GENIUS Act Stablecoin Law Explained: The Compliance Countdown Has Begun
The 18-month countdown has officially begun.
The GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins) was signed into law by President Trump on July 18, 2025. GENIUS represents the most significant crypto-related legislation in U.S. history. GENIUS redraws the stablecoin landscape: who can issue, how they’re audited, what reserves can be held, and which regulatory pathways are available.
If you're responsible for the compliance function at for a stablecoin issuer, the compliance clock just started ticking.
Make one small slip-up, and you could face fines of $100,000/day.
No license? You’re basically frozen out of the U.S. market.
Your deadline? GENIUS takes full effect on the earlier of 18 months from signing or 120 days after final rules are issued by the Federal regulators.
So, let’s break down what you need to know, and the steps you can take to prepare right now for a successful transition to this new regulatory regime.
What is the GENIUS Act and Why Does it Matter?
The GENIUS Act gives the U.S. its first clear, licensing framework for stablecoins. The Act defines “payment stablecoins,” which are stablecoins designed to be used as payment or settlement, backed 1:1 by approved cash and cash equivalent assets, and redeemable at a fixed value.
The Act specifically excludes lawmaking over:
Crypto-collateralized stablecoins (e.g., DAI)
Bridged or wrapped assets (e.g., WBTC)
CBDCs or foreign national currencies
In short: If your stablecoin is fiat-denominated, is backed by cash and/or financial instruments, and is used for payments or settlement, it probably qualifies as a “payment stablecoin.”
Stablecoin Issuer Regulatory Pathways under GENIUS
The Act introduces strict issuer criteria using a three-path regulatory model, but keep your eye on this space as federal and state regulators issue additional rules and interpretations. Let’s break down the three paths to licensing:
1. State Qualified Issuers
Must be U.S.-domiciled
Under $10 billion in tokens issued and outstanding
Must operate in a state regulatory regime that’s deemed “substantially similar” to the federal framework and approved by the Stablecoin Certification Review Committee.
Must be licensed by that state as a State Qualified Stablecoin Issuer
If you breach $10 billion in tokens issued, you have 1 year to transition to be a Federally Qualified Issuer
2. Federal Qualified Issuers
Over $10 billion in tokens issued and outstanding
Must be U.S.-domiciled
Can be banks, credit unions, or crypto-native entities
3. Foreign Issuers Seeking U.S. Access
Must hold all reserves in U.S. financial institutions
Must obtain explicit approval from the OCC
May issue only if their home jurisdiction’s regulatory requirements are deemed substantially equivalent to U.S. rules by the Treasury
Bottom line: Issuers should determine which pathway they intend to be licensed under as soon as possible. If you’re unsure which pathway makes sense for your stablecoin operation, click here to book a 30 minute consult with our experts.
| Federal | State | Foreign | |
|---|---|---|---|
| Issuer Size | > 10B Tokens Issued | < 10B Tokens Issuer | Any Size |
| Issuer Archetypes | National Banks, Credit Unions, Large Crypto Native Issuers | State Chartered Banks, Local Credit Unions, Crypto-Native Issuers | International Banks, International Crypto-Native Issuers |
| Licensee Domicile | United States (excluding US Territories) | US State | Foreign Domicile |
| Oversight Authorities | OCC, Federal Reserve, FDIC, National Credit Union Administration | Statement Banking Regulators (w/ Oversight from Fed) | US Treasury & OCC |
| Attestation Requirements | Monthly Examinations by PCAOB-registered Audit Firm | Monthly Examinations by PCAOB-registered Audit Firm | Monthly Examinations by PCAOB-registered Audit Firm |
| Audit Requirement | <50B: Private Audit, >50B: PCAOB-level Audit | Private Company Audit | To be Determined |
Key Compliance Deadlines
The law takes full effect on the earlier of:
18 months from the signing date (July 18, 2025)
120 days after final federal rules are issued
Stay alert, significant updates from both the Federal and State regulators are coming soon. If you are a issuer with a business plan that includes U.S. customers, US exchange listings and US partnerships, now is the time to start your preparation.
Reserve Requirements: No More Gray Area
Under the GENIUS act, qualifying reserve assets are strictly defined. Here’s what qualifies:
Qualified Reserves:
United States coins and currency or account balances held directly with the Federal Reserve Bank
U.S. bank demand deposits
U.S. Treasury instruments with maturities of 93 days or less (T-bills, notes, bonds)
Overnight repos and reverse repos backed by qualifying Treasuries
Government money market funds that only invest in the above instruments
Any similar asset approved by federal regulators
Fully compliant tokenized versions (e.g., USTB)
What’s out?
Crypto collateral
Corporate bonds or stocks
Fractional reserves of any kind
Transparency Requirements: Audit & Attestations
Proof of Reserves Transparency isn’t optional anymore, it’s law.
Stablecoin issuers must:
Publish monthly reserve disclosures, including composition, average maturity, and geography
Undergo monthly attestations by a PCAOB-registered audit firm
Submit CEO/CFO certifications verifying report accuracy
Complete annual financial audits
Over $50B in issuance? From a reporting perspective, you are effectively a public company now. You’ll need a financial statement audit under PCAOB-standards and will be required to make public financial disclosures, even if your company is privately held.
This will dramatically raise the bar for audit readiness, internal controls, and reporting infrastructure.
