Trump endorses GENIUS Act legislature - Digital currencies, crypto integration, and related developments...
The Guiding and Establishing National Innovation for U.S. Stablecoins Act, or GENIUS Act, was signed into law on July 18, 2025, marking a significant shift in the regulatory landscape for payment stablecoins in the United States. This comprehensive federal framework affects major players such as Tether (USDT), USD Coin (USDC), and Dai (DAI).
Regulatory Framework and Issuance Restrictions
The GENIUS Act establishes clear federal oversight over payment stablecoin issuers, limiting issuance to federally insured depository institutions or entities approved by the Office of the Comptroller of the Currency (OCC), as well as state-chartered entities under qualifying regimes. This narrows and clarifies who can legally issue stablecoins in the U.S.
100% Reserve Requirement
All payment stablecoins must be backed on a 1:1 basis with safe and liquid assets, such as U.S. Treasuries or cash equivalents, ensuring full backing and reducing risks of insolvency or "fractional backing." This directly affects issuers like Tether, which have faced transparency concerns.
Consumer Protection and Priority in Bankruptcy
The Act enhances consumer protections by granting stablecoin holders priority claims over other creditors in the event of issuer bankruptcy, providing more security for holders of USDT, USDC, and DAI.
Transparency and Auditing
Major stablecoin issuers with market capitalization over $50 billion must undergo annual independent audits according to stringent federal standards. This requirement targets large players, including Tether, mandating higher transparency and credibility.
Anti-Money Laundering (AML) and Know Your Customer (KYC) Compliance
Issuers must implement full-scale AML and KYC protocols comparable to those in banking, including customer due diligence, suspicious activity monitoring, and compliance with sanctions. They must also enable authorities to freeze or destroy ("burn") tokens on demand to combat illegal activities.
Restrictions on Big Tech and Foreign Issuers
Large technology companies are banned from issuing stablecoins to prevent concentration of financial and data power. Foreign companies can only issue stablecoins after Federal Reserve approval and full compliance with U.S. standards.
Conflict of Interest Provisions
The Act prohibits high-ranking government officials, members of Congress, and their immediate relatives from being beneficiaries or executives of stablecoin-issuing companies, addressing concerns about conflicts of interest.
Implementation Timeline
Although the Act was signed in July 2025, prohibitions on non-compliant stablecoin issuance will take effect around November 2026, allowing time for regulators, the Treasury, and banking agencies to produce rules and guidance.
Impact on Specific Stablecoins
Tether (USDT)
Likely to face the strictest scrutiny due to its large market cap, past transparency issues, and requirements for full 1:1 backing and annual audits, as well as enhanced AML/KYC controls.
USD Coin (USDC)
Already backed by regulated institutions and generally aligned with compliance norms, USDC issuers may find adapting to GENIUS Act requirements manageable but still must comply with the new federal rules and audit mandates.
Dai (DAI)
As a decentralized stablecoin governed by MakerDAO, Dai’s compliance will be more complex since the GENIUS Act focuses on centralized issuers approved by federal or state regulators. Dai may face challenges or a need to restructure governance or find eligible issuer entities to operate within the U.S. market under the new law.
In summary, the GENIUS Act aims to increase stability, transparency, consumer protection, and national security while limiting stablecoin issuance to a regulated circle of entities with robust compliance systems. The battle for the future of money in the U.S. has only just begun, with potential court battles and legal challenges to the GENIUS Act on the horizon.
- The GENIUS Act establishes a regulatory framework that limits stablecoin issuance to federally insured depository institutions, entities approved by the Office of the Comptroller of the Currency, and state-chartered entities under qualifying regimes.
- All payment stablecoins must be backed on a 1:1 basis with safe and liquid assets, and issuers like Tether must comply with this 100% reserve requirement.
- The Act enhances consumer protections by granting stablecoin holders priority claims over other creditors in the event of issuer bankruptcy, providing more security for holders of USDT, USDC, and DAI.
- Major stablecoin issuers with market capitalization over $50 billion must undergo annual independent audits according to stringent federal standards, a requirement that directly affects Tether, requiring higher transparency and credibility.
- Issuers must implement full-scale Anti-Money Laundering (AML) and Know Your Customer (KYC) protocols, including customer due diligence, suspicious activity monitoring, and compliance with sanctions, to combat illegal activities.
