Definition
The Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act) is bipartisan federal legislation introduced by Senator Bill Hagerty (R-TN) in February 2025 and passed by the Senate Banking Committee on March 13, 2025, by a 18-6 vote. The bill creates the first comprehensive federal regulatory framework for “payment stablecoins” — digital assets designed to maintain a stable value relative to the US dollar and used primarily for payment purposes. The GENIUS Act establishes a dual regulatory structure in which large stablecoin issuers (above $10 billion in outstanding stablecoin) are regulated by federal banking regulators (the OCC for non-bank issuers and the Federal Reserve for bank issuers), while smaller issuers may choose between federal oversight and state regulatory approval, provided the state’s framework meets federal standards established by the bill.
The legislation defines a “payment stablecoin” as a digital asset that is or is represented to be redeemable on demand for a fixed monetary value in fiat currency. This definition is designed to capture dollar-pegged stablecoins used as a medium of exchange (USDC, USDT, PYUSD) while excluding crypto assets that fluctuate in value (Bitcoin, Ethereum) and explicitly excluding algorithmic stablecoins — those that maintain their peg through automated adjustments to token supply or collateral rather than through actual fiat reserves. The prohibition on algorithmic stablecoins is a direct legislative response to the May 2022 collapse of the TerraUSD (UST) stablecoin, which lost its peg and triggered a broader crypto market collapse that wiped out approximately $40 billion in market value within days.
Key Facts
- The GENIUS Act requires payment stablecoin issuers to maintain 1:1 reserves in permissible assets: US currency, demand deposits at insured depository institutions, Treasury bills with maturities of 93 days or less, or funds held in a repurchase agreement collateralized by US Treasury securities.
- Monthly reserve attestation by a registered public accounting firm is required for issuers above $50 billion, with semi-annual attestation for smaller issuers — creating ongoing third-party verification of reserve adequacy.
- Foreign payment stablecoin issuers may serve US persons only if they register with the Federal Reserve and comply with US reserve requirements — a provision specifically targeting Tether (USDT), which is issued by a Cayman Islands-based entity and holds reserves partly in non-Treasury assets.
- Circle’s USDC, which already maintains 100% cash and Treasury reserves and publishes monthly attestations, is widely viewed as well-positioned for GENIUS Act compliance.
- Tether’s USDT, which holds reserves including commercial paper and other non-permissible assets and is issued by a non-US entity, would need significant restructuring to comply with the GENIUS Act’s requirements if it seeks to serve US persons.
- The GENIUS Act explicitly states that payment stablecoins are not securities under the Securities Act of 1933 or the Exchange Act of 1934, resolving a key regulatory uncertainty about whether SEC registration is required for stablecoin issuance.
- A two-year moratorium on new algorithmic stablecoins is included, with a study by the Treasury and banking regulators required before any new algorithmic stablecoin framework could be established.
Relevance to Tokenization
The GENIUS Act is foundational for the US tokenization ecosystem because stablecoins serve as the cash leg of tokenized asset transactions. When an investor purchases a tokenized Treasury bill, tokenized private equity fund interest, or tokenized real estate position, the payment must be made in some form of digital value that can settle simultaneously with the security delivery on-chain — that is, the cash leg of the trade must also be on-chain. Without regulatory certainty about the status of stablecoins, institutional investors, banks, and custodians have been reluctant to use stablecoins in tokenized securities settlements, preferring instead slower but legally certain wire transfers or traditional book-entry payment systems.
GENIUS Act passage would provide the legal clarity that institutional actors need to confidently use USDC, PYUSD, and other compliant stablecoins as settlement instruments in tokenized asset markets. Specifically, knowing that USDC is a regulated payment stablecoin issued by a federally licensed entity, backed 1:1 by US Treasuries, and subject to monthly attestation eliminates the counterparty and legal risk concerns that have made many institutional tokenized asset buyers reluctant to hold stablecoins during the settlement window. This matters for T+0 atomic settlement: the ability to finalize a tokenized bond trade in seconds, with simultaneous payment in USDC and delivery of the token, depends entirely on the institutional acceptability of the stablecoin used.
For the broader US financial system, the GENIUS Act would establish US-domiciled regulated stablecoins as the global standard for digital dollar payments, extending US monetary influence into the tokenized economy. USD-denominated stablecoins already represent approximately 99% of the global stablecoin market by market capitalization, and US-regulated stablecoins operating under GENIUS Act frameworks could prevent the fragmentation of global digital payment systems into multiple competing national stablecoin frameworks. For US tokenization platforms serving global investors, this means that the dollar-denominated settlement infrastructure would remain unified, liquid, and trusted across jurisdictions.
Related entries: Atomic Settlement, Delivery vs Payment, Money Transmitter License