The GENIUS Act: A New Federal Framework for Stablecoin Issuers

The GENIUS Act seeks to establish the first comprehensive federal framework for the issuance, regulation and oversight of payment stablecoins in the United States. The bill aims to bring regulatory clarity to a rapidly growing area of digital finance while preserving room for innovation and consumer protection. Vice President Vance, speaking at the 2025 Bitcoin Conference, said the White House endorses the GENIUS Act and that the Act would establish a “clear, pro-growth legal framework” for stablecoins and will “vastly expand the use of stablecoins as a payment system.”

The desire for legislation comes as stablecoins have become mainstream. Circle Internet Financial, one of the largest stablecoin issuers, recently launched on the New York Stock Exchange, vastly outperforming expectations. Circle’s IPO marks a pivotal moment for the stablecoin industry, offering new legitimacy and transparency in the digital asset space. With its listing on the NYSE and backing from major financial institutions, Circle’s move underscores the potential of regulated stablecoins to play a central role in the evolving internet financial system, a development the GENIUS Act aims to support with a clear regulatory framework.

As currently drafted, the Act would restrict stablecoin issuance to certain federally regulated banks, qualified nonbank entities and state-regulated issuers under specified conditions. It imposes strict reserve-backing requirements, mandates regular public disclosures and subjects issuers to anti-money laundering, compliance and consumer protection obligations. The legislation also outlines a dual state-federal regulatory structure designed to accommodate both national and localized oversight.

Overview and Purpose
The GENIUS Act would provide a clear and uniform regulatory framework for the issuance and use of payment stablecoins. Stablecoins are digital assets designed to maintain a stable value relative to a fiat currency, most commonly the U.S. dollar. The legislation reflects a growing recognition that stablecoins are likely to become a permanent part of the financial ecosystem and that a cohesive federal policy is needed to mitigate risks while enabling continued innovation.

The bill’s stated goals include:

• enhancing consumer and investor confidence in stablecoin markets;
• preventing regulatory arbitrage and fragmented oversight across jurisdictions;
• reducing systemic risk by ensuring issuers maintain sufficient reserves and operate within a robust compliance regime; and
• encouraging responsible innovation by providing clear rules of the road for both traditional financial institutions and emerging financial technology companies.

Proponents of the bill contend that a consistent legal structure is necessary to address current regulatory uncertainty, improve market stability and enable broader adoption of stablecoins within the financial system. They argue that the growth of stablecoin markets raises questions around consumer protection, financial oversight and integration with existing payment infrastructure.

Key Provisions
The GENIUS Act sets forth a regulatory framework for payment stablecoins that addresses issuer eligibility, reserve composition, oversight authority and compliance obligations. The following summarizes the core components of the bill as introduced.

Permitted Issuers
Under the current draft, the bill limits stablecoin issuance to entities that meet specific regulatory criteria, emphasizing institutional oversight and risk management.

These include:

• Federally insured depository institutions. Banks and credit unions may issue stablecoins within their existing regulatory frameworks.
• Federally licensed nonbank entities. Nonbank issuers must obtain a specialized license from the Office of the Comptroller of the Currency (OCC).
• State-chartered issuers (under $10B cap): State-supervised issuers may operate under this regime provided their issuance remains below a $10 billion threshold.

Entities that fall outside the permitted categories, including most fintech startups, Decentralized Autonomous Organizations and decentralized protocols, would not be eligible to issue permitted payment stablecoins under the GENIUS framework. The bill does not prohibit the existence of other types of stablecoins, but it limits access to the regulatory benefits and legal recognition provided by the Act.

Reserve-Backing and Transparency Requirements
To promote redemption stability and mitigate financial risk, the bill mandates fully collateralized reserves and public transparency.

The proposed requirements call for:

• 1:1 backing with liquid assets. Stablecoins must be fully backed by U.S. dollars, short-term treasuries or similarly liquid, high-quality assets.
• Monthly public disclosures. Issuers must publish reserve composition and valuation data on a recurring basis.
• Annual independent audits. Issuers are required to undergo annual audits by qualified public accountants.

These provisions are designed to reinforce the credibility and stability of payment stablecoins.

