tl;dr
President Donald Trump is set to sign the GENIUS Act, a bill regulating stablecoins in the US, which will take effect 18 months after signing or 120 days after final regulations. The Act requires stablecoin issuers to back tokens 1:1 with US dollars or equivalent assets and mandates regular audited ...
President Donald Trump is one signature away from enacting a bill to regulate stablecoins, which will define how issuers of these tokens must operate to serve the US market. The US House recently passed three crypto bills, including the GENIUS Act—short for “Guiding and Establishing National Innovation for US Stablecoins Act.” Originating from the Senate, this bill now only requires Trump’s signature to become law, expected at a signing ceremony in Washington, DC. The law will take effect 18 months after signing or 120 days following final regulations issued by primary federal stablecoin regulators such as the Treasury and Federal Reserve.
The GENIUS Act introduces significant changes for stablecoin issuers. Crypto lawyer Logan Payne explains that the Act encourages issuers to pursue banking licenses since the new stablecoin license limits companies strictly to stablecoin issuance. Given that most issuers engage in additional activities, many will instead seek trust bank charters through the Office of the Comptroller of the Currency (OCC), allowing broader operations without the need for multiple state licenses.
One notable restriction in the bill bans stablecoin issuers from offering interest or yield to token holders, a move likely to disrupt many popular marketing strategies in the stablecoin space. Yield offerings have been key to attracting users, especially those earning rewards on exchanges like Coinbase and Kraken. This ban could lead to significant changes in how stablecoin products incentivize users going forward.
Decentralized finance (DeFi) faces considerable uncertainty under the GENIUS Act, as it leaves questions unresolved about how DeFi platforms should handle stablecoins. Payne notes that additional legislation and regulations will be necessary to clarify these issues over the coming years, pointing to the related CLARITY Act that aims to classify digital assets and their regulators as part of this evolving legal framework.
The law mandates that permitted stablecoin issuers back their tokens 1:1 with US dollars or equivalent monetary products like Treasury bills, requiring them to publish detailed, audited reserve reports regularly. This transparency aims to assure market participants of the stablecoin's actual backing and stability.
After three years, the bill will prohibit any stablecoins not issued by approved entities from operating in the US. Foreign-issued stablecoins will be allowed only if their issuers comply fully with US regulations or if their home countries maintain comparable regulatory standards, including registration with the OCC and holding sufficient US-based reserves.
The GENIUS Act establishes a multi-agency regulatory framework, allowing banks, credit unions, and nonbanks to issue stablecoins under dual federal and state oversight. Regulatory bodies like the National Credit Union Administration, FDIC, OCC, Treasury, and Federal Reserve will share responsibility, ensuring robust supervision across diverse stablecoin issuers in the growing digital asset sector.