What Is the GENIUS Act and How Does It Relate to Stablecoins?
What is the GENIUS Act and how does it relate to stablecoins? The GENIUS Act is a US federal law signed in July 2025 that establishes the first comprehensive regulatory framework for payment stablecoins in the United States. The effective date is the earlier of January 18, 2027 or 120 days after federal regulators finalize implementing regulations, whichever comes first. It requires 1:1 reserve backing in cash, deposits, or short-term US Treasuries; monthly attestations certified by issuer executives; and licensing through the OCC, Federal Reserve, or approved state regulators. |
Historically, stablecoin issuers in the US operated under a patchwork of state money transmitter licenses and state banking charters, without a uniform federal standard for reserve composition, attestation, consumer protection, or comprehensive supervision.
The GENIUS Act will change that.
This post explains what the GENIUS Act is, what it requires, and what it means for stablecoin issuers and the institutions that use them.
What is the GENIUS Act?
The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act was signed into US law in July 2025. It is the first comprehensive federal statute governing payment stablecoins in the United States and is expected to be in full effect by January 2027.
The law applies to “payment stablecoins,” defined as digital assets designed to maintain a stable value relative to a fiat currency, redeemable on demand, and used or intended for use as a means of payment.
Algorithmic stablecoins, asset-referenced tokens, and stablecoins not designed for payment are outside the scope of the GENIUS Act's primary requirements.
What the GENIUS Act requires
The GENIUS Act establishes requirements across five areas:
Reserve composition: Payment stablecoin issuers must maintain 1:1 reserves in cash, deposits at federally insured depository institutions, US Treasury bills with a maturity of 93 days or less, repurchase agreements with a maturity of 7 days or less collateralized by Treasury bills with maturities of 90 days or less, shares in SEC-registered money market funds investing in the above, or deposits at Federal Reserve Banks.
Reserve verification: Monthly attestations must be conducted by a Public Company Accounting Oversight Board (PCAOB)-registered public accounting firm. The issuer’s CEO and CFO must personally certify the accuracy of reserve disclosures.
Annual reporting: Issuers with more than $50 billion in outstanding stablecoins must publish annual audited financial statements.
Redemption: Holders must be able to redeem payment stablecoins at par. Fees, if any, must be disclosed in advance. Any changes to redemption terms require 7 days’ notice.
Consumer protection in insolvency: In any bankruptcy or insolvency proceeding, stablecoin reserves are excluded from the issuer’s estate and stablecoin holders receive a super-priority claim to those reserves.
Who can issue stablecoins under the GENIUS Act
The GENIUS Act defines a set of permitted payment stablecoin issuers:
Federally chartered banks: Including national banks and federal savings associations.
Credit union subsidiaries: Operating under applicable federal credit union law.
OCC-chartered nonbank issuers: National trust banks chartered by the OCC specifically for stablecoin issuance.
State-licensed payment stablecoin issuers: Issuers with $10 billion or less in outstanding stablecoins, subject to state frameworks that meet or exceed the GENIUS Act's standards.
Issuers above the $10 billion threshold must transition to federal oversight or receive an exemption to continue operating under state oversight, otherwise it must cease stablecoin issuance. Foreign issuers may serve US customers only if they operate under a comparable foreign regulatory framework recognized by US regulators.
What the GENIUS Act changed
Before the GENIUS Act, stablecoin issuers in the US operated under one of three models:
State money transmitter licenses: Permitted the transfer of funds but imposed no specific requirements for stablecoin reserve composition, attestation, or redemption.
State banking charters: States such as New York through NYDFS applied banking-level standards, including capital, reserve, and consumer protection requirements.
Federal banking charters: A small number of issuers obtained OCC trust charters, but no federal law specifically required or defined stablecoin issuance standards.
The GENIUS Act replaced this patchwork with a single federal standard for issuers, while establishing a minimum floor for smaller issuers operating at the state level. For the first time, reserve composition, attestation methodology, redemption rights, and insolvency protections for payment stablecoin holders are defined in federal law.
Key GENIUS Act provisions at a glance
Provision | Requirement |
Reserve composition | Cash, insured deposits, T-bills (<=93-day), repos (<=7-day on T-bills <=90-day), approved MMFs, or Fed deposits |
Reserve verification | Monthly attestation by PCAOB-registered firm; CEO/CFO certification |
Annual reporting | Audited financials required for issuers above $50B in outstanding stablecoins |
Permitted issuers | Federal banks, credit union subsidiaries, OCC-chartered nonbanks, state-licensed entities (under $10B) |
Federal oversight threshold | Required at $10B in outstanding stablecoins |
Redemption | At par; fees disclosed; 7-day notice required for changes |
Insolvency protection | Super-priority claim for holders; reserves excluded from bankruptcy estate |
Foreign issuers | Must operate under comparable framework recognized by US regulators |
What the GENIUS Act does not cover
Algorithmic stablecoins: Stablecoins that maintain their peg through algorithmic mechanisms rather than fiat reserves are not classified as payment stablecoins under the Act.
Securities or investment products: Tokens structured as securities are regulated by the SEC, not under the GENIUS Act.
Crypto assets generally: The GENIUS Act does not apply to Bitcoin, Ethereum, or other non-stablecoin digital assets.
Stablecoin trading platforms: Exchanges and trading venues that list stablecoins are regulated under separate frameworks.
Why this matters
The GENIUS Act resolved a significant regulatory gap.
Before it, there was no federal standard for what a US-issued payment stablecoin must hold in reserves, how those reserves must be verified, or what rights holders have in an insolvency. Those gaps created uncertainty for issuers, financial institutions, and users.
The GENIUS Act establishes a clear floor: licensed issuers, 1:1 reserves in high-quality assets, monthly independent attestation, and enforceable redemption rights. It does not resolve every open question in stablecoin regulation, but it defines the minimum standard for payment stablecoins in the US.
Where Paxos fits
Paxos was issued a national trust charter from the OCC in December of 2025, and qualifies as a permitted payment stablecoin issuer under the GENIUS Act. PayPal’s PYUSD is issued under such supervision and adheres to the same standards that will be in place once the GENIUS Act is in effect. Paxos maintains 1:1 reserves in cash and US Treasury bills, conducts monthly independent attestations, and provides holders with enforceable redemption rights.
If you're interested in offering blockchain and digital asset solutions to your customers, Paxos can help. Contact us to learn more.
Related: How Are Stablecoins Regulated in the US and Globally?
Related: What Does "Fully Backed" Actually Mean for a Stablecoin?
This post is provided for informational purposes only and does not constitute legal advice. Readers should consult their own legal counsel regarding any legal matters or requirements relevant to their specific situation. Paxos makes no representations or warranties regarding the legal accuracy, completeness, or suitability of the information contained herein.
