What are the requirements of the GENIUS Act under the U.S. encryption policy?

Detailed explanation of the GENIUS Act: New regulations and compliance paths for stablecoin supervision

The GENIUS Act ("Guiding and Establishing National Innovation Law for U.S. stablecoin Countries") was officially signed into law on July 18, 2025. This is the first independent federal law passed by the U.S. Congress to address specific categories of crypto assets. The bill requires all issuers of U.S. payment stablecoins to follow a strict 1:1 cash equivalent reserve standard, obtain federal or state licenses, make monthly public reserve disclosures, and prohibit the payment of interest or income to holders.

However, the core obligations of the bill have not yet taken effect. According to legal provisions, these regulations will take effect as early as January 18, 2027; if regulators complete the formulation of implementation rules in advance, they may take effect earlier.

What is the GENIUS Act?

The GENIUS Act defines a "payment stablecoin" as a digital asset used for payments or settlements that can be exchanged for a fixed amount (usually one dollar). The bill deliberately distinguishes payment stablecoins from other digital assets and excludes them from the securities or commodity classification under existing federal law.

Reserve rules under the GENIUS Act

Reserve mandatory requirements are at the heart of the bill and there is little room for interpretation:

• 100% Backing criterion: The issuer must hold at least one dollar of licensed reserves for every dollar of stablecoin circulation.
• Permitted reserve range: Limited to U.S. coins and currencies, deposits with insured banks and credit unions, Treasury bonds with a remaining maturity of 93 days, overnight repo agreements backed by Treasury bonds, government money market funds, and central bank reserves.
• Prohibition of interest payments: Issuers may not pay interest or income to anyone solely because of holding stablecoins.
• Capital and Risk Management: Capital, liquidity and risk management requirements need to be tailored to the size and business model of each issuer and set jointly by federal and state regulators.

Who is qualified to legally issue payment stablecoins?

Licensing is at the center of the framework, and the bill provides issuers with three different compliance paths:

Three licensing paths

1. Federally qualified non-bank issuers approved by the Office of the Comptroller of the Currency (OCC).
2. Insured banks operating stablecoin subsidiaries.
3. State qualified issuers operating under state regulatory systems certified as "substantially similar" to federal standards.

US$10 billion threshold

Uninsured banks or non-bank issuers with outstanding stablecoin balances below US$10 billion have the option to join the state regulatory system and operate nationwide. Once an issuer exceeds this threshold, it must transition to a federal regulatory framework within 360 days unless it obtains a federal regulatory exemption.

What information must issuers disclose?

Transparency obligations are implemented on a monthly basis, and violations will face severe penalties:

• Redemption Policy: Announces redemption policies that explain how and when holders can convert stablecoins back into U.S. dollars.
• Monthly confirmation: Monthly confirmation letter detailing the exact composition of reserve assets.
• Executive Certification: Monthly certification by the issuer's CEO and CFO of the accuracy of the report.
• Annual Anti-Money Laundering Certification: Submit Anti-Money Laundering (AML) and Sanctions Compliance Certification within 180 days of obtaining authorization and annually thereafter. Failure to submit results in license revocation, and knowingly submitting false certification can result in up to five years in prison.
• Financial Reporting: Issuers with more than $50 billion outstanding stablecoins (if not already subject to SEC reporting) must also publish annual GAAP financial statements, including related party transaction disclosures.

In addition, marketing is strictly restricted: issuers may not use "United States,""United States Government," or similar government terms in the name of a stablecoin, nor may they market in a way that implies it is fiat currency, a government issue, or a government guarantee. The law clearly states that payment stablecoins are not protected by FDIC or NCUA insurance and are not endorsed by the U.S. government's discretionary credit. If the issuer goes bankrupt, the holder of the stablecoin has a better order of repayment than other creditors.

When will the GENIUS Act actually take effect?

The timetable for the bill has become quite complex. Section 13 gives the Office of the Comptroller of the Currency (OCC), the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Treasury Department, and state regulators a full year from the date of promulgation (i.e., until July 18, 2026) to finalize implementing rules through an announcement and comment process. However, agencies missed the deadline; as of the deadline, the main rule package covering licensing, reserves, capital, custody and anti-money laundering controls remained only proposals rather than final regulations.

The OCC said it expects to complete its rule development by November 2026, which would push the law's effective date to around March 2027 based on the bill's 120-day implementation window.

About August 17, 2026, in order to strengthen enforcement before the effective date, the Treasury Department issued proposed rules under Article 3, formally defining who has the right to legally issue, provide or sell payment stablecoins to U.S. customers, and stipulating that unauthorized sales will face criminal penalties once the deadline comes. The rule-making process also exposed specific compliance gaps in Tether, the largest stablecoin issuer.

Tether's own first-quarter 2026 BDO Italia confirmation letter shows that approximately 25% of USDT reserves are in assets prohibited by the GENIUS Act, including approximately $8 billion in gold and $7 billion in Bitcoin. This means that even after overcoming another hurdle-the Treasury Department's reciprocal determination (confirming that its parent jurisdiction's rules are equivalent to U.S. standards and had not been released as of August 2026), Tether still needs to restructure assets worth an estimated $47 billion.

Another deadline is July 18, 2028, when digital asset service providers must completely stop providing any non-compliant stablecoins to U.S. users. Missing the rulemaking deadline will not suspend the bill itself: no matter when final regulations are in place, reserve, disclosure and bankruptcy priority requirements will remain legally binding.

Conclusion

The GENIUS Act requires a 100% liquid asset reserve, mandatory federal or state licensing, monthly public disclosures, annual anti-money laundering certification, and gives stablecoin holders priority in bankruptcy. These obligations will take effect on January 18, 2027, or 120 days after regulators complete rule development, whichever is earlier. A new rule from the Ministry of Finance now defines criminal penalties for unauthorized sales, and exchanges must completely remove non-compliant tokens by July 18, 2028.