Technical corrections only. The diff between v3 and v4 primarily consists of the addition of public law information, including the public law number, approval date, legislative history, and numerous 'NOTE' tags throughout the text, indicating the bill's enactment. No substantive policy changes were made.
GENIUS Act
- Sponsor
- Sen. Hagerty, Bill [R-TN]
- Last action
- Jul 18, 2025
Bottom line
The GENIUS Act creates a dual federal-state regulatory regime for payment stablecoins, aiming to ensure their stability, protect consumers, and mitigate financial risks while fostering innovation within a regulated environment.
What it actually does
This Act, known as the GENIUS Act, establishes a comprehensive federal and state regulatory framework for payment stablecoins in the United States. It restricts the issuance of payment stablecoins to "permitted payment stablecoin issuers" (insured depository institutions, federal qualified nonbank entities, and state qualified entities), sets stringent reserve, capital, liquidity, and risk management requirements, and clarifies that compliant payment stablecoins are not securities or commodities. The bill also includes robust anti-money laundering provisions and addresses insolvency treatment for issuers.
Proponents argue
Supporters argue that the bill provides much-needed regulatory clarity and certainty for the stablecoin market, promoting financial stability by mandating robust reserve requirements and capital standards. They contend it protects consumers by ensuring timely redemptions and preventing deceptive marketing, while also bolstering national security through enhanced anti-money laundering and sanctions compliance. Proponents believe it fosters responsible innovation by creating a clear path for regulated entities to issue stablecoins, preventing illicit finance, and maintaining U.S. leadership in digital assets.
Opponents contend
Critics might argue that the bill's stringent requirements could stifle innovation and concentrate power within traditional financial institutions, potentially limiting competition from new entrants. Concerns could be raised about the complexity of the dual federal-state regulatory structure and the potential for regulatory arbitrage or inconsistent enforcement. Some may also argue that the definitions and exclusions, particularly regarding securities, could still leave ambiguities or create unintended consequences for the broader digital asset ecosystem.
The bill is moderately long and contains complex financial and legal terminology, requiring significant time and expertise to fully comprehend its implications, which may exceed the time typically allotted for legislative review.
Section 3
Limitation on Payment Stablecoin Issuers and Offers
This section makes it unlawful for any person other than a "permitted payment stablecoin issuer" to issue payment stablecoins in the U.S. After three years, digital asset service providers can only offer or sell payment stablecoins issued by permitted issuers. Foreign issuers must have the technological capability to comply with lawful orders. Violations carry significant fines and imprisonment.
Supporters argue
Supporters argue this centralizes stablecoin issuance under a robust regulatory framework, enhancing financial stability and consumer protection by ensuring all stablecoins available in the U.S. meet high standards.
Critics contend
Critics might argue this provision creates a barrier to entry for new innovators and concentrates power among existing financial institutions, potentially stifling competition and limiting consumer choice.
Tradeoffs
Balances financial stability and consumer protection against potential impacts on innovation and market competition.
Section 4(a)
Reserve, Redemption, and Disclosure Requirements
Permitted payment stablecoin issuers must maintain 1:1 reserves in highly liquid assets (e.g., U.S. currency, Treasury bills, demand deposits). They must publicly disclose their redemption policy and monthly reserve composition, including asset types, tenor, and custody location. Rehypothecation of reserves is generally prohibited with limited exceptions.
Section 4(a)(4)
Tailored Prudential Standards
Primary Federal payment stablecoin regulators (or State regulators for State-qualified issuers) must issue regulations for capital, liquidity, reserve asset diversification, and risk management. These requirements are to be tailored to the business model and risk profile of issuers and should not exceed what is necessary for ongoing operations. Existing capital standards for depository institutions are modified to avoid requiring excess capital for stablecoin activities.
Section 4(a)(5)
AML/CFT and Sanctions Compliance
Permitted payment stablecoin issuers are treated as financial institutions under the Bank Secrecy Act, subjecting them to all federal laws regarding economic sanctions, anti-money laundering (AML), customer identification, and due diligence. This includes maintaining effective AML and sanctions compliance programs, record retention, and suspicious transaction reporting.
Section 4(a)(11)
Prohibition on Interest or Yield for Stablecoin Holders
Permitted and foreign payment stablecoin issuers are prohibited from paying any form of interest or yield (cash, tokens, or other consideration) to holders solely for holding, using, or retaining the payment stablecoin.
Section 4(a)(12)
Restrictions on Non-Financial Public Companies Issuing Stablecoins
Public companies not predominantly engaged in financial activities, and their subsidiaries, cannot issue payment stablecoins unless the Stablecoin Certification Review Committee unanimously finds no material risk to the U.S. banking system, financial stability, or the Deposit Insurance Fund. Such companies must also comply with data use limitations and tying prohibitions. Similar restrictions apply to non-U.S. domiciled companies.
