GENIUS Act Explained: The US Stablecoin Law (2026)

TL;DR

• The GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins Act, S.1582 of the 119th Congress) is the first comprehensive US federal stablecoin law, signed by President Donald Trump on 18 July 2025.
• Only a Permitted Payment Stablecoin Issuer (PPSI) may issue a US payment stablecoin. Two licensing paths: federal (OCC) or state (e.g. NY DFS), with strict 1:1 reserves in cash and short-dated Treasuries.
• Algorithmic stablecoins are effectively banned. Existing issuers including Circle, Paxos, Ripple, and PayPal/Paxos must comply by 18 July 2026. Tether USDT faces the hardest decision and remains primarily an offshore product.
• The GENIUS Act sits alongside the CLARITY/FIT21 market-structure bill (still in the Senate), the SEC SAB 121 reversal (January 2025), and Trump Executive Order 14178 of 23 January 2025. Together they reset the US into the world's largest regulated stablecoin hub and entrench dollar dominance on-chain.

Table of contents

• What is the GENIUS Act?
• Sponsors and political path
• Who is a PPSI?
• Reserves, redemption and disclosure
• Algorithmic stablecoin ban
• Federal vs state path (OCC vs NY DFS)
• Affected issuers — token by token
• Comparison with STABLE, Lummis-Gillibrand, Clarity for Payment Stablecoins
• SEC SAB 121 reversal
• SEC vs CFTC jurisdictional split (FIT21 / CLARITY)
• Trump Executive Order 14178
• Implementation timeline and enforcement
• GENIUS Act vs MiCA
• Why it matters for dollar dominance
• Risks and criticism
• How to get a PPSI license — step by step
• FAQ
• Glossary
• Related reading
• Sources

What is the GENIUS Act?

The GENIUS Act — short for the Guiding and Establishing National Innovation for US Stablecoins Act of 2025 — is the first comprehensive federal stablecoin law in the United States. Codified as Senate Bill 1582 of the 119th Congress, it was sponsored by Senator Bill Hagerty (R-TN) and co-sponsored by Senator Cynthia Lummis (R-WY), passed the Senate on a 68-30 vote on 17 June 2025, passed the House on 17 July 2025, and was signed into law by President Donald Trump at a White House ceremony on 18 July 2025 (GENIUS Act signed).

The Act creates a single federal definition of a payment stablecoin: a digital token issued by a regulated entity, denominated in US dollars, redeemable at par on demand from the issuer, and backed at all times by reserves equal to or greater than 100% of outstanding token liabilities. It restricts issuance of such tokens to Permitted Payment Stablecoin Issuers (PPSIs), introduces a federal-or-state licensing path, mandates monthly reserve attestations, and explicitly bans algorithmic stablecoins.

The structural model is closely analogous to the EU MiCA E-Money Token regime (MiCA EMT), with key differences in jurisdictional architecture: where MiCA passports a single national licence across 27 member states, the GENIUS Act splits authority between the federal Office of the Comptroller of the Currency and the 50 state regulators, on top of the existing role of the Federal Reserve, the FDIC, FinCEN, and the SEC. The dual-track design reflects a long-running US tradition of state and federal financial regulation co-existing, going back to the National Bank Act of 1864.

Sponsors and political path

The GENIUS Act emerged from a multi-year sequence of failed and partial bills. Key sponsors and stages:

