GENIUS Act legalizes payment stablecoins; July 18 deadline looms

The GENIUS Act, enacted on July 18, establishes a federal framework for payment stablecoins and gives federal and state regulators one year to issue implementing rules. The rulemaking deadline will activate the law’s compliance requirements once finalized.

Under the statute, stablecoin issuers must hold reserves in highly liquid, government-backed assets such as demand deposits, short-dated Treasury securities, overnight repurchase agreements and government money market funds. A registered public accounting firm must review reserve reports monthly, and chief executives and chief financial officers must personally certify those reports.

The law treats payment stablecoin issuers as financial institutions for purposes of the Bank Secrecy Act. That classification brings requirements for anti-money-laundering programs, transaction monitoring, sanctions screening and customer due diligence. The legislation also bars issuers from paying holders interest or yield solely for holding the token, shifting revenue focus to income earned on reserves and revenue-sharing arrangements with distribution partners.

The stablecoin market is concentrated. Market data put total supply at about $311.5 billion, with Tether’s USDT at roughly $184.4 billion and Circle’s USDC near $73.3 billion, together accounting for about 80% of outstanding supply. Circle reports that USDC reserves are held in cash and cash equivalents, primarily through a government money market fund.

The law’s reserve and compliance rules affect issuer economics. At a 3.74% secondary-market yield on three-month Treasuries, a $200 million stablecoin would generate about $7.5 million in gross reserve income annually. By comparison, a $10 billion issuer would earn roughly $374 million at the same yield. An example annual compliance program costing $15 million would exceed the smaller issuer’s gross reserve income but represent a much smaller share of revenue for a multibillion-dollar issuer.

GENIUS allows issuers with less than $10 billion in outstanding stablecoins to request state-level supervision if a state regime is certified as substantially similar to the federal framework. Crossing the $10 billion threshold requires transition to federal oversight within 360 days unless a waiver is granted. The law also sets a later market-access deadline: from July 18, 2028, digital asset service providers generally cannot offer a payment stablecoin to U.S. users unless the token is issued by a permitted issuer or a qualifying foreign issuer.

Mike McCluskey, chief executive of tx, described the law as creating a compliance cost floor and called that floor “inherently regressive,” saying it favors firms with larger balance sheets. Zaheer Ebtikar, chief strategy officer at Plasma, described the burden as “recurring operational infrastructure” that includes segregated reserve accounts, monthly independent audits, transaction monitoring and dedicated compliance staff. Ebtikar added that tokens outside the permitted perimeter would lose exchange access, then liquidity, and then users.

Regulators have 12 months from July 18 to finalize the implementing rules specified by the GENIUS Act.