With the signing of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or the “GENIUS Act,” into law, the United States has officially established a first-of-its-kind regulatory framework for “payment stablecoins” and the entities that issue them.
The law introduces a clear gatekeeping model: Only entities recognized as “permitted payment stablecoin issuers” and qualifying foreign issuers may issue payment stablecoins in the United States once the law takes effect, which will be no later than January 2027. This change brings both clarity and constraints, particularly for nonbank companies looking to enter the space.
For companies formulating or evaluating their stablecoin strategy, the GENIUS Act presents an important decision point: how to enter the market compliantly, at what scale, and under which regulatory regime.
GENIUS Act Background
The GENIUS Act is a tailored measure aimed at regulating a specific slice of the digital asset market. The provisions of the GENIUS Act apply only to “payment stablecoins,” which are digital assets that meet the following criteria:
- used or designed for use in payments or settlement;
- where the issuer is obligated to convert, redeem, or repurchase the stablecoin for a fixed amount of monetary value; and
- where the issuer represents that the stablecoin will maintain, or creates the reasonable expectation that it will maintain, a stable value relative to a fixed amount of monetary value.
The GENIUS Act permits payment stablecoins to be issued in the United States only by “permitted payment stablecoin issuers.” This ability to issue payment stablecoins also comes with restrictions and obligations:
- Under the GENIUS Act, a permitted payment stablecoin issuer may engage only in the following activities: (i) issuing payment stablecoins; (ii) redeeming payment stablecoins; (iii) managing related services, such as purchasing, selling, holding reserve assets, or providing custodial services for reserve assets; and (iv) providing custodial services for payment stablecoins, required reserves, or private keys of stablecoins.
- The core GENIUS Act standards include requirements for a permitted stablecoin issuer to: (i) fully back payment stablecoins with reserves consisting of specified assets that are highly liquid, such as U.S. currency, funds held as demand deposits, and Treasuries; (ii) publicly disclose redemption policies; and (iii) publish the composition of reserves on a monthly basis.
Payment Stablecoin Issuance Paths
The following table outlines the three forward-looking payment stablecoin issuance paths available to nonbank companies under the GENIUS Act, each allowing issuers to remain outside the maximalist regulatory regime that applies to commercial banks.
- Path 1: Take the Federal-Qualified Path as a National Trust Bank
Create a subsidiary that obtains a national trust bank charter from the Office of the Comptroller of the Currency (“OCC”) and, as an uninsured depository institution, applies for approval with the OCC to become a “federal qualified nonbank payment stablecoin issuer.” - Path 2: Take the Federal-Qualified Path for Nonbank Companies
Create a subsidiary that is a nonbank company and applies for approval with the OCC to become a “federal qualified nonbank payment stablecoin issuer.” - Path 3: Take the State-Qualified Path
Create a subsidiary that could be a nonbank company and applies for approval with a state regulator to become a “state qualified payment stablecoin issuer.”[1]
Path 1 Federal-Qualified Path for National Trust Banks | Path 2 Federal-Qualified Path for Nonbank Companies | Path 3 State-Qualified Path | |
| Regulator | OCC | OCC | State (Federal Reserve and OCC backstop enforcement authority) |
| Time to market | Moderate to long—chartering process is rigorous | Moderate—statutory 120-day outer boundary for OCC review | Uncertain and variable—depends on the state’s approval process |
| Permissible activities | Limited to fiduciary and other related activities, and core GENIUS Act limitations | Core GENIUS Act limitations | Core GENIUS Act limitations |
| Preemption | Broad preemption as a national bank | Preemption of state licensure or other authorization requirements | Possible preemption of host state licensure or other authorization requirements |
| Compliance burden | Core GENIUS Act standards; OCC prudential supervision and regulatory requirements for capital, liquidity, corporate governance, and sound risk management; parent company must provide financial support | Core GENIUS Act standards; regulatory requirements for capital, liquidity, and risk management that are yet to be issued by federal regulators | Core GENIUS Act standards; regulatory requirements for capital, liquidity, and risk management that are yet to be issued by state regulators and may vary across states |
| Scalability | High—no issuance cap; ideal for national/global scale | High—no issuance cap; ideal for national/global scale | Limited—capped at $10 billion in consolidated outstanding issuance |
| Fed master account access | Federal Reserve has statutory authority | No Federal Reserve statutory authority | No new Federal Reserve statutory authority |
| Bottom line | Best for companies seeking strong regulatory credibility or engaged in complex financial operations | Best for scaled fintech companies or platforms seeking to stay out of the bank regulatory perimeter while operating nationally | Best for start-ups or entrants seeking to test stablecoin issuance and comfortable operating within geographic and scale limitations |
The GENIUS Act specifies that payment stablecoins meeting its terms are excluded from the definition of a “security” under the federal securities laws and “commodity” under the Commodity Exchange Act, effectively removing them from regulation by the Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”). This does not apply, however, to digital assets that are not payment stablecoins, such as those that pay yield or interest solely in connection with holding or using the stablecoin.[2]
While the GENIUS Act provides a foundational framework, many key details—particularly with respect to regulatory implementation, state-federal coordination, and foreign stablecoin issuer eligibility to access the U.S. market—remain to be clarified. Prospective payment stablecoin issuers should plan with flexibility and monitor developments closely.
The state’s regulatory regime must be certified as “substantially similar” to the federal regulatory framework under the GENIUS Act by the Stablecoin Certification Review Committee, which is to be chaired by the secretary of the Treasury and includes the chair of the Federal Reserve Board and the chair of the Federal Deposit Insurance Corporation as members. ↑
The federal banking agencies, SEC, and CFTC are tasked with issuing a study of non-payment stablecoins. Congress is separately considering proposed legislation that would apply to certain other types of digital assets. ↑