• Senator Bill Hagerty (R-TN), Senate Banking Committee, lead sponsor and primary architect of the final text.
• Senator Cynthia Lummis (R-WY), Senate Banking Committee, long-time crypto advocate, co-author of the predecessor Lummis-Gillibrand Payment Stablecoin Act of 2023 and the broader Responsible Financial Innovation Act of 2022.
• Senator Kirsten Gillibrand (D-NY), Democratic co-sponsor in the Senate Banking Committee, brought New York-DFS expertise.
• Representative French Hill (R-AR), House Financial Services Committee Chair, sponsor of the parallel House version (the Clarity for Payment Stablecoins Act and STABLE Act of 2025).
• Representative Maxine Waters (D-CA), former Ranking Member of HFSC, who negotiated key consumer-protection provisions.
• Treasury Secretary Scott Bessent, who endorsed both GENIUS and CLARITY in early 2025 testimony.
• White House Crypto and AI Czar David Sacks, appointed by Trump on 23 January 2025, coordinated executive-branch support.
• SEC Chair Paul Atkins, confirmed 9 April 2025, who paused enforcement actions and aligned SEC interpretation with the new bill.
• SEC Commissioner Hester Peirce, head of the SEC Crypto Task Force from January 2025.

The Act passed in part because the 2024 election delivered Republican control of the White House and Senate alongside a more crypto-friendly House, and because every major Democratic stakeholder including Senator Gillibrand had public co-sponsor positions on stablecoin frameworks.

Who is a Permitted Payment Stablecoin Issuer?

The Act defines three sub-categories of Permitted Payment Stablecoin Issuer (PPSI):

1. Subsidiary of an Insured Depository Institution

Any subsidiary of an FDIC-insured bank, savings association, or credit union may apply to its primary federal regulator (the Federal Reserve, OCC, FDIC, or NCUA) to be designated a PPSI. Examples in 2026 include the digital-asset arms of JPMorgan, Bank of New York Mellon, and Cross River Bank.

2. Federal Qualified Non-Bank Issuer

A non-bank may obtain a federal PPSI charter from the Office of the Comptroller of the Currency. The charter is similar to the OCC's National Trust Bank charter and gives the issuer a direct federal supervisory home. Circle has publicly confirmed it intends to apply for this charter.

3. State Qualified Payment Stablecoin Issuer

A state-chartered entity may issue if its state regime is certified by the Treasury Secretary as "substantially similar" to the federal regime. New York (via the NY DFS BitLicense and Limited Purpose Trust Charter), Wyoming (via the SPDI / Special Purpose Depository Institution charter), and Texas have all received early certifications.

Foreign issuers are subject to a separate substituted-compliance determination by the Treasury Secretary in consultation with the Federal Reserve. This is the channel through which a non-US issuer such as Tether could in theory obtain US access.

Reserves, redemption and disclosure

The GENIUS Act's reserve regime is strict and modelled closely on the NY DFS 2022 stablecoin guidance and the New York-issued reserves of Paxos and Gemini.

• 100% reserve backing at all times, segregated from the issuer's own funds.
• Eligible assets: cash on deposit at a Federal Reserve bank or insured depository institution; US Treasury bills with remaining maturity of 93 days or less; repurchase agreements collateralised by short-dated US Treasuries; SEC Rule 2a-7 money market fund shares with strict redemption gates; and central-bank reserves.
• Bankruptcy remoteness: reserves must be held by a qualified custodian under a structure that ensures stablecoin holders are senior creditors and reserves are excluded from the issuer's general estate in case of bankruptcy.
• Monthly attestations by an independent registered public accounting firm, published on the issuer's website.
• Annual audited financial statements filed with the primary regulator.
• Redemption right at par on demand, with operational service-level commitments. Issuers must process redemptions within one business day in normal market conditions and within five business days in stressed conditions.
• Capital and liquidity buffers above the 100% reserve floor, calibrated by the primary regulator.
• Prohibition on rehypothecation, lending out, or otherwise encumbering reserves outside narrowly defined permitted Treasury repos.

These rules effectively codify what Circle has been doing for USDC since 2023 and what Paxos has been doing under NY DFS for PYUSD, USDP, GUSD and USDG. They go further than the operational practice of Tether, which has historically held a portion of reserves in commercial paper, secured loans, gold, and Bitcoin.

Algorithmic stablecoin ban

The Act contains no standalone provision that outlaws algorithmic stablecoins by name, but its definition of a payment stablecoin together with the 100% reserve requirement means no PPSI may issue a stablecoin whose value is maintained primarily through:

• algorithms,
• smart contracts,
• arbitrage with another digital asset, or
• any other mechanism not 1:1 backed by eligible reserves.

