U.S. Implements Legislation Governing Stablecoin Sector

The U.S. Congress has passed, and President Donald Trump has enacted, the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), which establishes a federal regulatory framework for stablecoins and enforces stringent requirements on their issuers.

On July 17, 2025, both the U.S. Senate and House of Representatives endorsed the federal bill S.1582, known as the GENIUS Act, which aims to clarify the regulatory landscape for the stablecoin market within the nation. The legislation was officially signed by President Donald Trump on July 18, 2025.

This bill prohibits the issuance and circulation of unsecured payment tokens, mandates full backing of stablecoin reserves, and requires stablecoin issuers to report to regulators. It also creates a supervisory framework for the stablecoin sector in the U.S.

Key elements of the GENIUS Act include:

1. Stablecoins can only be issued by registered entities. Any issuance without authorization is subject to fines of up to $1 million and imprisonment for a maximum of 5 years.
2. Stablecoin reserves must be maintained at a 1:1 ratio. Only highly liquid assets are allowed as reserves, which include: cash in Federal Reserve accounts, treasury bonds with a remaining maturity of up to 93 days, and repos with government securities that can be reversed within 7 days, with counterparties restricted to highly reputable financial institutions.
3. Rehypothecation of reserves is not allowed. The assets backing stablecoins must be held in “clean” form, meaning they cannot be utilized as collateral for other issuer activities. However, issuers may use a portion of the reserves in temporary transactions to ensure liquidity for redemptions, but only with prior regulatory consent.
4. Interest payments to holders are prohibited. Stablecoin issuers are not permitted to offer interest or any other incentives for holding tokens — whether in digital assets, fiat currency, or other forms.
5. Issuers are required to publish reserve compositions on a monthly basis, certify senior management, and disclose independent audits performed by registered audit firms. Those with assets exceeding $50 billion must also provide enhanced financial disclosures.
6. Issuers with a turnover of up to $10 billion may operate under state-level regulatory supervision. All others will be subject to federal oversight. The law also allows for joint regulation.
7. Stablecoins issued by registered entities will not be classified as securities, commodities, or deposits, and therefore will not be under the jurisdiction of the Securities Investor Protection Corporation (SIPC), the Securities and Exchange Commission (SEC), or the Commodity Futures Trading Commission (CFTC). The payment stablecoin market will be overseen by the Treasury, the Federal Reserve, and banking regulators — including the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA).

The GENIUS Act is set to officially take effect on January 8, 2027. However, if implementing regulations are established sooner, the law will become effective 120 days after their approval.

Representatives from the crypto sector have described the legislation as a “turning point” that eliminates legal ambiguity and encourages innovation. Jeremy Allaire, CEO of Circle, who was present at the signing ceremony with President Donald Trump, referred to the bill as “one of the most transformative pieces of legislation in decades.” Hester Peirce, SEC Commissioner known for her progressive views on crypto, highlighted that the GENIUS Act finally clarifies that stablecoins are not securities. She noted that years of jurisdictional confusion between the SEC and CFTC have now concluded.

However, some dissenting opinions persist within the industry. For instance, Dante Disparte, Circle’s CSO, contends that while the law enhances transparency, it effectively solidifies the positions of large centralized issuers due to the expensive approval and audit requirements. Additionally, he believes the GENIUS Act may completely exclude decentralized stablecoins, as algorithmic stablecoin models are entirely prohibited under the new regulatory framework.

Interest in stablecoins among small and medium-sized businesses (SMB) in the U.S. has more than doubled in 2025, while major American banks are planning to launch their own stablecoins. Concurrently, the vast majority of traditional finance companies globally are actively utilizing or intend to adopt solutions based on stablecoins in the near future.

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