An overview of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, including information on the definition of payment stablecoin, licensing and other requirements imposed on permitted payment stablecoin issuers (PPSIs), and further regulatory steps to GENIUS Act implementation.
In July 2025, President Trump signed the GENIUS Act into law, creating a federal regulatory framework for payment stablecoins. The GENIUS Act represents the first major crypto legislative framework enacted into law in the US and broadly preempts state regulation in this area.
The GENIUS Act creates federal licensing and, in some cases, state licensing and regulatory requirements for payment stablecoins. The goal of the Act is for parties to treat payment stablecoins as a means of payment, just like US dollar currency, because of the value of redemption rights backed by liquid reserves. The Act sets out requirements for the custody and safekeeping of liquid reserves to back token holder redemption rights.
The GENIUS Act is expected to become effective on the earlier of:
This article outlines the key provisions of the GENIUS Act. In particular, it discusses:
Payment Stablecoins Defined
Payment stablecoins are electronic tokens that may be redeemed by the token holder for US dollars. The GENIUS Act defines a payment stablecoin as a digital representation of value:
The definition of payment stablecoin is limited to assets that qualify as digital assets. Digital asset, in turn, is defined as a digital representation of value that is recorded on a cryptographically secured distributed ledger.
Excluded from the definition of payment stablecoin are digital assets that are:
PPSIs
The GENIUS Act makes it unlawful for anyone other than a PPSI and, under specific conditions, a qualifying foreign payment stablecoin issuer (FPSI), to issue payment stablecoins in the US, subject to certain limited exceptions. Digital asset service providers may not offer or sell payment stablecoins to US persons beginning July 18, 2028, unless the stablecoin is issued by a PPSI or a qualifying FPSI.
The GENIUS Act allows the applicable federal regulator (for example, prudential bank regulators in the case of a Federal Deposit Insurance Corporation (FDIC)-insured depository institution (IDI) subsidiary) to create, receive, and review applications from prospective payment stablecoin issuers. Once approved, the federal payment stablecoin regulator will oversee permitted issuer activities, which include periodic examinations of each PPSI.
Under the GENIUS Act, PPSIs include persons “formed” in the US that are:
Non-US entities meeting certain limited criteria may qualify as FPSIs. FPSIs are issuers of a payment stablecoin that are:
FPSIs must be:
The OCC or Treasury may rescind or revoke an FPSI’s registration if it facilitates illicit finance, for sanctions evasion, or for anti-money laundering (AML) violations.
PPSI Requirements
The GENIUS Act requires each PPSI to:
The GENIUS Act prohibits the reserves maintained by PPSIs from being pledged, rehypothecated, or reused, except for the purpose of liquidity to meet reasonable expectations regarding requests to redeem payment stablecoins.
Along with the requirement to maintain a reserve, the GENIUS Act limits payment stablecoin activity by PPSIs to:
Other noteworthy requirements for PPSIs include:
The GENIUS Act also specifies the following further restrictions on payment stablecoin issuers:
BSA/AML and Sanctions Obligations
Under the GENIUS Act, PPSIs are recognized as financial institutions for purposes of the Bank Secrecy Act (BSA). By classifying PPSIs as financial institutions under the BSA, the GENIUS Act requires them to:
The GENIUS Act further:
Under Section 9 of the GENIUS Act, beginning 30 days after enactment, the Treasury secretary is required to open a 60-day public comment period to identify “innovative or novel” methods, techniques, or strategies that regulated financial institutions use, or have the potential to use, to detect illicit activity, such as money laundering, involving digital assets, including comments with respect to AI and use of blockchain technology and monitoring (see Treasury Request for Comment in Connection with GENIUS Act below). After this public comment period, the Treasury secretary is directed to conduct further research on the methods, techniques, or strategies identified in the comments. The Treasury’s Financial Crimes Enforcement Network is then required to issue guidance for public comment no later than three years after enactment of the GENIUS Act, based on the results of this research, including standards for PPSIs to identify and report illicit activity involving PPSIs.
Implementation of the GENIUS Act
The following actions are required by federal and state regulators:
The GENIUS Act mandates the Treasury to issue regulations that will cover, among other matters:
The Treasury is also responsible for determining whether a foreign payment stablecoin regulatory framework is comparable to the US framework, which is a requirement for stablecoins to be issued or sold by an FPSI in the US.
The GENIUS Act also requires other federal agencies to adopt implementing regulations, including the Board of Governors of the Federal Reserve System, FDIC, National Credit Union Administration, and OCC. The GENIUS Act requires these agencies to adopt regulations relating to:
Treasury Request for Comment in Connection with GENIUS Act
On August 18, 2025, the Treasury issued a request for comment, fulfilling its obligation under Section 9(a) of the GENIUS Act. The request for comment offered the opportunity to provide feedback on “innovative or novel” methods, techniques, or strategies that regulated financial institutions use, or could potentially use, to detect illicit activity, such as money laundering, involving digital assets.
In particular, the Treasury requested comment on “application program interfaces,” AI, digital identity verification, and use of blockchain technology and monitoring. The request acknowledged that innovative tools are critical to advancing efforts to address illicit finance risks in crypto and digital assets but can also present new resource burdens for financial institutions. As required by the GENIUS Act, the Treasury will use the public comments to inform research on effectiveness, costs, privacy and cybersecurity risks, and other related considerations.
Public comments were due by October 17, 2025. Comments may be viewed at https://www.regulations.gov/docket/TREAS-DO-2025-0070.
