The US Senate has passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) by a vote of 68-30, a significant development for cryptocurrency regulation in the United States. This passage follows the recent advancement of the Digital Asset Market Clarity (CLARITY) Act, a crypto market structure bill, through the House Financial Services and Agriculture committees and toward a full House vote, demonstrating growing bipartisan momentum for comprehensive crypto regulation.[1] The GENIUS Act represents the first comprehensive federal framework governing stablecoins, setting the stage for what could become the most significant digital asset regulatory development in years. The bill now advances to the House of Representatives, with President Trump expressing intent to sign stablecoin legislation before Congress’s August recess.

Key Provisions

The GENIUS Act would create three distinct categories of permitted issuers: subsidiaries of insured depository institutions, federal qualified payment stablecoin issuers regulated by the Office of the Comptroller of the Currency, and state qualified payment stablecoin issuers supervised by certified state regulators.

The proposed regulatory framework centers on a stringent reserve requirement that would mandate permitted issuers maintain identifiable reserves backing outstanding stablecoins on at least a 1:1 basis. These reserves would need to comprise highly liquid, low-risk assets, including US coins and currency, demand deposits at insured institutions, Treasury securities with 93 days or less maturity, and approved repurchase agreements. The GENIUS Act would explicitly prohibit rehypothecation of these reserves.

The Act would impose comprehensive operational requirements, including monthly reserve composition disclosures, public redemption policies with transparent fee structures, and robust anti-money laundering compliance programs. Large issuers with over $50 billion in outstanding tokens would be required to publish audited financial statements prepared in accordance with generally accepted accounting principles. All permitted issuers would face ongoing examination and supervision by their primary federal regulator, which would be granted enforcement authority, including civil monetary penalties and registration suspension powers.

The legislation would also prohibit stablecoin issuers from paying any form of interest or yield to holders solely in connection with holding stablecoins, effectively barring yield-bearing stablecoins. Additionally, the Act directs Treasury to study “non-payment stablecoins,” including algorithmic stablecoins that rely solely on other digital assets created by the same originator to maintain their fixed price, suggesting these types of stablecoins fall outside the current regulatory framework.

Importantly, the legislation would explicitly exclude payment stablecoins issued by permitted entities from the definition of “security” under federal securities laws, providing critical regulatory clarity that has been a major source of uncertainty in the digital asset space.[2] The legislation would also establish a three-year transition period after which digital asset service providers may only offer stablecoins issued by permitted entities.

Next Steps and Industry Impact

The GENIUS Act must now pass the House of Representatives before reaching President Trump’s desk. Trump has indicated he wants to sign stablecoin legislation before Congress’s August recess, creating potential momentum for House consideration. If enacted, the legislation would take effect 18 months after passage or 120 days after federal regulators issue implementing regulations, whichever comes first.

For the stablecoin sector, the GENIUS Act would provide the regulatory clarity that has long been sought by financial institutions looking to issue or use stablecoins.[3] The framework could accelerate stablecoin adoption by traditional financial institutions while potentially creating competitive advantages for compliant US-based stablecoin issuers over offshore competitors. The legislation’s reserve requirements and operational standards could help establish consumer confidence in stablecoins as a legitimate financial instrument. This may drive growth in the $240 billion market as major corporations explore stablecoin applications.

[1]See Katten’s Quick Reads post discussing the introduction of the Clarity Act here.

[2]See Katten’s Quick Reads post on recent guidance issued by the Division of Corporation Finance of the Securities and Exchange Commission, which clarified that covered stablecoins are not securities.

[3]See Katten’s client advisory on recent guidance from banking regulators easing restrictions against banks and insured depository institutions from participating in “crypto-related activities,” including maintaining stablecoin reserves and issuing cryptocurrencies such as stablecoins.