On June 17, the US Senate voted to pass the GENIUS Act, which offers the first comprehensive federal framework for regulating stablecoins in the country. The bill passed with a vote of 68 to 30.
Who Can Issue Stablecoins?
The GENIUS Act prohibits most companies, including Big Tech firms and foreign entities, from issuing payment stablecoins unless they meet strict criteria. Permitted issuers can include:
* Subsidiaries of insured depository institutions (e.g., banks and credit unions) * Federally qualified issuers approved by the Office of the Comptroller of the Currency (OCC) * State-chartered issuers, but only until they reach $10 billion in issuance, at which point they must transition to federal oversight.
Excluded issuers are public companies not primarily engaged in financial services and foreign firms without equivalent regulation.
Requirements for Stablecoin Issuers
For allowed issuers, the GENIUS Act imposes a long list of rules:
* 1:1 reserves must be held in ultra-safe assets such as U.S. cash, Treasury bills under 93 days, or certain money market funds. * Monthly reports & certifications signed by the CEO/CFO, plus third-party audits. * Public disclosures of outstanding stablecoin supply and reserve composition. * Prohibition on paying interest on stablecoins. * Ban on rehypothecation (i.e., reusing) reserve assets.
Regulators will also impose capital and liquidity requirements, as well as anti-money laundering (AML) and sanctions compliance obligations, similar to those required of banks.
The Future of Stablecoins in the US
If a stablecoin is not issued under GENIUS rules, it cannot be offered by U.S.-based crypto exchanges or custodians, even if issued by a foreign entity. However, the bill does not ban individuals from using unregulated stablecoins in peer-to-peer transactions or self-custody wallets. Nevertheless, those stablecoins will not be recognized as 'cash equivalents' or permitted as collateral in financial markets.
The GENIUS Act could represent a turning point in stablecoin regulation in the U.S., providing clarity and paving the way for institutional adoption. However, it raises the bar for issuers, allowing only heavily regulated entities to issue stablecoins.
