President Trump recently signed into law the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act. The GENIUS Act establishes a federal framework for payment stablecoin issuers permitted to offer and sell stablecoins in regulated financial markets.1
For banks, fintechs, and crypto-native issuers, the GENIUS Act signals a new compliance era – reshaping how payment stablecoins are designed and regulated.
Key provisions
- Scope: Only fiat-backed payment stablecoins are permitted. These must be redeemable 1:1 and used for commerce, settlement, or remittances.
- Prohibited: Yield-bearing stablecoins are barred from being classified as payment stablecoins under the Act.
- Tiered oversight: Issuers are regulated based on scale. Smaller issuers can operate under certified state regimes, while larger ones face mandatory federal scrutiny.
- Operational standards: Enforced by federal or state regulators, including 1:1 reserve backing, monthly attestations, and AML/KYC compliance.
- Rule making & effective date: Agencies have up to 12 months to finalize rules. The Act takes effect on the earlier of 18 months post-enactment or 120 days after rule finalization. Agencies must report to Congress within 180 days of the effective date, and existing issuers have 12 months to comply.
- Foreign issuers: Foreign-based issuers must demonstrate they are subject to a ‘comparable regulatory regime’ and agree to US oversight to access the US market.
The GENIUS Act sets a clear regulatory baseline – financial institutions must decide how to respond. Here's what to expect.
Implications for banks, fintechs & crypto firms
Whether you're a bank, fintech, or protocol, the stablecoin landscape is entering a new phase. The priority now is scaling, partnering, and monetizing, while each of the primary federal payment regulators establish implementing regulations. With regulatory clarity taking shape, we expect several key trends to accelerate:
- Stablecoin partnerships and M&A: Financial institutions will look to acquire or partner with infrastructure providers to fast-track capabilities.
- Infrastructure arms race: Banks and fintechs will invest heavily in wallet infrastructure, tokenization rails, and reserve management tech.
- Cross-border payments transformation: Stablecoins will become competitive rails for global transfers – beyond just fintechs.
- New monetization channels: Custody, compliance-as-a-service, and tokenized payments will present new revenue lines, alongside additional compliance costs.
Every player will face tough tradeoffs between growth, control, and risks from the issuance of stablecoins. Those who adapt fastest will shape the future of digital payments.
Banks
- Gain first-mover advantage in regulated issuance via subsidiaries.
- Access to legacy rails (FedNow, ACH) enables early deployment of compliant stablecoin products.
- Must modernize systems to compete in a tokenized world (e.g. ledger upgrades, 24/7 operations).
- Deposit flight risks loom if wallets holding non-bank stablecoins offer greater utility, UX, or interoperability.
- Opportunity to reassert dominance in payments by embedding stablecoins into existing corporate and retail flows.
Non-bank issuers/fintechs
- Regulatory clarity is a double-edged sword: unlocks growth, but with heavier compliance overhead.
- Federal registration opens doors to institutional partners, bank integrations, and broader consumer reach.
- Regulatory escalation kicks in as stablecoin volume grows – non-bank issuers with large volumes will face stricter federal oversight, creating pressure to scale fast or seek acquisition.
- Strong branding and US licensing will become key differentiators in competitive capital and consumer markets.
Crypto-native firms
- Algorithmic and synthetic models are excluded from GENIUS-compliant payment use, putting US market growth in these areas on hold pending future guidance.
- Must meet 1:1 reserve and disclosure rules to issue GENIUS-compliant stablecoins.
- May need to partner with licensed entities (banks, fintechs) to gain regulatory access or distribution.
- New product lines (e.g. tokenized treasuries, middleware for compliance) may emerge to adapt and monetize in the new regime.
- Some firms may launch offshore stablecoins or yield products that bypass US restrictions – risking exclusion from regulated markets but appealing to global users.
Unanswered questions & key unknowns
Even with GENIUS passed, several critical questions remain:
- Timeline uncertainty: While the GENIUS Act sets a clear 12-month rulemaking deadline for regulators, the exact timing of the final rules remains a challenge.
- Bank versus non-bank expectations: It remains to be seen how strictly bank subsidiaries will be held to prudential standards versus non-banks facing the full OCC supervision.
- Foreign issuers: What qualifies as ‘comparable’ oversight for non-US stablecoin issuers? This could impact global access to US markets.
- Yield-bearing wrappers: Some existing tokenized treasury products mimic stablecoins but offer yield. Regulators must decide if they count as de facto payment instruments.
- Yield reframing: Issuers may rebrand yield as ‘promotions’ or ‘rebates’ to skirt the ban, but this workaround remains untested and could face scrutiny from regulators.
- How hard will enforcement hit? The tone from federal agencies as regulations are being developed will shape how aggressively firms pivot or exit the market.
- Cross-border enforcement: How US regulators will handle foreign-issued stablecoins reaching US users via DeFi wallets remains unclear.
The path forward
As the GENIUS Act reshapes the stablecoin market, financial institutions and crypto-native players must calibrate quickly. To stay competitive and compliant, firms should:
- Monitor how agencies define ‘payment’ versus ‘investment’ use to assess product eligibility.
- Reassess issuance structures, reserve strategies, and user incentives.
- Pursue strategic partnerships to accelerate compliance or unlock distribution.
- Prepare for operational upgrades including audit readiness, reserve verification, and real-time disclosures.
Contact us to explore how we can support your roadmap and help you lead the next chapter of digital finance.
References
1 S.1582 - 119th Congress (2025-2026): GENIUS Act | Congress.gov | Library of Congress; GENIUS Act Passes in US Congress: A Breakdown of the Landmark Stablecoin Law; https://caldwelllaw.com/news/genius-act-stablecoin-regulation-2025; and Congress Passes GENIUS Act: Landmark Framework for Payment Stablecoins Will Reshape U.S. Digital Asset Regulation