Introduction

On July 18, 2025, President Donald J. Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act into law, marking a watershed moment in U.S. digital asset regulation.

The GENIUS Act (“Act”) establishes a comprehensive regulatory framework for "payment stablecoins." Payment stablecoins are cryptocurrencies pegged to assets like fiat currencies, such as the U.S. Dollar. They are designed to maintain stable value for transactions. As of early 2025, the stablecoin market exceeds $267 billion, with projections estimating growth to $400 billion by year-end and potentially $1.4 trillion by 2030.

The GENIUS Act has been described by the Trump administration as “pav[ing] the way for the United States to lead the global digital currency revolution.”

Key Highlights 

Definitions

The Act provides precise definitions to delineate its regulatory perimeter, for example, a "digital asset" is broadly defined as “any digital representation of value that is recorded on a cryptographically secured distributed ledger.” While more extensively described in the Act, a “payment stablecoin,” in simple terms, is defined as a type of digital currency designed for making payments or settling transactions. A payment stablecoin issuer must ensure it can be exchanged for a fixed amount of money (like dollars) and is expected to keep its value stable compared to that fixed amount. The Act also restricts stablecoin issuance to "permitted payment stablecoin issuers."

The Act addresses stablecoin reserve and transparency requirements. Stablecoins must be backed 1:1 by liquid assets like U.S. currency, Treasury bills, or similar instruments. Issuers are required to undergo regular audits and provide transparent disclosures to ensure solvency and protect consumers. In addition, with certain exceptions, the Act prohibits rehypothecation.

The Act addresses anti-money laundering (AML) and provides consumer protections. Stablecoin issuers are classified as financial institutions under the Bank Secrecy Act, mandating robust AML and counter-terrorism financing (CTF) compliance. The Act also strengthens consumer protections by ensuring bankruptcy redemption rights for stablecoin holders, granting super priority status in insolvency cases, though it raises questions about administrative costs in bankruptcy proceedings.

The Act also clarifies that payment stablecoins are explicitly not classified as securities, deposits, or commodities, thus clarifying their legal status, and issuers are prohibited from paying interest on stablecoins or marketing them as government-backed or legal tender. 

Regulatory Pathways

The GENIUS Act establishes a robust supervision and enforcement framework for payment stablecoin issuers, which is detailed in Sections 4–7 of the Act. 

Issuers, classified as subsidiaries of insured depository institutions, federal qualified issuers, or state-qualified issuers, face stringent oversight. Federal issuers apply to a primary federal regulator, with a structured application review process, including appeal rights for denials. By contrast, State-qualified issuers, with under $10 billion in stablecoin issuance and not affiliated with insured depository institutions, may opt for state supervision if the state’s regulatory framework is certified as substantially similar to federal standards by the Stablecoin Certification Review Committee. Non-financial public companies require unanimous Committee approval to issue stablecoins. 

The Act’s dual regulatory pathway balances state flexibility with federal oversight to prevent regulatory arbitrage. Large issuers (over $10 billion) and certain banking entities fall under federal regulation, while smaller state-qualified issuers are primarily supervised by state regulators. Federal intervention is possible if state oversight fails, and states can collaborate with federal regulators via memoranda of understanding. The Act’s framework includes financial condition reporting, compliance monitoring, and potential enforcement actions.

Anticipated Impacts

By providing more regulatory clarity, the GENIUS Act may create renewed interest in the stablecoin space from established financial institutions. It is also likely to result in an increase in the number of stablecoin issuers, increasing competition in a market currently dominated by Tether (USDT) and Circle (USDC). 

In addition, the Act’s consumer and financial system protections, including the reserve requirement and anti-money laundering provisions, will help to reduce any fraud or money laundering concerns and will both inspire confidence and provide a stable regulatory base for growth in the stablecoin sector.

Conclusion

The GENIUS Act goes a long way toward addressing industry concerns for more regulatory certainty, and those concerns may be further addressed in the near future. For example, on July 17, 2025, the Digital Asset Market Clarity Act of 2025, referred to as the CLARITY Act, passed the U.S. House of Representatives, with a bipartisan vote of 294-134, and it has now been sent to the Senate for consideration. While the CLARITY Act’s final passage into law is not guaranteed, the digital asset markets are optimistic about its potential to provide a clearer regulatory framework. 

In sum, President Trump’s signing of the GENIUS Act, and the July 17, 2025, U.S. House of Representatives’ passage of the CLARITY Act and the Anti-CBDC Surveillance State Act, suggest a rapidly changing digital assets landscape that is poised to foster greater innovation, regulatory clarity, and consumer protection in the U.S. cryptocurrency market.