On June 17, 2025, the U.S. Senate passed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. If enacted, the bill would establish a comprehensive federal regulatory framework for stablecoins and would mark the first major federal legislation regulating the broader cryptocurrency space.

The bill specifically would establish a regulatory framework for “payment stablecoins,” which the bill defines as digital assets that: 1) are used or designed to be used as a method of payment or settlement; 2) the issuer is obligated to convert, redeem, or repurchase for a fixed amount of monetary value in fiat currency; and 3) the issuer represents will maintain, or creates a reasonable expectation that the coin will maintain, a stable monetary value. The bill anticipates such payment stablecoins being used as a medium of exchange, rather than as an investment opportunity. To that end, the bill would prohibit issuers of payment stablecoins from paying interest on issued payment stablecoins, a practice among certain issuers today.

The GENIUS Act primarily focuses on issuers of payment stablecoins but would also impose requirements on entities that hold custody of payment stablecoins. Below, we discuss several key takeaways from the bill for industry participants.

Who Would Regulate Payment Stablecoins?

Under the GENIUS Act, only “permitted payment stablecoin issuers” would be allowed to issue payment stablecoins in the U.S. The bill would divide responsibility for approving and overseeing payment stablecoin issuers between multiple regulators.

On the federal level, issuers of payment stablecoins that are subsidiaries of insured depository institutions would be regulated by their primary federal banking regulator, while most other issuers would be regulated by the Office of the Comptroller of the Currency as “federal qualified payment stablecoin issuers.” Nonbank payment stablecoin issuers with a market capitalization of $10 billion or less would be able to opt out of federal regulation, as “state qualified payment stablecoin issuers” if regulated under a state regulatory regime that is “substantially similar” to the GENIUS Act’s framework.

A state’s regulatory regime would require annual certification from the “Stablecoin Certification Review Committee,” consisting of the Secretary of the Treasury, Chair or Vice Chair for Supervision of the Federal Reserve Board, and Chair of the Federal Deposit Insurance Corporation for issuers to be regulated by the given state. The first such certification would be required not later than one year after the bill’s effective date.

The bill would amend the definitions of a “security” in the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, and the Securities Investor Protection Act of 1940, plus the definition of a “commodity” in the Commodity Exchange Act, to exclude “a payment stablecoin issued by a permitted payment stablecoin issuer.” The bill would also amend the Investment Company Act to exclude permitted payment stablecoin issuers from the definition of an “investment company” under the same provision typically used by banks. The practical effect of these exclusions would be to largely remove payment stablecoins covered by the bill from the purview of the Securities and Exchange Commission (SEC) and the Commodities Future Trading Commission (CFTC).

What Requirements Would Payment Stablecoin Issuers Face?

The bill would require payment stablecoin issuers to maintain reserves backing the payment stablecoins that they issue on a one-to-one basis. