What is the GENIUS Act? The US Federal Stablecoin Law

The GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins Act) is the first US federal law specifically regulating payment stablecoins. It was passed by Congress and signed by the President in July 2025, after years of iteration from earlier proposals such as the STABLE Act and Lummis-Gillibrand.

The law establishes that only Permitted Payment Stablecoin Issuers (PPSIs) — FDIC-insured banks, non-bank subsidiaries of banks, and qualified federal/state entities — can issue payment stablecoins to the US public. It requires 1:1 reserves in cash and short-term Treasury bills, monthly disclosure of reserve composition, and prohibits uncollateralized algorithmic stablecoins.

In April 2026 the OCC and Federal Reserve published the Notice of Proposed Rulemaking (NPRM) with implementation rules, including capital requirements, orderly resolution, AML/BSA obligations, and a transition regime for existing issuers. Public comment closes in July 2026 and full effectiveness is expected in 2027.

The GENIUS Act coexists with the SEC securities framework for stablecoins deemed securities and with CFTC oversight of stablecoins used in derivatives. Circle, PayPal, and Gemini are among the first to apply for federal licenses.

The April 2026 rulemaking closes two asymmetries that had been open since the signing: (1) the FDIC released comprehensive proposed rules for insured banks to issue payment stablecoins under a formal regulatory framework, aligning the model with the GENIUS Act and opening the comment period; (2) the FASB simultaneously closed consultation on accounting treatment and mandatory disclosure of stablecoins on corporate balance sheets (deadline Q3 2026). The FDIC + FASB + GENIUS NPRM concurrency makes April 2026 the most important regulatory paper-week in the sector's history.

For non-US issuers (Tether, Ethena's USDe), the GENIUS Act creates a dilemma: either comply with the PPSI framework (which means licensing a US-FDIC-supervised entity with audited US reserves) or lose access to the US retail market. Tether has confirmed it will keep its El Salvador domicile and rely on offshore venues, while Circle (USDC) and PayPal (PYUSD) have positioned themselves as early compliers. The USDT vs USDC market split is set to intensify in H2 2026.