Regulatory Oversight Framework
The bill proposes a tiered oversight model, balancing federal authority with ongoing roles for state regulators.

The oversight structure includes:

• Federal oversight of licensed nonbanks. The OCC would supervise federally licensed stablecoin issuers directly.
• Existing bank supervision preserved. Federally regulated banks would continue to be overseen by their primary regulator.
• State oversight for smaller issuers. State-regulated issuers could operate under their existing frameworks, subject to federal coordination and reporting.
• Targeted federal preemption. The bill allows for limited preemption of state laws that conflict with the federal regime.

This approach aims to create regulatory clarity while accommodating institutional diversity across issuers.

Consumer Protection Measures
The bill introduces safeguards to prevent misleading practices and ensure that end-users receive meaningful information.

These protections require:

• No false representations. Issuers may not imply federal insurance or government backing of their stablecoins.
• Standardized disclosures. Users must be informed about redemption rights, reserve assets and material risks.
• Regulatory authority over advertising. Federal agencies would be empowered to enforce fair marketing and communications standards.

These provisions are intended to reduce consumer confusion and enhance transparency in the stablecoin market.

Compliance and Risk Management
Issuers would be required to meet existing financial crime compliance standards, aligning with broader regulatory expectations.

These standards include:

• Bank Secrecy Act (BSA) compliance. Issuers must register with FinCEN and comply with applicable BSA obligations.
• Anti-money laundering (AML) and sanctions controls. Programs must include customer due diligence, transaction monitoring and sanctions screening.
• Regulatory discretion for additional rules. Federal agencies would retain the authority to issue further compliance-related guidance.

The compliance framework is designed to ensure that stablecoin issuance operates within established anti-financial crime infrastructure.

Anticipated Impacts and Operational Considerations
If enacted in its current form, the GENIUS Act would introduce structural and compliance changes that affect how institutions engage with stablecoins, from issuance and reserve management to regulatory supervision and third-party risk oversight.

Below are key areas where market participants may need to focus:

• Eligibility and Corporate Structure. Nonbank firms interested in issuing stablecoins would need to evaluate whether their current legal and operational structures meet the criteria for federal licensure through the OCC. This may require forming a new legal entity or realigning internal governance for regulatory approval.
• Reserve and Treasury Operations. Institutions planning to issue stablecoins must ensure their reserve assets are fully compliant with the 1:1-backing requirements. Treasury teams may need to shift asset allocation strategies toward highly liquid instruments such as short-term treasuries or central bank deposits.
• Regulatory Supervision and Compliance Risk. Federally regulated banks and licensed nonbanks will face heightened scrutiny, including disclosures, annual audits and possible coordination with multiple regulators. Compliance teams should assess existing AML programs, BSA compliance and readiness for examination under OCC or state oversight.
• Vendor and Infrastructure Due Diligence. Regulated issuers may be expected to apply vendor risk management practices to wallet providers, custodians and payment processors that support stablecoin operations, particularly where those vendors interface with reserves, end-users or transaction processing.
• Product Development and Go-to-Market Strategy. Firms considering new stablecoin products or integrations should factor in longer development timelines, legal review cycles and potential licensing delays. Strategic roadmaps may need to adjust to accommodate regulatory engagement or operational pivots.

As the legislative language continues to evolve, institutions with exposure to digital assets or payment innovation should begin mapping existing business functions against the expected framework—preparing for the possibility of a formal federal regime.

What Happens Next?
As of June 20, 2025, the GENIUS Act has advanced through the Senate following a successful vote on the floor. The act will now proceed to the House, where further debate will take place.

The bill remains subject to amendment in the House of RepresentativesHouse. Key provisions, including those related to issuer eligibility, state-federal oversight dynamics and compliance requirements, may be revised before any final vote. If the House modifies the Act, it will be sent back to the Senate for confirmation.

Pillsbury’s Corporate & Transactional and Global Sourcing & Technology Transactions teams are closely monitoring the legislative process and will provide timely updates as the bill evolves. We are available to help clients assess the potential impact of the GENIUS Act and prepare for a range of outcomes, whether through internal strategy reviews, engagement with regulators or transactional structuring aligned with anticipated federal requirements.