This explicitly excludes synthetic dollars such as Ethena USDe, although Ethena's BUIDL-backed USDtb (essentially a wrapped tokenised money-market fund) may qualify under a separate determination. It permanently closes the door to a US relaunch of the original Terra UST design that collapsed in May 2022.

Section 14 of the Act directs the Treasury, in consultation with the Federal Reserve and the SEC, to study endogenously collateralized (algorithmic) stablecoins and to report to Congress within one year of enactment on the feasibility of a separate federal framework for non-payment "stable" digital assets. This is the door through which yield-bearing tokenised money market funds, RWA-backed stable instruments, and decentralised stablecoins like Sky's USDS may eventually obtain a regulated US home.

Federal versus state path

The dual-track design is the single most distinctive structural feature of the GENIUS Act compared to MiCA.

A state-chartered PPSI may operate nationally as long as the home state's regime is substantially similar. The Treasury Secretary publishes a list of qualified state regimes; as of April 2026 the list includes New York, Wyoming, Texas, Florida, and South Dakota.

Affected issuers — token by token

A snapshot of how the major US-relevant stablecoins fit into the new regime as of April 2026:

• Circle — USDC, EURC. Pursuing federal OCC charter as a non-bank PPSI. Already MiCA-authorised in the EU. Likely first major dual-licensed issuer.
• Paxos — PYUSD, USDP, USDG, Lift Dollar. State-chartered under NY DFS Limited Purpose Trust Charter, automatically qualifies. Also issues PYUSD on behalf of PayPal.
• Ripple — RLUSD. Issued by Standard Custody & Trust, NY DFS-chartered. Compliant.
• Sky Protocol (formerly MakerDAO) — USDS, DAI. Decentralised, no single issuer. As of April 2026 Sky is exploring a US-domiciled wrapped product through a regulated counterparty; native USDS is unlikely to obtain PPSI status.
• PayPal — PYUSD. Issued by Paxos, automatically compliant via Paxos.
• World Liberty Financial — USD1. The Trump-affiliated WLFI stablecoin; expected to apply for federal OCC PPSI charter.
• Gemini — GUSD. NY DFS-chartered, compliant.
• BitGo — USDB and FlatCoin USD. Pursuing federal PPSI charter via BitGo Trust.
• First Digital — FDUSD. Hong Kong-domiciled, subject to substituted compliance.
• Tether — USDT. Offshore. Not a PPSI. Cannot be marketed to US persons by US-licensed venues unless a substituted-compliance pathway is opened. USDT continues to dominate offshore exchanges and emerging markets but remains effectively excluded from the regulated US market.
• Ethena — USDe and USDtb. Synthetic dollar USDe is excluded by the algorithmic-stablecoin ban. USDtb (BUIDL-backed) may qualify under future Treasury determinations.

How GENIUS compares with predecessor bills

The GENIUS Act is the third major US stablecoin bill since 2020.

• STABLE Act (2020) — original Tlaib-Garcia House bill, would have required a bank charter for any stablecoin issuer; never advanced.
• Clarity for Payment Stablecoins Act (2023) — Patrick McHenry House bill, much closer to today's GENIUS Act; passed HFSC but not the full House.
• Lummis-Gillibrand Payment Stablecoin Act (2023) — Senate counterpart, similar structure with stronger NY-DFS-style rules.
• STABLE Act of 2025 — French Hill House version, passed by HFSC in May 2025 and reconciled with GENIUS Act in conference committee.
• GENIUS Act of 2025 — final reconciled and enacted version.

The reconciled GENIUS Act takes the federal-or-state dual-track from Clarity-for-Payment-Stablecoins, the strict NY-DFS-style reserves from Lummis-Gillibrand, and the stronger consumer-protection and bankruptcy-remoteness provisions from the STABLE Act 2025.

