GENIUS Act
What Is the GENIUS Act?
The Guiding and Establishing National Innovation for U.S. Stablecoins or GENIUS Act is the first major cryptocurrency legislation to become law in the United States, specifically focusing on creating federal regulatory standards for stablecoins.
The legislation represents a significant milestone for the cryptocurrency industry, providing what supporters call a “seal of approval” from the federal government. The act aims to create clear rules for stablecoin operations while establishing consumer protections and contributing to the U.S. dollar’s status as the global reserve currency.
What Does The GENIUS Act Do?
Stablecoins are cryptocurrencies pegged to stable assets like the U.S. dollar, designed to maintain consistent value for practical transactions. Before the GENIUS Act, stablecoins operated in a regulatory gray area with no clear federal guidelines, which limited their mainstream adoption and created uncertainty for businesses and consumers.
The GENIUS Act establishes several key requirements for stablecoin operations:
- Stablecoin issuers must hold 100% reserves in cash, U.S. Treasury securities, or similar high-quality liquid assets, ensuring that every stablecoin is backed 1:1 with eligible assets. This means if you hold $100 worth of stablecoins, the issuer must hold $100 worth of actual dollars, Treasury bills, or other approved assets.
- Large stablecoin issuers with over $10 billion in circulation face federal oversight, while smaller issuers can opt for state regulation.
- The Office of the Comptroller of the Currency (OCC) will regulate standalone stablecoin issuers, while the Federal Reserve, FDIC, and other agencies will oversee institutions they already regulate that issue stablecoins.
- Consumer protection measures include priority claims for stablecoin holders, meaning holders would get their money back before other creditors if an issuer goes bankrupt.
- Issuers must provide monthly public disclosures, routine reserve audits, and are prohibited from making misleading marketing claims about government backing or insurance.
- Issuers must comply with anti-money laundering rules and sanctions enforcement, including maintaining the technical capability to freeze, seize, or burn stablecoins when legally required.
