Compliance Journal August 2025
Special Focus Highlights of the GENIUS Act There has been much buzz in newsfeeds lately of the Guiding and Establishing National Innovation for U.S. Stablecoin Act (GENIUS Act or Act) which was signed into law early last month. The intention of the Act is to establish regulation around payment stablecoin issuers. This article highlights main components of the Act to help Wisconsin’s compliance officers understand its scope and what is to happen next on the regulatory front. The article does not cover requirements for foreign issuers under the Act. In general, the GENIUS Act sets forth who may issue payment stablecoins, the requirements for issuing payment stablecoins, regulatory oversight of such processes, and the treatment of payment stablecoins overall. The federal banking regulators, (i.e., Board of Governors of the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) (collectively, the agencies)) have rule-writing authority to implement requirements under the Act. The Department of the Treasury is the first agency to start such process with a recently published request for information regarding the use of innovative or novel methods, techniques, or strategies to detect and mitigate illicit finance risks involving digital assets. State regulators have also been given rulemaking authority under the Act; however, their framework need be substantially similar to what is created at the federal level. Additionally, the state regulators need share information with FRB on an ongoing basis to ensure consistency. The agencies also have supervisory and enforcement authority over subsidiaries of banks that are approved to issue payment stablecoins. Generally, the GENIUS Act becomes effective upon the earlier of January 18, 2027, or the date that is 120 days after the date for which the agencies issue final rules to implement the Act. Definition of Payment Stablecoin First, consider what is a payment stablecoin. Under the GENIUS Act, a “payment stablecoin” means a “digital asset” that is designed to be used as a means of payment or settlement and the issuer of which (a) is obligated to convert, redeem, or repurchase for a fixed amount of monetary value; and (b) represents that it will maintain, or creates the reasonable expectation that it will maintain, a stable value relative to the value of a fixed amount of monetary value. A “digital asset” means any digital representation of value that is recorded on a cryptographically secured “distributed ledger” which is technology in which data is shared across a network that creates a public digital ledger of verified transactions or information among network participants whereby cryptography is used to link the data to maintain the integrity of the public ledger and execute other functions. Excluded from the definition of “payment stablecoin” is a digital asset that is a national currency; a deposit (as defined in section 3 of the Federal Deposit Insurance Act), including a deposit recorded using distributed ledger technology; or is a security (as defined in section 2 of the Securities Act, section 3 of the Securities Exchange Act, or section 2 of the Investment Company Act).