The GENIUS Act in Plain English (for Busy People)

By Hermine Wong | Lecturer, UC Berkeley Law
September 3, 2025

The GENIUS Act is the new U.S. law on stablecoins. Let’s cut through the talking points and marketing, and get down to brass tacks.

1. Yes, we’ve got stablecoins, but only from companies

The GENIUS Act isn’t about experimental code or decentralized crypto projects. It’s about privately issued, dollar-pegged stablecoins. Companies, not protocols, are going to be the core of the U.S. stablecoin system. The law sets the rules for which companies can issue stablecoins, how reserves are managed, what are the compliance requirements, and how coins can be redeemed for US dollars.

2. Who gets to issue

The Act creates three paths to become a stablecoin issuer, which the law calls Permitted Payment Stablecoin Issuer (PPSI):

  • Bank subsidiary: A subsidiary of an existing bank.
  • OCC charter: Non-banks and uninsured national banks can apply to the Office of the Comptroller of the Currency (OCC) for a new federal charter.
  • State issuer: Issuers who will issue less than $10 billion can do so under a state charter, so long as their state’s regulatory regime is certified by a new federal Stablecoin Certification Review Committee (Treasury, Fed, and FDIC).

Bottom line: No matter how a U.S. issuer structures their business, they will need authorization from some regulator.

3. What counts as a reserve asset?

Every token in circulation must be backed 1:1 with high-quality, liquid assets:

  • Cash or demand deposits, custodied at banks
  • Short-term U.S. Treasuries
  • Other highly liquid, low-risk instruments, to be defined by regulators

Issuers cannot back stablecoins with equities, corporate debt, or volatile crypto assets. This is why U.S. stablecoins are often compared to money market funds. Although unlike money market funds, stablecoin reserves are not regulated by the SEC.

Issuers must also publish monthly public reports about their reserves and undergo annual audits (which obviously increases compliance costs, underscoring how difficult it would be for any startups to challenge existing incumbents).

4. High compliance costs is not for startups

Under the GENIUS Act, stablecoins are squarely within a bank-style regulatory framework. There is no SEC v. CFTC jurisdictional tussle. Treasury sets the overall rules of the road, from reserve assets to anti-money laundering and BSA compliance. Meanwhile, day-to-day oversight is assigned to the banking agencies.

  • Bank subsidiaries are overseen by their parent’s regulator (Fed, FDIC, or OCC).
  • Credit union subsidiaries are supervised by the NCUA.
  • OCC chartered-issuers are supervised by the OCC.
  • State-qualified issuers are overseen by their respective state regulator.

All of this means heavy, prudential supervision, e.g., regular, audited reporting and filings; full-blown AML/BSA/KYC programs; examinations and audits. This is not a playground for startups to break through.

5. Retail brands may show up, but probably as whitelabeled stablecoins

We keep hearing that household names (think Amazon and Walmart) will want their own stablecoin. But it’s important to note that the GENIUS Act prohibits non-financial services companies from becoming issuers.

What we are likely to see is retail brands launching a whitelabeled stablecoin by partnering with a regulated stablecoin issuer. The regulated issuer handles reserves, redemptions, compliance while the retail company provides the pipeline of customers.

Interestingly, this new payments route has the potential to drastically change the business models of credit cards and, through competition, push down their fee structures. However, this potential is not yet a reality. Unless stablecoins achieve wide adoption and consumers stay “onchain,” redemption fees for actual U.S. dollars will likely net out any fee savings in the near-term.

Still some big holes

Even with all this framework, some glaring omissions remain:

  • Secondary markets remain unregulated. The law is focused on issuers, not what happens once tokens are in circulation. In other words, there is a lot of regulation about stablecoin issuers’ reserves, redemption policies, compliance obligations, but no explicit regulation of secondary market activity. Congress is regulating stablecoins purely as payments product, but, for now, ignoring the ecosystem around it.  One clear example:
    • No yield from issuers, but yield can be offered by others: Stablecoin issuers themselves cannot pay interest or promote yield (that would risk treating their product as a security). But exchanges, DeFi protocols, and other intermediaries can. Perhaps they will someday be considered under securities laws or lending laws, but for now, it is all regulatory gray zone.
  • Not bankruptcy-remote. While the new law gives stablecoin holders superpriority claims in bankruptcy proceedings, it is not ownership. This means that while they’re better off than unsecured creditors, there is still a stay on their claim and they will have to wait for a court to sort things out and release funds. If the reserves of the issuer are impaired for some reason, the holder’s claim could fall short of the 1:1 peg when things are ultimately paid out.
  • No FDIC insurance. While U.S. stablecoins will be regulated under bank-style regulatory framework, there is no FDIC insurance. If an issuer fails, the holders’ only recourse is to wait out the bankruptcy proceedings.
  • No onchain transparency. The Act only requires monthly reports of the reserves, instead of real-time on-chain transparency of proof of reserves, something valued by crypto-native communities. This means that during moments of stress, we won’t have the kind of transparency we often hear as a fundamental value of the blockchain.
  • Depegging risk. Even with 1:1 reserve rules, stablecoins can still lose their peg. You’ll recall how USDC briefly slipped below $1 during the Silicon Valley Bank collapse. Under the GENIUS Act, there are no obvious protections for holders or penalties for issuers when a stablecoin depegs.

7. The global angle: CBDCs abroad

Because Trump has frozen U.S. CBDC development for the rest of his term, there is increasing chatter about CBDC acceleration abroad, especially with the newly U.S. stablecoin framework. Development of the EU’s digital euro continues to move forward. Most signficantly, however, is China’s and India’s CBDC development. For these countries, CBDCs aren’t just tools for payments, they’re geopolitical instruments. Moreover, with their massive digital-native populations, and already live pilots, they have a big edge over any other implementations.

Looking ahead

The GENIUS Act is a big first step in providing guardrails and consistency for stablecoins, but there are still gaps to fill. There are three years of runway to do that.

Regulators must issue final regulations by July 18, 2026, with the Act becoming effective by January 18, 2027. Even after the effective date, there’s a transition window through July 18, 2028.

The big open question is whether policymakers will use that time to open the door for more entrants, or whether the compliance burden will lock in today’s incumbents.

Hermine Wong is a leading expert on digital asset regulation and policy. She teaches crypto law at UC Berkeley School of Law and advises startups on regulatory and political strategy. She previously led public policy at Coinbase and served as a regulator at the SEC, the White House and the State Department.

Featured image credit: Freepik (DACFP licensed)

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