Section 4(c)
State-Level Regulatory Option and Certification
State qualified payment stablecoin issuers with less than $10 billion in outstanding stablecoins can opt for State-level regulation if the State regime is "substantially similar" to the Federal framework. States must certify their regimes to the Stablecoin Certification Review Committee, which reviews and approves or denies certifications.
Section 4(d)
Threshold for Federal/Joint Oversight
State qualified payment stablecoin issuers exceeding $10 billion in outstanding stablecoins must transition to federal or joint federal-state oversight within 360 days or cease new issuance. A waiver from this transition is possible based on specific criteria (capital, operations, state regulator experience, supervisory framework) and requires a finding by clear and convincing evidence that the state regime is insufficient or poses significant risk.
Section 11
Stablecoin Holder Priority in Insolvency
In insolvency proceedings, payment stablecoin holders have priority claims, on a ratable basis, over other creditors with respect to the required payment stablecoin reserves. If reserves are insufficient, remaining claims have first priority over any other claims against the estate, including administrative expenses, to the extent additional reserves should have been maintained. The automatic stay in bankruptcy is modified to allow for timely redemption of stablecoins from reserves.
Section 17
Exclusion of Payment Stablecoins from Securities and Commodities Definitions
This section amends the Investment Advisers Act of 1940, Investment Company Act of 1940, Securities Act of 1933, Securities Exchange Act of 1934, Securities Investor Protection Act of 1970, and Commodity Exchange Act to explicitly state that a payment stablecoin issued by a permitted payment stablecoin issuer is not a "security" or a "commodity." It also excludes permitted payment stablecoin issuers from the definition of an "investment company."
Section 18
Foreign Issuer Reciprocity and Registration
Foreign payment stablecoin issuers can operate in the U.S. if their home country's regulatory regime is comparable to the GENIUS Act (as determined by Treasury), they register with the Comptroller, hold sufficient U.S. reserves, and are not from sanctioned or high-risk AML jurisdictions. The Secretary of the Treasury can establish reciprocal arrangements.
The Secretary of the Treasury can issue regulations for limited safe harbors from the general prohibition on non-permitted stablecoin issuance, specifically for de minimis transactions or under unusual and exigent circumstances. For the latter, a justification must be submitted to Congress.
Section 3(c)
Why it matters:This is standard legislative practice for providing executive flexibility in unforeseen circumstances or for minor, non-material activities.
Case for: Proponents argue this provides necessary flexibility for the Treasury to adapt to evolving market conditions or address minor issues without requiring new legislation, ensuring the regulatory framework remains practical.
Case against: Critics might argue that such broad discretionary authority, even if limited, could be used to create exceptions that undermine the primary intent of the bill or create avenues for regulatory arbitrage.
Estimated impact: Potentially significant, depending on how "de minimis" is defined or how "unusual and exigent circumstances" are invoked, could affect market scope.
Explicitly states that payment stablecoins are not backed by the full faith and credit of the U.S. or subject to federal deposit/share insurance. It makes it unlawful to represent them as such and imposes penalties for misrepresentation and for marketing products as payment stablecoins if not issued under this Act.
Section 4(e)
Why it matters:This is a crucial consumer protection and clarity provision, often placed within the operational sections to ensure compliance.
Case for: Proponents argue this is vital for consumer protection, preventing misleading claims that could create false senses of security and ensuring market participants understand the true nature of stablecoins.
Case against: No specific opposition is typically raised against preventing misrepresentation, as it aligns with general consumer protection principles.
Estimated impact: Significant for consumer trust and market integrity, preventing potential financial losses due to misunderstanding.
Requires persons providing custodial services for stablecoin reserves, collateral, or private keys to be regulated by a federal or state financial regulator. Mandates customer property treatment, segregation from the custodian's assets (with specific exceptions for omnibus accounts), and grants customer claims priority over other creditors.
Section 10
Why it matters:This is a critical operational detail for ensuring the safety of stablecoin reserves, but its technical nature means it's often placed in a dedicated section rather than being part of the main policy overview.
Case for: Proponents argue this provision is essential for safeguarding customer assets, preventing commingling, and ensuring that reserves are protected in the event of a custodian's insolvency, thereby enhancing trust in the stablecoin ecosystem.
Case against: Some might argue that the strict segregation and regulatory requirements for custodians could increase operational costs, potentially limiting the number of eligible custodians or increasing fees for stablecoin issuers.
Estimated impact: Significant for the security and integrity of stablecoin reserves, directly impacting the risk profile for both issuers and holders.