GENIUS or Just Regulation? What the New U.S. Stablecoin Law Means for Treasurers

GENIUS or Just Regulation? What the New U.S. Stablecoin Law Means for Treasurers

From Treasury Masterminds

What is the GENIUS Act?

The GENIUS Act—short for Guiding and Establishing National Innovation for U.S. Stablecoins—is the first standalone federal legislation in the U.S. to specifically regulate stablecoins. Introduced as Senate Bill S. 1582 in May 2025, it passed both chambers of Congress and was signed into law by President Trump in July 2025.

Scope and Key Provisions

  1. Definition & Eligibility:
    • Applies only to “payment stablecoins,” meaning digital assets designed for payments or settlement at a fixed value, redeemable in U.S. dollars.
    • Issuance is limited to U.S.-based “Permitted Payment Stablecoin Issuers” (PPSIs), which include subsidiaries of insured depository institutions, OCC-approved nonbanks, or state-chartered issuers.
  2. Reserve & Transparency Requirements
    • Stablecoins must be fully backed 1:1 with high-quality liquid assets such as U.S. dollars, short-term Treasuries, or overnight repos.
    • Issuers must publish monthly reserve disclosures and undergo annual audits if their stablecoins exceed $50 billion in circulation.
  3. Compliance & Controls
    • Issuers must comply with capital, liquidity, risk management, consumer protection, marketing, audit, AML, and sanctions rules.
    • They must maintain the technical capability to freeze, seize, or burn tokens when legally required.
  4. Regulatory Hierarchy
    • The Act explicitly removes stablecoins under its scope from SEC and CFTC oversight, placing them instead under a bank-like regulatory regime.
  5. Foreign Issuers & Cross-Border Access
    • Foreign issuers may operate in the U.S. if their home country’s regulations are deemed equivalent, they register with U.S. regulators, and hold reserves in U.S. banks.
  6. Transition & Effective Dates
    • The Act takes effect on January 18, 2027, or 120 days after final regulations are issued—whichever comes first.
    • A three-year transition period is in place for digital asset service providers to come into compliance.

What It Regulates—and What It Doesn’t

Regulates:

  • The issuance and redemption of payment stablecoins by regulated U.S. entities
  • Reserve requirements and disclosure standards
  • Compliance with AML, sanctions, and consumer protections
  • Technical safeguards for enforcement and risk management

Does Not Regulate:

  • Algorithmic stablecoins or those not intended for payments
  • Central bank digital currencies (CBDCs)
  • Broader cryptocurrency markets (e.g. Bitcoin, Ethereum)
  • Peer-to-peer use or wallet-to-wallet transfers for private individuals

Implications for Corporate Treasurers

Stablecoins are increasingly seen as tools for instant settlement, cross-border payments, and liquidity efficiency. The GENIUS Act has several implications for treasurers considering or already using stablecoins in their operations.

Pros

  • Legal clarity: Provides a federal framework, reducing uncertainty around stablecoin use.
  • Improved security: Backing and audit requirements increase confidence in the value of stablecoins.
  • Regulatory alignment: Built-in compliance with AML and sanctions laws helps with treasury risk management.
  • Operational benefits: Enables faster, cheaper, and programmable payments compared to traditional rails.

Cons

  • Limited issuer landscape: Only a few approved issuers may meet the strict regulatory standards.
  • No yield: Treasurers cannot earn interest on held stablecoins, limiting use for investment purposes.
  • Implementation timeline: Full rollout won’t occur until 2027, delaying access to compliant solutions.
  • Cost and control: New compliance burdens could raise costs or limit flexibility for issuers and users.

Final Take

The GENIUS Act introduces a detailed framework for regulating payment stablecoins in the U.S., aimed at improving trust, transparency, and regulatory oversight. For corporate treasurers, it promises a safer and more compliant environment to explore the use of stablecoins in treasury operations. However, limits on issuer eligibility, the lack of yield, and a delayed timeline mean that adoption will remain gradual and cautious.

Also Read

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