Legislation Overview
Enrolled Bill, 119th Congress
S.1582, titled the “GENIUS Act,” was passed by the U.S. Senate and House in July 2025 to establish a national regulatory framework for payment stablecoins. The legislation aims to support the lawful use of fiat-backed digital assets in payment systems while protecting consumers and ensuring that only prudentially regulated entities may issue them. Introduced to address the growing role of stablecoins in financial markets and commerce, the Act creates clear federal standards for who may issue payment stablecoins, under what conditions, and with what oversight.
The core objective of the GENIUS Act is to enable innovation in payment technologies while preserving financial stability and public confidence. The bill allows both federally chartered and state-chartered institutions to become eligible stablecoin issuers, provided they meet registration, reserve, and redemption requirements. By doing so, the Act offers a dual-path regime for financial innovation that combines regulatory flexibility with federal safeguards.
Title I – Authorization of Stablecoin Issuers
The Act creates two main categories of authorized issuers:
- Federal Qualified Payment Stablecoin Issuers are nonbank entities approved by the Office of the Comptroller of the Currency (OCC). These institutions must undergo chartering, meet capital and risk standards, and comply with operational and compliance obligations set by the OCC.
- State Qualified Payment Stablecoin Issuers are state-chartered entities (such as trust companies or depository institutions) that register with the Federal Reserve. These issuers must meet federal criteria for reserve backing and redemption policies and are subject to oversight from both state regulators and the Fed.
All issuers are required to operate with transparency, clear governance, and defined redemption processes, helping ensure consumer confidence and operational integrity.
Title II – Reserve Backing and Redemption Rights
To ensure the stability and reliability of payment stablecoins, the GENIUS Act mandates that all issuers maintain **1:1 reserves** backed by high-quality liquid assets. Acceptable reserves include:
- U.S. dollars held at insured financial institutions
- U.S. Treasury securities with short maturity
- Federal Reserve account balances
The use of volatile assets (such as cryptocurrencies or illiquid instruments) is explicitly prohibited. Issuers must provide **prompt, full redemption** of stablecoins into fiat currency upon customer request. These requirements are designed to mirror the protections offered by deposit-backed money while avoiding systemic risks.
Title III – Oversight, Examinations, and Compliance
The Act assigns direct supervisory authority to the OCC for federal issuers and limited oversight powers to the Federal Reserve for state-registered issuers. Both regulators are empowered to conduct examinations, enforce compliance, and issue guidance on capital, risk, governance, and anti-money laundering (AML) practices.
Issuers are required to:
- Undergo periodic audits
- Make public disclosures on reserve composition and redemption practices
- Implement robust cybersecurity and operational risk management policies
These measures ensure that stablecoin systems are safe, transparent, and resistant to misuse or mismanagement.
Title IV – Enforcement and Foreign Issuers
Only qualified entities—licensed at the federal or state level and in good standing—may issue payment stablecoins under U.S. law. The Act prohibits the issuance of stablecoins by unregulated entities and authorizes civil and criminal penalties for violations.
Foreign entities must obtain approval from the Federal Reserve Board before issuing payment stablecoins in the U.S. market, ensuring consistent regulatory treatment and reducing risks from offshore activity.
Policy Rationale and Legislative Impact
The GENIUS Act represents a significant step forward in establishing national standards for the safe issuance of stablecoins in the United States. By allowing both federal and state-chartered entities to issue payment stablecoins—subject to federal registration and reserve rules—the Act encourages regulatory flexibility while ensuring essential consumer and systemic protections.
The legislation focuses exclusively on **payment-use stablecoins**, clearly distinguishing them from investment-oriented digital assets or algorithmic tokens. This approach minimizes risk and supports the integration of stablecoins into payment systems, remittances, and financial services innovation.
Ultimately, S.1582 lays the legal foundation for a safe and modern stablecoin ecosystem. It aligns with broader policy goals of expanding secure access to the payment system, maintaining U.S. leadership in financial innovation, and ensuring that the benefits of digital assets are available through well-regulated, trusted institutions.
Key Components:
- Enables Regulated Market Entry for Stablecoin Issuers
The Act authorizes both state-chartered and federally chartered entities to issue payment stablecoins under clear supervisory regimes—supporting FSAC’s mission to expand lawful, regulated access to U.S. payment infrastructure. - Creates a Dual Pathway for Charter Innovation
By providing separate licensing routes through the OCC and state regulators (with Federal Reserve registration), the legislation affirms FSAC’s call for regulatory parity and flexibility in institutional design. - Establishes Prudential Oversight Through Bank Regulators
The Act places stablecoin issuers under the supervision of the OCC and Federal Reserve, creating consistent, risk-based oversight that reflects FSAC’s vision for responsible financial innovation. - Supports Stablecoins as Legal Payment Instruments
By limiting the scope to fiat-backed tokens used for payments, the Act validates stablecoins as a lawful financial tool—advancing FSAC’s efforts to modernize U.S. payments with secure digital instruments. - Mandates Risk-Appropriate Reserve and Redemption Standards
Issuers must maintain fully backed, high-quality liquid reserves and offer immediate redemption at par, aligning with FSAC’s principle of safeguarding stability without stifling innovation. - Protects and Elevates State Regulatory Authority
State-licensed issuers can operate nationally under a federal registration regime, preserving the legitimacy of state-level supervision and reinforcing FSAC’s support for state-chartered innovation. - Promotes Transparency and Disclosure in Digital Finance
Stablecoin issuers are subject to public reserve disclosures, audit requirements, and operational reporting, helping fulfill FSAC’s goal of building public trust through transparency. - Excludes Unregulated Issuers from the Market
By prohibiting non-permitted entities from issuing payment stablecoins, the Act promotes a level playing field and supports FSAC’s call for fair competition among compliant institutions. - Strengthens U.S. Regulatory Standards for Foreign Issuers
Foreign firms must seek approval from the Federal Reserve to issue stablecoins in the U.S., aligning with FSAC’s advocacy for strong, consistent standards regardless of issuer origin. - Lays the Foundation for Secure Digital Payment Infrastructure
The GENIUS Act ensures that stablecoins—if issued under a regulated framework—can serve as a trusted foundation for innovation in banking, payments, and financial inclusion.