Congress Moves Forward on Stablecoin Legislation: The US Senate Banking Committee Approves the GENIUS Act

On March 13, 2025, the US Senate Banking Committee passed the Guiding and Establishing National Innovation for US Stablecoins Act of 2025 or “GENIUS Act,” out of committee by a vote of 18-6.

The legislation would establish for the first time a comprehensive regulatory framework for the issuance and regulation of payment stablecoins in the United States. Due to the strong bipartisan vote the bill received in committee, the bill is well positioned to be approved by the full Senate. Further, US House Financial Services Committee Chair French Hill (R-AR) has already signaled his intention to move forward with a similar proposal, the STABLE Act, and President Donald Trump has indicated he wants to sign payment stablecoin legislation. Accordingly, payment stablecoin legislation is poised to be enacted into law later this year.

In this Legal Update, we answer key questions about the GENIUS Act.

What is a Payment Stablecoin?

The GENIUS Act would define a payment stablecoin as a digital asset that is or is designed to be used as a means of payment or settlement if: (i) the issuer is obligated to convert, redeem, or repurchase for a fixed amount of monetary value; (ii) it will maintain a stable value relative to the value of a fixed amount of monetary value; and (iii) it is not a national currency, bank deposit, interest-bearing instrument, or a security under federal securities laws (other than by virtue of being a bond, note, evidence of indebtedness, or investment contract).

Who can Issue Payment Stablecoins?

To qualify as a permitted payment stablecoin issuers, a person would have to incorporate in the US and then be either:

• A federal qualified nonbank payment stablecoin issuer that have been approved by the Office of the Comptroller of the Currency (OCC) pursuant to terms set forth in the Act.
• A subsidiary of an insured depository institution that has been approved by the depository institution’s primary federal regulator (e.g., the Board of Governors of the Federal Reserve System (“Federal Reserve”) for state member banks) pursuant to terms set forth in the Act.
• A state qualified payment stablecoin issuer that have been approved by a state payment stablecoin regulator.

What are the Requirements for Becoming a Permitted Payment Stablecoin Issuer?

The Act sets forth the terms by which federal banking regulators can approve a person to become a permitted payment stablecoin issuer. These include that the applicant demonstrates its financial condition and appropriate resources, provides background information on officers, directors and principal shareholders, and satisfies any other relevant safety and soundness factors established by the federal banking regulators.

A federal regulator would have no more than 120 days to issue a decision on an application and could deny an application if it determined that the activities of the applicant would be unsafe or unsound based on its ability to satisfy the prudential requirements discussed below.

What are the Benefits of Becoming a Permitted Payment Stablecoin Issuer?

The issuance of payment stablecoins in the US would be restricted to the three types of permitted payment stablecoin issuers indicated above. Although a payment stablecoin that is not issued by a permitted payment stablecoin issuer still could be owned and sold in the US, the GENIUS Act would prohibit it from being treated as cash or a cash equivalent for accounting, securities margin, or derivatives purposes, or used as a settlement asset for wholesale payments between banking organizations or by payment infrastructure for settlement among banking organizations. These limitations will create strong incentive for payment stablecoin issuers to become permitted payment stablecoin issuers in the United States. However, even an unlicensed, non-US payment stablecoin issuer must comply with a US court order or agency action. Such orders and actions could direct the non-US issuer to seize, freeze, burn, or prevent the transfer of a payment stablecoin.

Further, under the GENIUS Act, the Treasury Department may determine that a non-US issuer (that is not a permitted payment stablecoin issuer) of any payment stablecoins trading in the United States has failed to comply with a court order or agency action. If the foreign issuer does not come into compliance with the order or action, then the Secretary of the Treasury may issue a notice prohibiting digital asset service providers from facilitating secondary trading of the foreign issuer’s payment stablecoins in the United States. This would effectively block the non-US issuer from having US customers own or trade its payment stablecoins.

What are the Requirements for Issuing Payment Stablecoins?

