The GENIUS Act: America's First Stablecoin Law

What Is a Payment Stablecoin?

A payment stablecoin is a digital asset designed to maintain a stable value — typically pegged 1:1 to the U.S. dollar — and used primarily for payments and value transfer rather than investment. Under the GENIUS Act, a payment stablecoin is explicitly not a security and not a bank deposit. It sits in its own regulatory category, which is what the industry has been asking for since at least 2019.

Who Can Issue Them Now?

The law creates two authorized issuer tracks. First, insured depository institutions — banks and credit unions — can issue stablecoins directly under their existing charters with approval from their primary federal regulator. Second, "qualified nonbank payment stablecoin issuers" can obtain a new federal license from the OCC or operate under a state framework that federal regulators have deemed substantially similar. This is the path available to companies like Circle (USDC), Tether (USDT), and Ripple (RLUSD) that operate outside the traditional banking system.

Reserve Requirements

The GENIUS Act requires 1:1 reserve backing at all times. Eligible reserves are limited to: U.S. dollars in insured deposit accounts, Treasury bills with maturities of 93 days or less, repos backed by Treasuries, and certain money market fund shares. Notably, this means algorithmic stablecoins that maintain their peg through arbitrage mechanisms — like the now-collapsed TerraUSD — would be prohibited under the new framework. Issuers must publish their reserve composition monthly and have it attested by an independent accounting firm.

Why It Matters for USDC, USDT, and RLUSD

Circle has been the loudest advocate for legislation like this — USDC is already structured to comply. Tether faces the hardest road: its reserves have historically included commercial paper and other non-qualifying assets, and it operates from outside the U.S. The foreign issuer provision gives offshore stablecoin operators 18 months to either comply with U.S. rules or exit the American market. Ripple's RLUSD, launched in December 2024 under a New York trust charter, is positioned well — Ripple's 2023 acquisition of Standard Custody & Trust gave it exactly the kind of regulated institutional infrastructure the GENIUS Act is designed to accommodate.

Key Provisions

• →Payment stablecoins must be backed 1:1 by U.S. dollars, short-term Treasuries, or equivalent liquid assets — no algorithmic pegs
• →Issuers must be federally approved: insured depository institutions, federally-qualified nonbank payment stablecoin issuers, or state-chartered entities under an approved framework
• →Monthly public disclosure of reserve composition and attestation by a registered public accounting firm
• →The Federal Reserve, OCC, and FDIC share supervisory authority depending on issuer type
• →Foreign stablecoin issuers must comply with U.S. rules to offer their tokens to American customers
• →Prohibits paying interest on payment stablecoins (preserving the distinction from bank deposits and securities)
• →Customers retain priority claim on reserves in the event of issuer insolvency
• →State regulatory frameworks can coexist with federal rules if approved as "substantially similar" by federal regulators

Timeline

What Comes Next

The GENIUS Act covers payment stablecoins. The broader digital asset market structure — how to classify tokens as securities vs. commodities, exchange requirements, DeFi rules — is addressed in the CLARITY Act, which was introduced concurrently but has moved on a separate legislative timeline.