The GENIUS Act is the first federal law in the United States to regulate stablecoins — the dollar-pegged tokens like USDC and USDT that crypto traders use to move money without cashing out to a bank. Signed on July 18, 2025, it requires any company issuing a US payment stablecoin to hold full 1-to-1 reserves in cash or short-term Treasuries, publish monthly reserve reports, and register with a federal or state regulator — while banning issuers from paying interest to holders.

Key takeaways

  • GENIUS stands for the Guiding and Establishing National Innovation for US Stablecoins Act, signed into law by President Trump on July 18, 2025.
  • It requires 1-to-1 reserves in cash, insured deposits and short-dated Treasuries for every stablecoin in circulation, with monthly public attestations.
  • Issuers must be licensed through one of three routes — a federal OCC charter, a certified state regime, or a foreign-issuer registration — depending on size.
  • Stablecoin issuers are banned from paying interest or yield directly to holders, which is why exchanges route “rewards” through separate programs instead.
  • As of August 2026, regulators have missed the July 18, 2026 rulemaking deadline; the law becomes fully binding on the earlier of 120 days after final rules or January 18, 2027.

Why the GENIUS Act exists

Before 2025, stablecoins operated in a regulatory gap. Tether and Circle issued hundreds of billions of dollars in dollar-pegged tokens with no single federal law dictating what had to back them, who could issue them, or how reserves were verified — states and self-regulation filled the space unevenly.

The GENIUS Act closes that gap. It was introduced by Senator Bill Hagerty (R-Tenn.), with Senators Kirsten Gillibrand (D-N.Y.), Cynthia Lummis (R-Wyo.) and Angela Alsobrooks (D-Md.) as lead co-sponsors, passed both chambers of Congress, and was signed into law on July 18, 2025. It is the first comprehensive federal stablecoin statute — read the full bill text on Congress.gov. The goal, as stated by its sponsors, is to give payment stablecoins a legal foundation solid enough for banks, retailers and payment networks to build on, while protecting holders from a reserve collapse like the one that wiped out the algorithmic stablecoin TerraUSD in 2022.

What the GENIUS Act actually requires

The law’s core mechanism is a strict backing rule: every “permitted payment stablecoin issuer” must hold reserves equal to 100% of the tokens it has issued, made up only of US dollars, insured bank deposits, short-dated Treasury bills, and overnight repurchase agreements collateralised by Treasuries. Riskier assets — corporate bonds, equities, other cryptocurrencies — cannot count as backing.

Issuers must publish the composition of those reserves on their website every month, and the report has to be examined by a registered public accounting firm, with the issuer’s CEO and CFO personally certifying its accuracy. The law also treats permitted issuers as “financial institutions” under the Bank Secrecy Act, which pulls in anti-money-laundering programs, customer identification checks, and sanctions-compliance obligations that previously varied issuer by issuer.

Who is allowed to issue a stablecoin

The GENIUS Act sorts issuers into three licensing categories rather than opening the field to anyone. A permitted payment stablecoin issuer is a bank subsidiary or a nonbank that obtains a limited federal charter from the Office of the Comptroller of the Currency (OCC) — in December 2025 the OCC conditionally approved the first five national trust bank charters under this track. A state-qualified issuer can operate under a state regime the Treasury certifies as “substantially similar” to the federal standard, an option aimed at smaller issuers. A foreign payment stablecoin issuer can reach US customers only if its home jurisdiction’s rules are judged comparable and it registers with US authorities.

Size decides which door matters most: issuers with more than $10 billion in stablecoins outstanding must operate under full federal supervision, while smaller issuers can rely on the certified state track. That threshold effectively targets the market’s two dominant players, Circle’s USDC and Tether’s USDT, which together account for the large majority of stablecoin supply. We covered how that reserve requirement turns issuers into major buyers of government debt in how the GENIUS Act steers stablecoins into US Treasury debt.

Why stablecoin issuers can’t pay you interest

The most consumer-facing rule in the GENIUS Act is also the least publicised: a compliant US payment stablecoin issuer is legally barred from paying interest or yield directly to token holders. The issuer earns the return on its Treasury-bill reserves; the holder earns nothing from the token itself.

That single provision reshapes how exchanges and issuers compete. Rather than paying yield on a stablecoin balance directly, platforms have shifted to separate “rewards” programs, brokerage-style interest accounts, or yield-bearing products that sit legally apart from the stablecoin itself — a distinction that matters if you’re comparing “yield-bearing stablecoins” marketed to retail users. It also means the pitch that stablecoins pass Treasury income back to ordinary holders is, for GENIUS-compliant tokens, not how the law works.

What happens if you hold USDC, USDT or another stablecoin

For most holders, the immediate practical effect is limited — a fully reserved, monthly-audited stablecoin from a licensed issuer should behave exactly like the dollar-pegged token you already use. The bigger question is which tokens end up licensed at all. Once the law is fully in force, stablecoins that don’t fit one of the three permitted categories will need to restructure, exit the US market, or convert to a compliant structure.

There’s also a control trade-off worth understanding: a stablecoin balance is a database entry the issuer administers, not physical cash. Issuers like Tether have frozen wallets and complied with law-enforcement and sanctions requests before, and GENIUS-compliant issuers inherit the same technical ability. That’s the reason self-custodied assets are frequently cited as a hedge against issuer-level control — our guide to self-custody and wallet basics walks through the trade-offs.

Where the rulemaking stands as of August 2026

The GENIUS Act gave regulators — the OCC, the Federal Reserve, the FDIC, and Treasury’s FinCEN and OFAC — one year from enactment, until July 18, 2026, to finish the detailed rules implementing the law. That deadline has passed without a complete, final rulebook: the OCC published its core proposal in February 2026, and Treasury issued a follow-up anti-money-laundering proposal on June 22, 2026, with agencies requesting comment on customer-identification requirements through August 21, 2026.

Missing the deadline doesn’t switch the law off. The GENIUS Act becomes fully effective on whichever comes first: 120 days after final rules are published, or January 18, 2027, 18 months after enactment. We track what that means for issuers in GENIUS Act deadline: what July 18 means for stablecoins. Until the rules are locked in, “GENIUS-compliant” claims from issuers are marketing statements rather than confirmed regulatory status.

Frequently asked questions

What does GENIUS Act stand for?

GENIUS is short for the Guiding and Establishing National Innovation for US Stablecoins Act. It’s the first federal law in the United States specifically regulating payment stablecoins — dollar-pegged digital tokens like USDC and USDT — and was signed into law on July 18, 2025.

What does the GENIUS Act require stablecoin issuers to do?

Issuers must back every token 1-to-1 with cash, insured bank deposits or short-dated US Treasuries, publish monthly reserve reports certified by their CEO and CFO, and register under one of three licensing tracks depending on how large they are. They must also comply with anti-money-laundering and sanctions rules as regulated financial institutions.

Does the GENIUS Act let stablecoins pay interest?

No. The law explicitly bans permitted payment stablecoin issuers from paying interest or yield directly to holders. Issuers keep the return earned on their reserve assets, which is why “yield-bearing” stablecoin products are typically structured as separate accounts or rewards programs rather than interest on the token itself.

Is the GENIUS Act fully in effect yet?

Not entirely. Regulators missed the July 18, 2026 deadline to finalise implementing rules. The law becomes fully effective on the earlier of 120 days after those rules are published or January 18, 2027, so as of August 2026 the licensing and reserve requirements are still being phased in.

Sources

This article is educational and not investment, legal or tax advice. Do your own research.