Payment stablecoin issuers would be required to comply with several standards for the issuance of payment stablecoins. These include:

• Reserves. Issuers would be required to maintain reserves backing their payment stablecoins on at least a 1:1 basis. Acceptable reserves would include US coins and currency, deposits with Federal Reserve Banks, demand deposits at insured depository institutions, Treasury bills, notes, or bonds with a maturity of 93 days or less, certain repurchase agreements, reverse repurchase agreements, and money market funds. Reserves could be tokenized or held in their “natural” form.
  • However, the GENIUS Act explicitly states that the requirement to maintain reserves does not mean a payment stablecoin issuer would or would not be eligible for a Master Account at a Federal Reserve Bank.
• Public Reserves Disclosure. Monthly disclosures of the composition of reserves, including the total number of outstanding payment stablecoins and the amount and composition of the reserves, would need to be published on the issuer’s website. A payment stablecoin issuer’s public reserve disclosure would need to be examined on a monthly basis by a registered public accounting firm, and the CEO and CFO of the issuer would need to certify the accuracy of the disclosure to the relevant federal or state regulator. Payment stablecoin issuers that have more than $50 billion in consolidated total outstanding issuance and are not SEC reporting companies would be required to obtain an annual audit of their financial statements (which must cover related party transactions) and disclose that information on their website and to their primary federal banking regulator.
• Redemption Procedures and Disclosure. Issuers would be required to establish procedures for timely redemption of outstanding payment stablecoins and publicly disclose their redemption policy.

Payment stablecoin issuers generally would be prohibited from pledging, rehypothecating, or reusing reserves, except for satisfying related margin or custody services obligations or creating liquidity to meet redemption requests. Issuers also would be prohibited from conditioning their payment stablecoin services on a customer’s agreement to obtain another paid service from the issuer (or its affiliates) or abstain from obtaining service from a competitor.

Payment stablecoin issuers also would need to comply with appropriate capital, liquidity, reserve asset diversification, and interest rate risk management requirements, as well as appropriately tailored operational, compliance, and information technology risk management standards. The capital requirements would not be subject to the limitations of the Dodd-Frank Act’s Collins Amendment, which prohibits regulators from setting lower capital standards than were in effect for banks in 2010.

How are Non-Stablecoin Activities Regulated

Similar to banks and bank holding companies, the non-stablecoin-related businesses of a payment stablecoin issuer would be restricted. Specifically, a payment stablecoin issuer would be permitted to only: (i) issue and redeem payment stablecoins; (ii) manage reserves related to the payment stablecoins; (iii) provide custodial and safekeeping services related to payment stablecoins; and (iv) undertake other functions that directly support the work of issuing and redeeming payment stablecoins. However, a payment stablecoin issuer’s regulator could authorize it to engage in other activities. The holding company of a payment stablecoin issuer and “sister” affiliates would not be restricted with respect to their business activities or relationships.

Who Supervises Permitted Payment Stablecoins Issuers?

Federal qualified nonbank payment stablecoin issuers would be regulated and supervised exclusively by the OCC, the current supervisor of national banks. A federal qualified nonbank payment stablecoin issuer would be required to submit quarterly financial condition and compliance reports and undergo examination by the OCC. The OCC would have exclusive regulatory and supervisory authority over a federal qualified nonbank payment stablecoin issuer. This may indicate that state licensing requirements, such as money transmitter and trust company laws, would be preempted for federal qualified nonbank payment stablecoin issuers.

Payment stablecoin issuers that are subsidiaries of insured depository institutions would be regulated and supervised by the federal regulator of the insured depository institution (e.g., Federal Reserve, with respect to subsidiaries of state member banks).

Payment stablecoin issuers with consolidated total outstanding issuance of payment stablecoins of $10 billion or less (and which are not a subsidiary of an insured depository institution) could opt to be regulated and supervised under a state stablecoin framework, provided that the state framework is substantially similar to the federal framework. This means that states will need to update their regulatory frameworks as the GENIUS Act is implemented to ensure they reflect the new federal requirements. Further, a state regulator could enter into an agreement with the Federal Reserve to share supervision of that state’s stablecoin issuers with the federal authority.

Payment stablecoin issuers with consolidated total outstanding issuance in excess of $10 billion would be required to directly comply with federal stablecoin regulations unless granted a waiver by a federal banking regulator. State stablecoin issuers that are non-depository institutions would become jointly regulated and supervised by their state regulator and one of the federal banking regulators, but would not need to convert to a federal charter. State stablecoin issuers that are depository institutions would become jointly regulated and supervised by their state regulator and one of the federal banking regulators.

Does the SEC or CFTC have Jurisdiction over Payment Stablecoins?