SEC SAB 121 reversal — January 2025

In April 2022 the SEC under Gary Gensler issued Staff Accounting Bulletin No. 121 (SAB 121), requiring publicly traded companies that custody crypto-assets for customers to record those assets as liabilities on their balance sheets, with a corresponding asset for the safeguarding obligation. The practical effect was to make crypto custody prohibitively capital-intensive for US banks, blocking JPMorgan, BNY Mellon, State Street, and Citi from offering it.

On 23 January 2025, the SEC under acting Chair Mark Uyeda rescinded SAB 121 and replaced it with SAB 122, which restored the traditional off-balance-sheet treatment of customer-custodied digital assets. This single move opened the door for major US banks to enter custody, custody settlement, and ultimately stablecoin issuance — and was a precondition for the bank-subsidiary PPSI path under the GENIUS Act.

SEC versus CFTC jurisdictional split

The GENIUS Act explicitly excludes payment stablecoins from the SEC's securities perimeter — Section 4 carves them out of the Securities Act of 1933 and Investment Company Act of 1940 definitions. This codifies a position that the SEC under Paul Atkins had already adopted in February 2025 by dropping the SEC's stablecoin-related enforcement theories.

The broader question of which crypto-assets are securities versus commodities remains the domain of FIT21/CLARITY, which is still under Senate consideration as of April 2026. FIT21 passed the House on 22 May 2024 by a 279-136 vote. The CLARITY Act, expanding and replacing FIT21, passed the House again in mid-2025 and is awaiting Senate floor action (CLARITY Act passes House).

The general direction is:

• Stablecoins → GENIUS Act, primary regulators OCC and state regulators.
• Digital commodities (BTC, ETH, most "sufficiently decentralised" tokens) → CFTC under FIT21/CLARITY.
• Digital-asset securities (most newly issued tokens, ICOs) → SEC under existing securities laws.
• Banking activities involving digital assets → Fed, OCC, FDIC.
• AML/CFT → FinCEN, Treasury OFAC.

Trump Executive Order 14178 — 23 January 2025

On 23 January 2025, three days into his second term, President Donald Trump signed Executive Order 14178, "Strengthening American Leadership in Digital Financial Technology" (Trump Digital Assets EO). Key provisions:

1. Revoked Biden EO 14067 of 9 March 2022 on "Ensuring Responsible Development of Digital Assets" and the resulting Treasury framework.
2. Banned the establishment, issuance, circulation, or use of a US central bank digital currency (retail or wholesale) without explicit Congressional authorisation.
3. Established the President's Working Group on Digital Asset Markets, chaired by the Crypto and AI Czar.
4. Created the role of White House Crypto and AI Czar, filled by David Sacks.
5. Ordered the Working Group to deliver a federal regulatory framework for digital assets, including stablecoins, within 180 days.
6. Directed Treasury, the SEC, the CFTC, and other agencies to evaluate "fair access" to banking services for crypto firms — addressing the Operation Choke Point 2.0 controversy.

The order set the political momentum that produced the GENIUS Act just under six months later.

Implementation timeline and enforcement

GENIUS Act vs MiCA — head-to-head

For a deeper comparison, see MiCA Explained.

Why it matters for dollar dominance

Approximately 99% of stablecoin market cap by April 2026 is denominated in US dollars. Stablecoin issuers collectively held more than $130 billion in US Treasury bills as of Q1 2026, a figure cited repeatedly by Treasury Secretary Scott Bessent and former Treasury Secretary Janet Yellen as a major and growing source of demand for US sovereign debt. If stablecoin issuers were a country, they would be the 18th-largest holder of US Treasuries globally, larger than Saudi Arabia or South Korea.