On September 19, 2025, the Treasury issued an advance notice of proposed rulemaking (ANPRM) soliciting public comment on 58 questions across the following six subject areas:
The public comment deadline was extended to May 18, 2026.
Proposed FDIC PPSI Application Rule
On December 17, 2025, the FDIC issued a proposed rule, Approval Requirements for Issuance of Payment Stablecoins by Subsidiaries of FDIC-Supervised Insured Depository Institutions, as required under the GENIUS Act. The rule would detail the application and approval process for FDIC-supervised bank PPSIs. The release also includes a request for comment on 11 relevant questions.
The proposed rule would add a new Section 303.252 to Title 12, Part 303, subpart M of the FDIC Rules and Regulations, titled “Permitted payment stablecoin issuers.” This new section would apply to FDIC-supervised institutions that seek to issue payment stablecoins through a subsidiary. The proposed rule would implement the requirements of Section 5 of the GENIUS Act with respect to evaluating the factors, processing applications within specified time frames, and establishing an appeal process for FDIC-supervised PPSI applicants under the GENIUS Act. As required under the GENIUS Act, the FDIC would only deny an application if the activities of the applicant would be unsafe or unsound based on the factors described in Section 5(c) of the GENIUS Act.
Under the proposed rule, the term applicant would mean either:
This definition would distinguish the applicant (the FDIC-supervised institution) from the PPSI subsidiary through which the institution would issue payment stablecoins and perform certain other payment stablecoin activities permitted by the GENIUS Act. Paragraph (c) of proposed Section 303.252 would state that applications under the new section would be required to be filed with the appropriate FDIC region, as defined in 12 C.F.R. § 303.2(g), which is consistent with the FDIC’s practice for receiving other types of applications.
FDIC PPSI Applications
Under Section 303.252(d) of the proposed rule, the applicant would submit information to the FDIC in the form of a letter application that would contain the information listed in the regulation, to the extent applicable. The rule would minimize the regulatory burden for applicants by requesting only information necessary to evaluate the factors to be considered under Section 5(c) of the GENIUS Act and to determine the safety and soundness of the proposed activities of the applicant, inclusive of the activities of its subsidiary.
Section 5(c) of the GENIUS Act specifies the following factors to be considered in a PPSI application:
The FDIC has not proposed any additional factors. The applicant may, however, include any other materials or information that it would like the FDIC to consider.
Additionally, an applicant would be required to include in the application, among other things:
The proposed rule would require inclusion of an engagement letter with a registered public accounting firm. This information is intended to demonstrate that the applicant’s subsidiary would be able to comply with the examination of monthly reserve reports and certification requirements in Section 4 of the GENIUS Act.
Application Processing and Decisions
Under the proposed rule, the FDIC would notify an applicant regarding whether the application is considered substantially complete not later than 30 days after it is received. At that time, if the application is not considered substantially complete (for example, because it lacks sufficient information for the FDIC to render a decision on whether the applicant satisfies the factors described in Section 5(c) of the GENIUS Act), the FDIC will specify the additional information the applicant must provide for the application to be considered substantially complete.
Examples of cases where the FDIC might not consider an application to be substantially complete include where:
The FDIC would approve or deny an application not later than 120 days after receiving a substantially complete application. If the FDIC does not render a decision within 120 days of receiving a substantially complete application, the application will be deemed approved. The FDIC may impose conditions on approving an application but generally intends for approval with conditions to include routine items, for example, the submission of items that were not included or finalized in the application, such as final organizing documents or fulfillment of commitments of the applicant such as capital injections.
The FDIC states that it will only deny a substantially complete application if the activities of the applicant would be unsafe or unsound based on the factors to be considered. The FDIC would provide the applicant with written notice of the basis for denial not later than 30 days after the date of denial, with an explanation that will include all findings made by the FDIC. Not later than 30 days after the receipt of a denial of its application, the applicant would be permitted to request in writing a written or oral hearing before the FDIC, which the FDIC would treat akin to a material supervisory determination. The denied applicant would be required to follow procedures similar to the process for an appeal of a material supervisory determination but within the timelines provided under the GENIUS Act. The FDIC would then notify the applicant of its final determination not later than 60 days after the hearing date.
Safe Harbor for Pending Applications
Section 5(f) of the GENIUS Act outlines a safe harbor for pending applications. Under this section, an applicant would be permitted to request a waiver of certain requirements regarding a pending application, with any granted waiver not to exceed 12 months from the effective date of the GENIUS Act. An applicant would be permitted to submit, together with an application, a written request for a waiver in writing that explains the basis for the request, the extent of the requirements to be waived, and the time period sought. The FDIC has not provided procedures for requesting a waiver under the GENIUS Act’s safe harbor provision due to the temporary nature of the provision and the case-by-case analysis required for any waiver.
Anticipated Impact of the GENIUS Act
Because the GENIUS Act creates a market for privately issued payment stablecoins, it has been criticized for potentially creating systemic risk in the nonbank sector or a digital shadow banking sector that is not subject to prudential regulation. Conflict-of-interest concerns have also been raised by some regarding the involvement of members of government in private stablecoin issuance. Other parties advocated for a comprehensive crypto bill and opposed stand-alone stablecoin legislation.
Additionally, a potential large-scale increase in the demand for US Treasuries is anticipated because these assets will be needed for PPSI reserve accounts. This has the potential to dramatically impact the global US Treasury markets and counter macro factors that have weakened the status of the US dollar as the world’s top reserve currency.
