Regulated Payment Stablecoins Become a Reality in the U.S.

The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act was signed into law June 18, establishing a regulatory framework for the issuance and transaction of payment stablecoins in the U.S. The law goes into effect 18 months after enactment (December 2026) or 120 days after the Federal Reserve Board (FRB), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corp. (FDIC) and the National Credit Union Administration (NCUA) issue final regulations, whichever is earlier.

What Is a Payment Stablecoin?

A payment stablecoin is defined as a digital asset issued on a public blockchain designed for payment and settlement purposes. Stablecoins are not securities or commodities. Authorized issuers of payment stablecoins are required to redeem them for a fixed amount of money and must maintain the stability of each coin’s value by holding an appropriate level of highly liquid assets, or reserves, against them. It is this feature that gives stablecoins their name.

The GENIUS Act specifies how the stable value, or peg, of an issued stablecoin must be maintained. Issuers are required to hold assets (reserves) on at least a one-to-one basis against the value of the coins issued. In short, if an issuer issues $1 in stablecoin, they must hold at least $1 in acceptable liquid assets against that coin. Acceptable assets include:

• U.S. currency, deposits held at insured depository institutions
• U.S. Treasury securities with a remaining maturity of no more than 93 days, and
• Other liquid federal government-issued financial instruments, including government money market funds.

The GENIUS Act gives federal regulators authority to approve additional types of reserves not specified in the law. Approved reserves also may be issued in tokenized form.

Who Can Issue a Payment Stablecoin?

Any entity that wishes to issue a payment stablecoin is required to receive approval from a federal banking or credit union regulator. For banks, thrifts and credit unions, this means either the OCC, the Federal Reserve, the FDIC or the NCUA are required to give approval. An uninsured bank, such as a national trust bank, and federal branches of foreign banks, must receive approval from the OCC. States also may approve certain entities to become authorized issuers if the state’s regulatory framework is “substantially similar” to the framework developed by federal banking regulators. The GENIUS Act establishes a Stablecoin Certification Review Committee (SCRC), chaired by the U.S. Treasury Secretary and composed of the chair of the FDIC and the chair of the Board of Governors of the Federal Reserve System, to review and approve state-level regulatory frameworks. States are required to submit certification requests on an annual basis to the SCRC for recertification. Additionally, if a state-approved stablecoin issuer issues more than $10 billion in payment stablecoins, it is required to transition to the federal regulatory framework within one year of crossing the $10 billion threshold. That entity would then be jointly supervised by their home state and a federal banking regulator.

The GENIUS Act generally assumes that issuers of payment stablecoins will be institutions engaged in banking and other financial activities. However, the law does allow U.S. and non-U.S. companies not engaged in one or more financial activity to legally issue stablecoins if they receive a unanimous vote from the SCRC. The SCRC is required to evaluate several factors, including risks to financial stability, and to the safety and soundness of the banking system, in making its determination.

What Activities Can an Approved Stablecoin Issuer Engage In?

Approved stablecoin issuers are generally limited to four main activities: issuing stablecoins, redeeming stablecoins, managing reserves, and providing custodial or safekeeping services.

The GENIUS Act prohibits issuers from paying stablecoin holders yield or interest on their coins. Issuers also are prohibited from requiring a customer to purchase other products or services as a condition for issuing a stablecoin to that customer (also known as tying).

Each month, issuers are required to publish the composition of their reserves on their website. They also are required to publish their procedures and fee schedule for purchasing and redeeming stablecoins. All reports attesting to the state of an issuer’s reserves must be certified by the CEO and CFO of the issuing institution and must be examined monthly by a registered public accounting firm. Issuers with $50 billion or more in total stablecoin issuance must prepare annual audited financial statements.

What’s Next?

The GENIUS Act requires each federal banking regulator to issue regulations to implement the act within one year of passage. This includes establishing a regulatory framework, implementing capital, liquidity and risk management requirements and developing diversification standards for the reserve assets backing an issuer’s stablecoins.

In addition, there are numerous other rulemakings due within one year of the GENIUS Act, which also requires federal stablecoin regulators and the Treasury Secretary to issue several reports—some within one year of enactment and others on an ongoing basis.

To learn more about banking regulation, read the St. Louis Fed’s “Supervising Our Nation’s Financial Institutions” series.