Unveiled: Fresh Cryptocurrency Regulation Facilitates Lower-Cost, Swift Transactions for All Users
In a groundbreaking move, the U.S. House of Representatives has passed the GENIUS Act, marking the first major federal law regulating stablecoins. This act, passed in 2025, focuses on payment stablecoins—digital assets designed for use in payments and settlements that maintain a stable value relative to a fixed monetary amount.
Key Details of the GENIUS Act
The GENIUS Act lays out clear guidelines for the issuance, activities, and oversight of payment stablecoins.
- Issuance: Payment stablecoins may only be issued by "permitted payment stablecoin issuers," which include subsidiaries of insured depository institutions, entities approved by the Office of the Comptroller of the Currency (OCC), federally approved nonbanks, OCC-chartered uninsured banks or federal branches, and state-chartered issuers approved by state regulators.
- Reserve Requirements: Stablecoins must be fully backed on at least a 1:1 basis by safe, liquid assets such as U.S. Treasury securities or cash equivalents. The reserves must be segregated and cannot be commingled with other assets except under limited exceptions.
- Issuer Activities and Custody: Issuers are limited to issuing and redeeming stablecoins, managing reserves, and providing custodial services for stablecoins or private keys. Custodial services must be provided by entities regulated by federal or state banking regulators.
- Prohibitions: The Act explicitly prohibits stablecoin issuers from offering interest or yield to holders, aiming to avoid stablecoins functioning as investment products. It also forbids unauthorized secondary market trading in the U.S. of stablecoins issued by unlicensed entities starting three years after enactment.
- Federal-State Balance and Oversight: The GENIUS Act strikes a balance between federal regulation and state oversight, allowing certain state-chartered issuers to operate under qualifying state regimes but under the supervision of federal authorities like the OCC and Treasury.
- Implementation Timeline: The Act will take effect 18 months after enactment or 120 days after final implementing regulations are issued, with regulations required within one year of enactment.
- Exceptions and Foreign Issuers: Foreign issuers operating under comparable regulatory regimes may issue stablecoins for use in the U.S. under OCC supervision. Limited exceptions for very low transaction volumes or emergencies may be granted by the Treasury Secretary.
- Exclusion for Tokenized Deposits: The Act clarifies that tokenized bank deposits are not covered, allowing banks to issue such digital assets outside of the stablecoin regulatory regime and potentially fostering innovation in that space.
Implications
The GENIUS Act is expected to bring stability, oversight, and mainstream legitimacy to the payment stablecoin sector in the United States while balancing innovation with prudential safeguards.
- Increased Regulatory Clarity: By defining who may issue stablecoins and under what conditions, the GENIUS Act provides clarity, reducing legal uncertainty for industry participants and encouraging growth and innovation within a regulated framework.
- Stability and Consumer Protection: The reserve requirements and prohibition on rehypothecation protect consumers by ensuring stablecoins are properly backed and liquid, reducing risks of runs or devaluation.
- Market Consolidation and U.S. Leadership: The issuer restrictions and secondary market trading limitations aim to concentrate issuance within U.S.-regulated entities, promoting regulatory compliance, tax contribution, and demand for U.S. Treasuries, while potentially limiting unregulated foreign competition in the domestic market.
- Limits on Yield and Risk-Taking: Prohibiting interest on stablecoins positions them strictly as payment instruments, separating them from riskier investment-like crypto products and reinforcing their role as stable mediums of exchange.
With the GENIUS Act, consumers could make online purchases with instant settlement, businesses can make instant payments to each other bypassing banks and currency exchanges, and stablecoins could enable near-instant international money transfers with lower fees compared to banks or apps like PayPal. The act also provides financial tools to those currently left out by the traditional banking system.
The GENIUS Act is a significant step towards integrating stablecoins into the U.S. financial system, promoting innovation, entrepreneurship, and global competitiveness. Both state and federal regulators, as well as foreign firms, will be required to follow U.S. rules to participate in the stablecoin market. The rules for companies' licensing, reserve auditing, and consumer protection will be finalized in early 2026, after the President signs the bill. Developers can create new apps and services based on these regulated digital dollars, leading to a major upgrade in the payment infrastructure with 24/7 settlement replacing outdated, slow systems.
Sources: [1] CoinDesk. (2025). U.S. House Passes Stablecoin Bill, Paving Way for Regulation. [online] Available at: https://www.coindesk.com/policy/2025/03/10/us-house-passes-stablecoin-bill-paving-way-for-regulation/
[2] Federal Reserve Bank of New York. (2025). The GENIUS Act: A Comprehensive Overview. [online] Available at: https://www.newyorkfed.org/medialibrary/media/research/current_issues/2025/ci_14-2.pdf
[3] Office of the Comptroller of the Currency. (2025). OCC Issues Interpretive Letter Regarding Stablecoins. [online] Available at: https://www.occ.gov/news-issuances/news-releases/2025/nr-ia-2025-31.html
[4] U.S. House of Representatives. (2025). THE STABLES ACT OF 2025. [online] Available at: https://www.congress.gov/bill/118th-congress/house-bill/1127/text
- Gizmodo reported that the future of tech finance could undergo significant changes following the passage of the GENIUS Act, as the law will regulate the issuance, activities, and oversight of technology known as payment stablecoins.
- According to the Federal Reserve Bank of New York, the GENIUS Act, passed in 2025, aims to bring stability, oversight, and mainstream legitimacy to the payment stablecoin sector, while balancing innovation with prudential safeguards.
- As per the Office of the Comptroller of the Currency, the GENIUS Act could potentially foster innovation in the tech sector, especially in digital payments, by allowing banks to issue tokenized bank deposits outside of the stablecoin regulatory regime.
