The GENIUS Act: the US stablecoin law explained

What is the GENIUS Act?

A payment stablecoin is a crypto token pegged to a fixed amount of money, usually one US dollar, and meant to be used for payments. The GENIUS Act — the Guiding and Establishing National Innovation for U.S. Stablecoins Act — sets federal rules for these tokens. The White House states that it was signed on 18 July 2025.

The law does three big things. It decides who may issue a payment stablecoin, it sets what must sit behind each token, and it decides who gets paid first if things go wrong. It also brings issuers inside the Bank Secrecy Act, so they must run anti-money-laundering and sanctions programmes and be able to seize, freeze or burn tokens when legally required. For the basics of how stablecoins work, start with what is a stablecoin.

Who can issue a payment stablecoin under the GENIUS Act?

Only a permitted payment stablecoin issuer. The House Financial Services Committee's section-by-section summary lists three kinds:

Once a state qualified issuer has more than $10 billion outstanding, the committee summary says it must move to the federal framework, get permission from its federal regulator to stay under state supervision alone, or stop issuing new tokens until it is back under the threshold. Foreign issuers are covered too: Treasury's August 2026 proposal says US platforms may offer a foreign-issued payment stablecoin only if the issuer can and will comply with lawful orders and any reciprocal arrangement between the US and its home country.

What must back each stablecoin?

Every token must be matched by at least one dollar of reserves. The permitted assets are deliberately dull: US currency, deposits at insured banks, short-term Treasury bills, notes and bonds, short-term repurchase and reverse repurchase agreements, and money market funds — plus tokenized versions of these.

Disclosure is frequent. Issuers must publish the composition of their reserves every month, with the chief executive and chief financial officer certifying the report. Issuers with more than $50 billion outstanding must also produce audited annual financial statements.

Can a GENIUS Act stablecoin pay interest?

No. According to the committee summary, permitted issuers are prohibited from paying interest or yield on their payment stablecoins. The White House adds that issuers may not make misleading claims that their coins are backed by the US government, federally insured or legal tender.

The Act also settles the securities question for compliant coins: once it takes effect, payment stablecoins from permitted issuers are excluded from the legal definitions of both security and commodity. The SEC's March 2026 crypto interpretation follows the same timeline. It says these coins will categorically not be securities after the Act's effective date, treats a group it calls covered stablecoins as not involving securities until then, and says other stablecoins may or may not be securities depending on the facts and circumstances — background in SEC vs CFTC.

When does the GENIUS Act take effect?

Not all at once. The Act takes effect on the earlier of 18 months after enactment or 120 days after regulators issue final rules. Eighteen months after 18 July 2025 is 18 January 2027, and Treasury's August 2026 release gives that as the expected effective date, when licensing requirements start.

As of October 2026 the rules are still at the proposal stage. Treasury sought comment on its main proposed rule on 17 August 2026, and FinCEN and the federal banking agencies proposed in June 2026 to treat issuers as Bank Secrecy Act financial institutions with customer identification programmes. Final rules may differ from the proposals.

What mistakes do people make about the GENIUS Act?

• Thinking a stablecoin is now a bank deposit. Issuers may not claim federal insurance; holder priority in insolvency is not the same as deposit insurance.
• Assuming every dollar token is already compliant. The Act is not expected to take effect until January 2027, and platforms have until July 2028 to drop non-permitted coins.
• Expecting the issuer to pay yield. The Act bans it; any advertised yield comes from someone else using your coins.
• Treating proposals as final. Details in the 2026 proposals can change before they are adopted.
• Forgetting other countries' rules. Euro and dollar tokens in the EU follow MiCA, not the GENIUS Act.