# What the GENIUS Act means for stablecoin issuers

> The GENIUS Act, signed into law on 18 July 2025, sets binding rules for anyone who wants to issue a payment stablecoin for US persons: mandatory licensing through one of three pathways, 100% reserve backing with a defined asset list, monthly public disclosures examined by a registered accountant, timely redemption procedures, and an explicit prohibition on paying holders interest. Existing issuers have a transition period; new entrants must comply from launch.

7 min read · Updated 2026-06-09 · Topic: regulation

Canonical: https://tempo.dataos.so/articles/genius-act-stablecoin-issuers

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:

1. It operates under a **comparable foreign regulatory regime** (as determined by the Treasury Secretary)
2. It **registers with the OCC**
3. It maintains **US reserves** sufficient to meet customer liquidity demand
4. It has no exposure to **sanctioned jurisdictions**
5. 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](/articles/genius-act-vs-mica).

## FAQ

**Which stablecoin issuers are affected by the GENIUS Act?**

Any person or entity that issues a payment stablecoin intended for use by US persons is covered, regardless of where the issuer is incorporated. Domestic issuers must be licensed through one of the three permitted-issuer pathways. Foreign issuers may serve US persons through registered intermediaries only if they meet equivalence and registration conditions set by the OCC and Treasury.

**What assets can a GENIUS Act-compliant reserve hold?**

US currency, demand deposits at FDIC-insured banks, US Treasury securities with maturities of 93 days or less, overnight repurchase agreements backed by short-term Treasuries, and qualifying money market funds investing in those assets. Tokenized versions of approved assets are also permitted. Crypto-assets and other securities are explicitly prohibited.

**How often must issuers report their reserves?**

Monthly. Issuers must publish reserve composition reports on their websites each month, examined by a registered public accountant. Officers must certify accuracy to the relevant regulator. Issuers with more than $50 billion in outstanding stablecoins (if not publicly traded) must additionally file annual audited financial statements under GAAP.

**Can a stablecoin issuer pay users yield under the GENIUS Act?**

No. The Act explicitly prohibits issuing-entity payments of interest or yield to holders solely in connection with holding, using, or retaining a payment stablecoin. Issuers earn the yield on reserves; holders do not. Users can earn yield separately through third-party lending or DeFi protocols, but the token itself cannot bear interest.

**What is the state vs. federal pathway choice for issuers?**

Issuers with $10 billion or less in outstanding stablecoins may operate under a state licensing framework certified as substantially similar to federal standards by the Stablecoin Certification Review Committee. Above $10 billion, federal oversight is required unless the issuer obtains a waiver. The federal route — OCC approval as a nonbank issuer or bank-subsidiary charter — carries no size cap.

## Sources

1. [S.1582 — GENIUS Act, 119th Congress — Congress.gov](https://www.congress.gov/bill/119th-congress/senate-bill/1582)
2. [Gibson Dunn — The GENIUS Act: A New Era of Stablecoin Regulation](https://www.gibsondunn.com/the-genius-act-a-new-era-of-stablecoin-regulation/)
3. [Mayer Brown — GENIUS Act Signed into Law](https://www.mayerbrown.com/en/insights/publications/2025/07/genius-act-signed-into-law-us-enacts-federal-stablecoin-legislation)
4. [White House Fact Sheet: President Trump Signs GENIUS Act](https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-signs-genius-act-into-law/)
5. [Morgan Lewis — GENIUS Act Passes in US Congress: A Breakdown](https://www.morganlewis.com/pubs/2025/07/genius-act-passes-in-us-congress-a-breakdown-of-the-landmark-stablecoin-law)

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