Before the GENIUS Act, stablecoin issuers in the United States operated in a fragmented regulatory landscape: some held state money-transmitter licenses, some held bank charters, and a few operated with no US license at all, relying on the lack of a clear federal framework. That changed on 18 July 2025, when the Act was signed into law. It is now the governing statute for any payment stablecoin issued to US persons.
This article is written for issuers — existing and prospective — who need to understand what the law requires of them.
Who counts as an issuer under the GENIUS Act
The Act defines a payment stablecoin as a digital asset designed to be used for payment or settlement that an issuer must redeem for a fixed monetary value — effectively, any fiat-pegged token with a hard redemption commitment. "Issuer" means any person that creates and is responsible for the redemption of such a stablecoin.
The statute is explicit that only permitted issuers may issue payment stablecoins for use by US persons. Unauthorized issuance is a violation; so is operating as a US digital-asset service provider that knowingly offers a non-permitted stablecoin to US users.
Three pathways to becoming a permitted issuer
1. Subsidiary of an insured depository institution
A bank holding company may charter a subsidiary specifically to issue payment stablecoins. The subsidiary operates under the supervision of the bank's federal or state chartering authority. This is the fastest route for existing banks: it draws on an established regulatory relationship and an existing charter rather than requiring a new one.
2. Federally qualified nonbank issuer (OCC pathway)
Non-bank companies — fintech firms, existing stablecoin issuers without bank charters — may apply directly to the Office of the Comptroller of the Currency (OCC) for approval as a federal payment stablecoin issuer. This is the primary pathway for entities like Circle, which already holds a stablecoin issuer license under New York's BitLicense framework and various state money-transmitter licenses, but operates at a scale that now requires federal licensing.
The OCC's approval standards, application process, and ongoing supervisory expectations are subject to rulemaking that was in progress as of mid-2026. Issuers on this pathway should monitor OCC regulatory guidance.
3. State-qualified issuer (SCRC-certified framework)
States may develop their own stablecoin licensing frameworks. If the Stablecoin Certification Review Committee — chaired by the Treasury Secretary and including the OCC Comptroller, the Fed Chair, and the FDIC Chair — certifies a state framework as "substantially similar" to federal standards, issuers licensed under that state may operate as permitted issuers.
States with existing digital-asset licensing regimes (New York's DFS, Wyoming's SPDI charter, and others) receive expedited SCRC review within 180 days of enactment. The catch: state-pathway issuers are capped at $10 billion in outstanding stablecoins. Issuers that grow beyond that threshold must transition to federal oversight or obtain a waiver.
Reserve composition: the full rulebook
Every permitted issuer must maintain a reserve equal to 100% of outstanding stablecoins at all times. The qualifying assets are:
| Permitted reserve asset | Notes |
|---|---|
| US currency | Physical cash or central-bank deposits |
| Demand deposits | At FDIC-insured depository institutions; includes correspondent-bank deposits |
| Treasury securities | Maturity of ≤93 days at purchase |
| Overnight repurchase agreements | Backed by short-term Treasuries |
| Qualifying money market funds | Investing in the above assets |
| Tokenized versions | Of any approved asset class |
What may not be held in reserve:
- Cryptocurrencies (including Bitcoin, Ether, or other stablecoins)
- Equities or corporate bonds
- Any security not explicitly permitted
How reserves may not be used:
Reserves may not be pledged, rehypothecated, or reused for any purpose other than meeting redemption requests, satisfying margin obligations, providing custodial services, or creating liquidity to meet redemption demand. This prohibition on rehypothecation is a hard line — issuers cannot generate additional revenue by lending out reserves.
Disclosure obligations: monthly reports
Issuers must publish a monthly reserve report on their website. Each report must disclose:
- Total outstanding stablecoins
- Total reserve assets and their composition by asset class
- Average maturity of reserve instruments
- Geographic custody location
Each report must be examined by a registered public accounting firm — not merely an internal attestation, but an independent accountant's review. Officers must certify the accuracy of the report to the relevant federal or state regulator.
Issuers with more than $50 billion in outstanding stablecoins (if not publicly traded) must go further: annual audited financial statements prepared in accordance with GAAP, filed with regulators. This provision applies to any issuer at Tether's scale.
Redemption rights and fee disclosures
Issuers must establish and publicly disclose procedures for timely redemption in plain language. The Act does not specify an exact number of business days — "timely" is the standard — leaving that detail to rulemaking or individual issuer policy, subject to regulatory review.
Any change to redemption fees requires at least seven days' prior notice to holders. Surprise fee increases are prohibited.
The interest prohibition
The GENIUS Act contains an explicit provision: issuers may not pay holders any form of interest or yield solely in connection with holding, using, or retaining a payment stablecoin. This applies to the token itself — it does not prevent a holder from earning yield by separately lending stablecoins through DeFi protocols or third-party products.
The practical effect is that payment stablecoins remain non-interest-bearing instruments. The yield on the reserve assets — the income from Treasury bills and repo agreements that backs each token — belongs to the issuer. For large issuers like Circle and Tether, reserve income is the primary revenue source.
This prohibition draws a clear line between payment stablecoins and bank deposits, which do pay interest. It is a deliberate design choice: Congress wanted to avoid creating unregulated deposit substitutes that could destabilize the banking system.
AML and sanctions compliance
All permitted issuers are explicitly subject to the Bank Secrecy Act. This means:
- A written AML/BSA compliance program
- Customer identification and due diligence (CIP/KYC)
- Suspicious activity reporting (SARs) to FinCEN
- Sanctions screening against OFAC lists
- Record-keeping obligations
FinCEN is authorized under the Act to issue guidance and risk standards specific to stablecoin issuers, and to monitor innovation in illicit-activity detection.
Foreign issuers: the registration route
Foreign-incorporated issuers are not automatically prohibited from serving US persons, but they cannot do so by directly issuing into the US market without going through the permitted-issuer pathways above.
A foreign issuer may continue to reach US persons through US-licensed digital-asset service providers if it satisfies five conditions:
- It operates under a comparable foreign regulatory regime (as determined by the Treasury Secretary)
- It registers with the OCC
- It maintains US reserves sufficient to meet customer liquidity demand
- It has no exposure to sanctioned jurisdictions
- It complies with US asset-seizure orders
An issuer that fails these conditions — or is designated by Treasury as non-compliant — may be publicly named, barred from US platforms, and subject to civil penalties of up to $1 million per day for US persons who knowingly deal in its tokens.
Transition timeline
The GENIUS Act was signed on 18 July 2025. Detailed rulemaking by the OCC, Federal Reserve, Treasury, and FinCEN was in process as of mid-2026. Key pending items include:
- OCC application standards and approval criteria for federal nonbank issuers
- Treasury determination of which foreign regimes count as "comparable"
- FinCEN's AML risk standards for stablecoin issuers
- The insolvency study regulators must complete within three years of enactment
Issuers operating in the US should monitor OCC and FinCEN guidance closely through the second half of 2026.
The bottom line
The GENIUS Act converts what was an implicit set of expectations — back your tokens, disclose your reserves, screen for sanctions — into legally binding requirements with a specific licensing architecture. For established issuers like Circle (USDC) and PayPal (PYUSD), the requirements largely codify practices already in place. For newer issuers or foreign issuers serving US persons, the licensing decision and reserve restructuring are the immediate priorities. For a head-to-head comparison of GENIUS Act and MiCA issuer obligations, see GENIUS Act vs MiCA.