No. The GENIUS Act would explicitly exclude payment stablecoins from the federal regulatory regimes for securities, commodities, and investment companies. Payment stablecoins would be excluded from the definition of “security” under federal securities laws, the definition of “commodity” in the Commodity Exchange Act, and the definition of an “investment company” under the Investment Company Act.

Do States have Jurisdiction over Payment Stablecoins?

Federal qualified nonbank payment stablecoin issuers would not be subject to state supervision or regulation, which is similar to the treatment of national banks under the National Bank Act. It appears that approved subsidiaries of insured depository institutions would not be subject to state supervision or regulation, although this is not clearly stated in the Act.

For state qualified payment stablecoin issuers, the GENIUS Act would require state regulators to establish criteria for determining whether a state regulatory regime is substantially similar to the federal regulatory framework for stablecoins. States would need to certify on an annual basis to the federal Secretary of the Treasury that their regimes satisfy those criteria. If a state fails to submit an annual certification or the Secretary of the Treasury rejects a certification, then that state’s payment stablecoin issuers would become subject to the federal regulatory framework for stablecoins, regardless of market capitalization.

A payment stablecoin issuer regulated by a state generally would be subject to the consumer protection laws of that state. Other states could impose consumer protection requirements on an out-of-state state-regulated payment stablecoin issuer only to the extent states may impose such requirements on an out-of-state federal qualified nonbank payment stablecoin issuer (i.e., only if the consumer protection requirement would not be preempted by federal law). This preemption provision does not appear to protect a state-regulated payment stablecoin issuer from other states’ money transmitter licensing requirements.

State regulators (and federal regulators) would be able to bring enforcement actions against their payment stablecoin issuers and affiliated parties that are similar to the actions they may bring against analogous insured depository institutions and their affiliated parties.

What are the AML Requirements for Permitted Stablecoin Issuers?

Payment stablecoin issuers would be expressly classified as financial institutions for purposes of the federal Bank Secrecy Act. This would subject them to the full range of anti-money laundering (“AML”) compliance obligations, including customer identification and due diligence, although FinCEN would be required to implement compliance rules that are tailored to the size and complexity of the issuer.

Further, the risk management standards established by federal banking regulators would be required to include AML and sanctions compliance. In particular, payment stablecoin issuers also would be required to have the technological capacity to effectively block a digital asset of a non-US person pursuant to a court order or agency action.

What Happens if a Payment Stablecoin Issuer Fails?

The GENIUS Act would amend the Bankruptcy Code to permit a payment stablecoin issuer that is not a depository institution to be a debtor. This would allow a federal qualified nonbank payment stablecoin issuer, subsidiary of an insured depository institution, or state qualified payment stablecoin issuer that is not a bank or trust company to declare bankruptcy. Stablecoin issuers that are depository institutions, such as banks or trust companies, would be resolved either by the FDIC (for insured depository institutions) or under state insolvency law (for uninsured state-chartered depository institutions).

The GENIUS Act would amend and supersede existing insolvency laws (e.g., Bankruptcy Code) by establishing that a person holding payment stablecoins issued by an insolvent stablecoin issuer would have priority over all other claims against the issuer. This would apply to both insolvencies under federal insolvency laws and state insolvency laws, superseding any state claims priority to the contrary.

What’s the Authority for Banks to Provide Services for Payment Stablecoins?

The Act addresses the provision of banking services for payment stablecoins in two ways.

First, a person would be able to offer custodial or safekeeping services for permitted payment stablecoins or private keys of permitted stablecoins only if (i) the person is supervised or regulated by a federal or state banking regulator, and (ii) the person complies with segregation requirements imposed under federal banking, securities, or derivatives law. Such requirements generally could not include obligations to maintain additional loss reserves or capital for such custodial and safekeeping services (i.e., no reimposition of the Securities and Exchange Commission’s SAB 121).

Second and more broadly, the GENIUS Act would implicitly recognize that a federal or state depository institution, credit union, or trust company has the authority to engage in certain digital asset-related activities, including:

• accepting or receiving deposits and issuing digital assets that represent deposits;
• utilizing a distributed ledger for the books and records of the entity and to affect intrabank transfers; and
• providing custodial services for payment stablecoins, private keys of payment stablecoins, or reserves backing payment stablecoins.

When Would the Bill Become Effective?

If enacted, the GENIUS Act would take effect either 18 months after the date of enactment or 120 days after the date on which a federal banking regulator issues final implementing regulations, whichever is earlier.