Act, the House also passed another bill establishing a regulatory framework for all digital assets, including stablecoins, called the Digital Asset Market Clarity Act of 2025 (CLARITY Act). This bill aims to create a comprehensive framework for digital asset markets, addressing other considerations such as custody, trading, and the issuance of digital assets.

The CLARITY Act was amended in the House to bring its provisions in line with the provisions contained within the GENIUS Act. While the CLARITY Act passed the House with a vote of 294-134, its future in the Senate remains uncertain. The Senate began its summer recess on August 1, 2025, and will not return until after Labor Day. At that point, Congress’ focus will likely be on appropriations, making the timeline for the CLARITY Act’s passage murky.

Other legislation impacting digital assets has also been discussed. Of note, Senators Cynthia Lummis (R-WY) and Kristin Gillibrand (D-NY) have been championing a bill that would address certain taxation issues with digital assets. That bill would exempt de minimis amounts of digital assets sold or exchanged for personal transactions from taxation and would clarify that staking and mining rewards are not taxable until they are sold.

The GENIUS Act represents a milestone piece of legislation for blockchain and digital asset companies. Stablecoin growth has surged over the past five years, going from less than $20B in 2020 to more than $250B as of the date of this article. Companies with no prior digital asset activity are now expected to start exploring the use of stablecoins as part of their regular business activity. If you have any questions related to the GENIUS Act or stablecoin adoption, contact our team below.