The GENIUS Act formalises this by creating a regulated channel through which the world buys synthetic dollars on-chain, backed by Treasury debt that is sold to fund US deficits. Critics call this "stablecoin imperialism" or "exorbitant privilege 2.0". Supporters call it "Bitcoin-dollar synthesis" — a phrase coined by Lummis and used in Atlantic Council analysis through 2025. Either way, the effect is structural: by making the US the regulated home of issuance, the GENIUS Act locks in dollar dominance in on-chain markets for at least the next decade.

For comparison, total US currency in circulation is roughly $2.4 trillion. Stablecoin market cap as of April 2026 is approximately $260 billion, growing at 35-40% annually. Bernstein, Citi, and Standard Chartered analysts have forecast stablecoin market cap reaching $1-2 trillion by 2028-2030, with most of that growth happening in regulated US issuance under the GENIUS framework.

Risks and criticism

• Bank concentration. Reserve deposits are heavily concentrated in a handful of US banks. The March 2023 SVB episode showed that even short-duration cash holdings can be subject to bank-run risk when reserves cluster.
• Treasury market dependence. If stablecoin issuance contracts sharply, forced selling of $130B+ in T-bills could spike short-end yields. The Fed has indicated willingness to backstop via the Standing Repo Facility, but this is untested at scale.
• Foreign-issuer ambiguity. Treasury substituted-compliance determinations have been slow. Until they are made, USDT and other offshore stablecoins remain in a regulatory grey zone for US users.
• Consumer-protection gaps. Unlike FDIC-insured deposits, stablecoin reserves are not federally insured. Bankruptcy remoteness helps but does not equal deposit insurance.
• Privacy concerns. Mandatory FinCEN reporting and OFAC screening apply to all PPSIs; some commentators argue this entrenches surveillance of payments.
• Innovation drag. The algorithmic stablecoin ban locks out some on-chain stable designs that may otherwise be safer at scale (e.g. fully over-collateralised crypto-native stables).
• Federalism friction. State and federal regulators may apply substantially-similar tests differently, creating compliance asymmetry across states.

How to get a PPSI license — step by step

1. Choose your path. Bank subsidiary, federal OCC non-bank, or state-chartered. Consult counsel on which best fits your existing corporate structure and capital base.
2. Pre-apply. Schedule pre-filing meetings with your primary regulator. The OCC has a designated digital-asset team; NY DFS runs a Virtual Currency Unit.
3. Build the reserve and custody stack. Identify your qualified custodian, T-bill manager, and 2a-7 MMF counterparty. Negotiate segregated-account documentation.
4. Build the redemption infrastructure. Operational SLA for one-business-day redemption in normal markets; five business days in stress. Stress-test the queue.
5. Build the disclosure and attestation pipeline. Engage a registered public accounting firm. Build automated reserve-composition reporting.
6. Build the AML/CFT stack. FinCEN registration as MSB, OFAC screening, transaction monitoring, suspicious-activity reporting.
7. File the charter or licence application. OCC charter applications can run 12-18 months. NY DFS BitLicense is faster (6-12 months for established applicants).
8. Coordinate with parallel jurisdictions. Most major issuers also need MiCA EMT in the EU, Hong Kong HKMA stablecoin licence, MAS major-payment-institution licence in Singapore, and others. Build a multi-jurisdictional compliance map.
9. Operate. Monthly attestations, annual audits, ongoing examinations, and ad-hoc incident reporting.

FAQ

What is the GENIUS Act?

The Guiding and Establishing National Innovation for US Stablecoins Act of 2025, the first comprehensive federal stablecoin law in the United States. Signed by President Trump on 18 July 2025.

Who can issue a stablecoin under the GENIUS Act?

Only a Permitted Payment Stablecoin Issuer: bank subsidiary, federal OCC-chartered non-bank, or state-chartered issuer in a state with a substantially-similar regime.

What reserves does it require?

100% backing in cash, T-bills under 93 days, repos and 2a-7 MMFs. Segregated, bankruptcy-remote, with monthly attestations and annual audits.

Are algorithmic stablecoins banned?

