Stablecoins have been sprinting ahead of the rules for years. Oversight was patchy, and there was no uniform bar for reserves, audits, or redemption. We saw the risks in practice: for example, TerraUSD’s 2022 collapse, and USDC briefly losing parity in 2023 after exposure to a failing bank.
US regulators worried about runs, forced selling of treasuries during stress, and illicit-finance loopholes. A 2021 President’s Working Group report urged Congress to bring issuers inside the banking perimeter and set one national standard for who can issue, how reserves are held, and how users are protected. Congress answered that call with the GENIUS Act, the US’s first federal law that squarely regulates stablecoins and compliance will be required broadly by January 2027.
Below, we’ll cover what the GENIUS Act entails, what it means for different stakeholders, and what compliance looks like now.
What are the key features of the GENIUS Act?
The GENIUS Act defines what counts as a stablecoin, who gets to issue one, and the rules for reserves, reporting, and compliance.
What qualifies as a “payment stablecoin”?
The law covers only one model: fiat-backed stablecoins redeemable at par. If it isn’t pegged 1:1 and payable on demand, it doesn’t count. Algorithmic experiments are excluded.
Who’s allowed to issue?
Banks and credit unions can issue under their existing regulators. Nonbanks need approval from the Office of the Comptroller of the Currency (OCC). States, if substantially similar to the federal regime, can supervise smaller programs, but only up to $10 billion; after that, they move under federal supervision. Foreign issuers have to adhere to a list of requirements including proving they’re regulated at home to the same standard, as well as register with the OCC.
How are the rules for reserves?
Every stablecoin has to be matched, dollar for dollar, with high-quality liquid assets, which include cash and short-term treasuries. Monthly disclosures are mandatory, independent audits for large issuers are annual, and executives have to personally certify the numbers. If an issuer collapses, holders of the stablecoins get their money back before any other creditors.
What isn’t permitted?
Issuers can’t market their stablecoins as government-backed, and they can’t pay yield directly to holders.
What checks are required?
Issuers are now legally treated as financial institutions under the Bank Secrecy Act, which means Know Your Customer (KYC) and anti-money laundering (AML) checks are required. And they need the technical ability to freeze or burn coins in response to law enforcement requests.
How do stablecoin regulations affect different stakeholders?
The GENIUS Act reshapes the ground for everyone involved in stablecoins, from the companies that issue them to the institutions that move money and the people who actually hold and use the tokens. Issuers, banks, fintech platforms, and end users all walk away with a different set of obligations, rights and opportunities.
How it affects issuers
Launching a stablecoin now means acting more like a bank: licensing, audits, reserve management, and an AML program that can withstand scrutiny. Smaller crypto startups will need to partner with regulated institutions or use platforms such as Bridge that already have the compliance stack in place. The upside is legitimacy: those who make it through will find themselves running products that regulators and institutions can trust.
How it affects financial institutions
Financial institutions could already issue tokenized deposits, but the law now explicitly allows banks and payment companies to issue stablecoins and integrate them into payments, settlement, and custody. That means faster cross-border transactions, cheaper remittances, and new treasury tools.
How it affects consumers
The law builds in protections for everyday users. Stablecoins have to be fully backed with eligible reserve assets and come with the guarantee that holders are first in line to redeem their stablecoins for cash if an issuer fails. No issuer can promise direct yield, and none can pretend their stablecoins are government-insured. That honesty, combined with transparency, is what lets consumers treat compliant stablecoins as digital dollars without worrying they’ll disappear overnight.
What compliance framework and best practices should issuers follow?
Issuers now have to run their reserves, audits, and AML programs at the level regulators expect from banks. They’ll need to build systems that can actually work day to day.
Here’s what they’ll need to consider.
What regulators are involved in stablecoin oversight?
Oversight is spread across the core banking agencies. The OCC supervises nonbank issuers that get federally licensed. The Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and National Credit Union Administration (NCUA) regulate banks and credit unions that issue stablecoins. The Treasury Secretary and the OCC oversee foreign issuers. The Financial Crimes Enforcement Network (FinCEN) enforces AML requirements. State regulators can still oversee smaller issuing programs, but only if their rules match the federal standard.
How should issuers manage reserves?
Every stablecoin must be backed one-for-one with the safest assets available: cash, short-term treasuries, certain money market funds, or certain collateralized overnight repurchase agreements. Additionally, excluding repurchase agreements, tokenized versions of the above assets are also allowed. That requires daily reconciliation and tight internal controls so the numbers never drift. Issuers have to publish monthly reserve reports, undergo independent audits (for large issuers), and certify the results at the executive level. In the event of insolvency, stablecoin holders are first in line to reclaim those reserves.
What compliance obligations apply to issuers?
The law treats issuers as financial institutions under the Bank Secrecy Act. That means KYC checks, ongoing transaction monitoring, and reporting of suspicious activity. Issuers also need sanctions screenings, strong information technology risk management tailored to their business model, and the technical ability to freeze or burn stablecoins if ordered by law enforcement. These requirements demand ongoing investment in compliance teams and technology.
Issuing under the GENIUS framework is closer to running a bank than to running a crypto project. The companies that succeed will be the ones that treat compliance as infrastructure, not as an afterthought.
What is the future of stablecoin regulation?
The GENIUS Act is only the start. Implementation, enforcement, and global responses will shape what stablecoins look like in practice around the world. Understanding what comes next helps issuers, institutions, and investors decide where to place their bets.
What changes are coming next?
The law is passed in the U.S., but the work isn’t done. Regulators now have to translate it into actual playbooks: how to apply for OCC approval, what counts as a similarly situated state regime, how often supervisors come knocking, and how FinCEN expects issuers to spot shady flows on-chain.
The GENIUS Act goes into full effect either 18 months after it was enacted or 120 days after regulators issue their final guidance—whichever comes first. After that, unlicensed stablecoin issuers won’t be allowed to operate in the US and those that are authorized will need to comply.
How does the US stack up globally?
Other markets are writing their own scripts, though many follow a similar format. The EU’s Markets in Crypto-Assets Regulation (MiCA) requires stablecoin issuers to be authorized and meet reserve requirements amongst a long list of other regulatory requirements. Hong Kong also passed its own stablecoin law in 2025 that mirrored the US on 1:1 reserves and licensing. The UK is working to create a financial services regulatory regime for cryptoassets such as stablecoins.
What does this mean for innovation and investment?
Now that there’s a legal lane, venture capitalists (VCs) who have been skittish have more reason to write checks, and banks can actually build products on stablecoin networks without worrying their lawyers will kill it in committee. The winners will be the boring-sounding but transformative use cases: treasury teams moving cash across borders instantly, fintech apps offering accounts in markets where local banks can’t, and exchanges cutting out direct debit delays with stablecoin deposits. The innovation that survives will be sturdy: solid infrastructure, clean integrations with banks, and resilience in moments of stress.
The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Bridge does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent attorney or accountant licensed to practice in your jurisdiction for advice on your particular situation.
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