A New Era for Banking: Navigating the GENIUS Act

The recent enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025, or GENIUS Act, marks a pivotal moment in the evolution of U.S. financial regulations. This landmark legislation, the first major cryptocurrency bill to become law, creates a comprehensive framework for the oversight and regulation of payment stablecoins, irrevocably impacting the traditional banking sector as it provides a clear pathway for financial institutions to enter the stablecoin market.

The Act limits payment stablecoin issuance in the U.S. to approved entities known as “permitted payment stablecoin issuers.” One of the primary avenues is through a subsidiary of the insured depository institution (IDI). This presents a strategic opportunity for the existing banking industry to offer new services that allow them to stay competitive with financial technology companies (FinTechs) and offer modern payment solutions to their account holders. With those new opportunities comes a new revenue stream or the banking industry as well; however, there are some compliance considerations to consider from that perspective within the Act, including –

• Disclosure of Fees:

Just like your typical deposit account today, deposit institutions that become payment stablecoin issuers (PPSIs) are required to publicly disclose all fees associated with purchasing or redeeming stablecoins. This disclosure must be clear, conspicuous, and in plain language.

• Prohibition on Interest/Yield:

The Act strictly prohibits PPSIs and foreign payment stablecoin issuers from paying interest or yield to stablecoin holders solely in connection with the holding, use, or retention of the stablecoin.

• Consumer Protection:

Issuers cannot require customers to obtain an additional paid product or service or agree not to obtain a product or service from a competitor, as a condition for accessing or using stablecoins.

• Fee Changes:

Changes to existing fees require a minimum of seven days’ advance notice to consumers.

• Reserve Requirements:

The Act mandates a 100% reserve backing for all stablecoins, held in high-quality, liquid assets like U.S. currency and short-term Treasuries. Deposit institutions and their subsidiaries must implement robust systems to ensure these reserves are always maintained, segregated from operational funds, and not rehypothecated. By requiring stablecoin reserves to be held in U.S. Treasuries and other liquid assets, the GENIUS Act is expected to increase demand for these assets, which in turn could help strengthen the U.S. dollar’s role as the world’s reserve currency.

• Transparency and Audits:

Stablecoin issuers are required to publish monthly public disclosures of their reserve composition and undergo regular third-party audits. This will require institutions to establish new reporting mechanisms and work with external auditors to verify compliance.

• BSA/Anti-Money Laundering (AML) and Sanctions:

The GENIUS Act classifies stablecoin issuers as financial institutions under the Bank Secrecy Act. This means they must comply with existing AML and sanctions regulations, including having a compliance officer, monitoring suspicious transactions, and implementing customer identification programs. The law also requires issuers to have the technical capability to freeze or seize stablecoins when legally required.

The law also clarifies the roles of different regulatory bodies. Stablecoin-issuing subsidiaries of IDIs will be regulated by their existing primary federal banking agency. Nonbank issuers, on the other hand, will be supervised by the Office of the Comptroller of the Currency (OCC). This structure provides a clear chain of command and avoids the regulatory ambiguity that has plagued the crypto industry for years.

While the GENIUS Act certainly represents a landmark moment for the banking industry by providing a structured and predictable regulatory environment that empowers banks to innovate in the digital asset space, it also creates new and complex compliance obligations that the industry must address now and in the future. As always, don’t hesitate to reach out to one of our advisors through a consultation request. We are here to help you and your institution successfully navigate this new frontier.