Not by a standalone statutory ban, but effectively yes: because a PPSI must hold 100% reserves in cash and short-dated Treasuries, it cannot issue a token whose value is maintained primarily by algorithms, smart contracts, or arbitrage with another digital asset. Section 14 directs Treasury to study endogenously collateralized (algorithmic) stablecoins.

When did the GENIUS Act take effect?

Signed 18 July 2025. Implementing rules due mid-January 2026. Legacy issuers must comply by 18 July 2026.

How does it compare with MiCA?

The GENIUS Act covers only US payment stablecoins. MiCA covers stablecoins, exchanges, custody, brokerage and market abuse across 27 EU states. Both ban algorithmic stablecoins and impose 1:1 reserves.

What about Tether?

Tether is offshore and is not a PPSI. It can theoretically obtain access via a Treasury substituted-compliance determination, but this is unlikely in the near term. USDT remains primarily an offshore product.

What about Sky USDS?

USDS is decentralised and is unlikely to obtain PPSI status in its current form. Sky is exploring a wrapped US-domiciled product through a regulated counterparty.

What is a PPSI?

Permitted Payment Stablecoin Issuer — the entity type authorised to issue payment stablecoins under the GENIUS Act.

What is the relationship to FIT21 and the CLARITY Act?

GENIUS handles stablecoins. CLARITY/FIT21 handles broader market structure (SEC vs CFTC). CLARITY is in the Senate as of April 2026.

Glossary

• GENIUS Act — Guiding and Establishing National Innovation for US Stablecoins Act of 2025, S.1582.
• PPSI — Permitted Payment Stablecoin Issuer, the licensed entity type under the Act.
• OCC — Office of the Comptroller of the Currency, the federal bank regulator.
• NY DFS — New York State Department of Financial Services, runs BitLicense and Limited Purpose Trust.
• SAB 121 / SAB 122 — SEC Staff Accounting Bulletins on crypto custody balance-sheet treatment.
• FIT21 — Financial Innovation and Technology for the 21st Century Act, broader US market-structure bill.
• CLARITY Act — 2025 expanded version of FIT21, currently in the Senate.
• EO 14178 — Trump Executive Order on digital financial technology, 23 January 2025.
• Crypto Czar — White House Crypto and AI Czar role created by EO 14178; David Sacks.
• Substituted compliance — Treasury determination allowing foreign issuers to access the US market.

Related reading

• Stablecoins Explained: The Complete 2026 Guide
• MiCA Explained: The EU Crypto Regulation
• SEC Crypto Enforcement: Complete History from Gensler to Atkins
• Hong Kong Crypto Licensing: The Complete 2026 Guide
• Real-World Asset Tokenization in 2026
• CBDCs Explained — The Complete 2026 Guide

Sources and further reading

• S.1582 — Guiding and Establishing National Innovation for US Stablecoins Act of 2025
• White House — Presidential Actions
• OCC — Charters and Licensing
• NY DFS — Virtual Currency Businesses
• SEC — Crypto Assets
• SEC — SAB 122 Rescission of SAB 121
• CFTC — Digital Assets
• FinCEN — Money Services Businesses
• Treasury OFAC — Sanctions Programs
• BIS Working Paper 1146 — A Money View of stablecoins
• BIS Working Paper 1219 — Stablecoins and monetary policy
• BIS Working Paper 1270 — Stablecoins and safe asset prices
• Federal Reserve FEDS 2021/020 — Global Stablecoins
• IMF — Regulating the Crypto Ecosystem (Stablecoins)
• FSB — Global Stablecoin Recommendations
• Atlantic Council — Bitcoin-Dollar Synthesis
• Galaxy Research — Stablecoin Market Report 2024

About the author

DeFi Intel Research covers crypto market structure, MEV, tokenisation, and global crypto regulation. The team includes former bank-trading-floor engineers, securities lawyers, and protocol researchers, with on-chain and TradFi research published since 2021. For corrections or research collaboration, contact us via the about page.

Last updated: 2026-04-26