Congressional Research Service: Overview of the GENIUS Act

Author: Paul Tierno, Congressional Research Service, United States

After the setback on May 8, the U.S. Senate voted on May 19 to pass the cloture motion for Bill S.1582 (the "Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025," abbreviated as the GENIUS Act). The cloture procedure is a process to end debate and deliver a vote. The GENIUS Act aims to establish a regulatory framework for stablecoins.

Requirements for Issuing Payment Stablecoins

The S.1582 bill defines "payment stablecoins" as digital assets that are redeemable for a predetermined fixed amount (such as 1 dollar) and used for payment or settlement. Issuers must hold at least 1 dollar in compliant reserves for every 1 dollar of stablecoin issued. The bill stipulates that compliant reserves are limited to coins and currency, insured deposits in banks and credit unions, short-term government bonds, repurchase agreements (repo) and reverse repurchase agreements (reverse repos) collateralized by government bonds, government money market funds, central bank reserves, and other similar government-issued assets approved by regulatory authorities. Issuers may only use reserve assets for specific activities, including redeeming stablecoins and serving as collateral for repurchase and reverse repurchase agreements. The bill requires federal and state regulators to establish specific capital, liquidity, and risk management rules for federal and state stablecoin issuers, but stablecoin issuers are not subject to regulatory capital standards applicable to traditional banks.

The issuer must establish and disclose the stablecoin redemption procedure, and regularly publish reports on the circulating supply of stablecoins and the composition of reserves. The reports must be certified by executives and "reviewed" by a registered public accounting firm. Issuers of stablecoins with a circulating supply exceeding $50 billion must submit audited annual financial statements.

Issuers must comply with the Bank Secrecy Act, and the Financial Crimes Enforcement Network (FinCEN) must establish specific anti-money laundering rules. The S.1582 bill requires FinCEN to promote "new methods for detecting illegal activities involving digital assets." Issuers must certify that they have implemented anti-money laundering and sanctions compliance programs. The bill prohibits individuals who have been convicted of certain financial crimes from serving as executives or directors of issuers.

Stablecoins can be issued by banks and credit unions (through subsidiaries) or non-bank institutions (not limited to financial enterprises). All types of issuers must register with the appropriate federal regulatory agency (the regulatory agency is one of the federal banking regulatory agencies based on the type of issuer). The regulatory agency will assess whether the issuer meets baseline requirements (as described above). If the application is not processed within 120 days, it is deemed automatically approved. The regulatory agency must state the reasons for rejection and allow the applicant to appeal.

For non-bank issuers of stablecoins with a circulation of less than $10 billion, the bill allows them to choose state regulatory systems, but it must be determined by the Secretary of the Treasury, the Chairman of the Federal Reserve, and the Chairman of the Federal Deposit Insurance Corporation that the state regulatory system is "substantially similar" to the federal system.

Federal Supervision and Law Enforcement System:

Choose a bank or non-bank issuer of stablecoins in circulation exceeding $10 billion, which will be supervised by the regulatory authority of its affiliated bank or credit union (non-bank issuers are supervised by the Office of the Comptroller of the Currency - OCC). The regulatory authority will assess the issuer's financial condition, risks to the safety and soundness of the institution and the financial system, as well as the risk management systems.

All stablecoin issuers under the federal regulatory framework are required to submit reports to their primary federal regulatory agencies and may be subject to inspections by the regulators.

If regulators determine that the issuer has violated the requirements of the law or any written conditions set by the regulators, they have the right to prevent the issuer from continuing to issue stablecoins or take other enforcement actions.

State Regulatory System

Non-bank issuers of stablecoins with a circulation of less than 10 billion USD may opt for a state regulatory framework. If their scale exceeds this threshold, they must transition to a federal regulatory framework jointly managed by federal and state regulatory agencies, unless they obtain an exemption from the federal regulatory agency.

Supervision and Law Enforcement

State regulators have "supervisory, inspection, and enforcement authority" over all state issuers, but the bill allows state regulators to delegate these powers to the Federal Reserve. The bill also permits the Federal Reserve or OCC to take enforcement actions against state issuers in "exceptionally urgent situations."

Foreign Issuer

The bill stipulates that the "issuance and sale" of stablecoins within the United States must be limited to compliant domestic issuers for three years after the bill takes effect. The Treasury may, after consulting with federal stablecoin regulatory agencies, enter into "reciprocal" agreements with jurisdictions deemed "comparable" to U.S. regulations. Stablecoins from qualified jurisdictions that have the capacity to freeze transactions and comply with legal directives, registered with the OCC, and subject to ongoing supervision, may trade in the U.S., interoperate with USD stablecoins, and be used for international transactions, provided that U.S. financial institutions hold sufficient reserves to meet domestic redemption demands. The bill authorizes the Treasury Secretary and other agencies to waive multiple requirements for foreign issuers and digital asset providers selling stablecoins.

Other Terms

The bill establishes rules for stablecoin assets and reserve custodians, who can be issuers or non-issuers, but must be regulated by federal or state banking regulators, the U.S. Securities and Exchange Commission, or the Commodity Futures Trading Commission. The bill prohibits custodians from mixing their own funds with client funds (except in special circumstances). The bill allows banks to custody stablecoins and reserves, use blockchain technology, and issue tokenized deposits.

This bill grants stablecoin holders priority over other creditors in the event of the issuer's bankruptcy, and amends bankruptcy law.

This bill clarifies that payment stablecoins do not fall under securities or commodities and do not enjoy federal insurance.

A provision of S.1582 states that current ethical laws and regulations prohibit senior executives from issuing stablecoins.