Federal Preemption: Say Goodbye to the 50-State Patchwork
Today’s stablecoin compliance often means managing a fragmented system of 50 different state money transmitter licenses.
That changes now.
If your state regulator (typically a Department of Financial Services or Department of Banking) has a licensing framework that is “substantially similar” to federal law, and you’re domiciled there, you’ll benefit from a nationwide “passport” to serve customers across the U.S...
However, each state regine must receive annual re-certification from the Stablecoin Certification Review Committee, a 3-person body comprised of the Treasury Secretary (Chair), Fed Chairman, and FDIC Chairman, or risk losing the ability to oversee state regulated payment stablecoin issuers. If your state falls out of compliance, your entire operation could be at risk.
We will be keeping a close eye on how states approach this hurdle, so keep your eye out for more TNF analysis coming soon.
Criminal & Civil Penalties
Violations of the Genius Act come with serious consequences:
$1 million fine + criminal charges for felons attempting to serve as officers
$100,000/day penalties for non-compliance
Up to 5 years in prison for certain violations
While the enforcement posture of regulators is unclear today, and may shift with political winds, the law does provide regulators with significant tools to conduct enforcement actions.
What You Can’t Do Under the GENIUS
The GENIUS Act outlines strict prohibitions relevant to all issuers under every regulatory pathway
Offering native, on-chain yield on stablecoin holdings
Using names like “US Government Coin” or tickers like “USG1.” Luckily “USD” is officially allowed.
Enforcing non-competes in your terms of service
Requiring users to use your stablecoin to access platform services
Issuing a stablecoin if you’re a non-financial company (sorry, Big Tech)
While the law outlines exceptions in many instances, most of these prohibitions are distinctly concrete.
Commingling Reserves: Technically Prohibited, with Exceptions
The GENIUS act technically prohibits the commingling of reserve assets with an issuer’s operational or other assets. However, many exceptions to this rule exist:
Holding reserve assets for multiple stablecoins within a single omnibus account
Holding a portion of reserves for transfering or settling transactions related to commissions, taxes, storage, and other charges related to issuing the stablecoin
Commingling reserves, in accordance with rules promulgated by Federal regulators, as long as customer and company assets are seperately accounted for, treated as, and dealt with belonging to stablecoin issuers or customers.
Yes, the GENIUS Act allows many commingling of Company and Customer assets in certain circumstances for expenses like fees, taxes, and settlement. It’s technically permitted.
But here’s the reality:
It invites deeper scrutiny from regulators, especially with new examination powers granted under the Act
Auditors will flag it and likely ask for more documentation and separation
It adds complexity, raises costs, and blurs financial transparency
If you’re a CFO or compliance lead, this isn’t about what’s “allowed.” It’s about what’s operationally viable.
We strongly recommend keeping reserves clean, segregated, and audit-ready, especially if you plan to scale or face a surprise examination.
Stablecoins Are Not Securities or Commodities
One of the biggest developments in the Genius Act?
Licensing of payment stablecoin issuers is officially outside of SEC and CFTC jurisdiction.
By amending the Securities Act of 1933, the Securities Exchange Act of 1934, and the Commodities Exchange Act, the bill creates a clear, carve-out classification for payment stablecoins. Payment stablecoins are officially not securities or commodities.
Issuers can breathe a little easier knowing there is a regulatory path, and that regulators that regulated by civil action in past years will play no part in licensing and overseeing issuers. However, the transparency and effectiveness of the the new Federal and State regulatory bodies has yet to be seen.
Final Thoughts: What you Should Be Doing Right Now
This isn’t a wait-and-see moment. It’s an act-now-or-pay-later situation.
Here’s what finance and compliance leaders need to prioritize today:
Map your compliance pathway (federal, state, or foreign)
Review your reserve structure, immediately
Audit your redemption, custody, and reporting systems and consider your Terms of Service in light of GENIUS Act developments
Plan for monthly attestations, annual financial audits, and start talking to CPA firms
Upgrade your accounting systems and processes to handle increased scrutiny
Avoid disqualifying activities like offering native yield
Need Help Navigating Strategy, Compliance, and Audit & Attestation Requirements?
The Network Firm is already working with top global stablecoin issuers to implement these changes and stay ahead of the regulatory curve.
We pioneered stablecoin attestations in 2018. We’ve done this before and we’ll help you do it now. We were also the first to offer a real-time attestation (Real Time Proof of Reserves) system.
Book a consultation with us today to get started.
Noah Buxton, CEO
Author Bio:
Noah has more than 15 years of attest, legal, IT and regulatory compliance experience. Noah sets the strategy and oversees execution of strategy at The Network Firm. While Noah advises public blockchain and virtual currency clients on myriad industry-specific issues, his expertise lies in licensing, IT & Security matters as well as attest and assurance reporting for Exchanges, Asset-backed token issuers, lenders and blockchain and cryptocurrency startups.
Noah is a member of the American Institute of Certified Public Accountants (AICPA), Florida Institute of Certified Public Accountants (FICPA), and a former member of the California Bar Association and International Association of Privacy Professionals (IAPP). Noah has served in active roles for working groups with the AICPA and Chamber of Digital Commerce (CODC) since 2018 and holds a current seat on the Steering Committee for C4’s Cryptocurrency Security Standard (CCSS).
Connect with Noah Buxton on LinkedIn/Twitter for more expert advice.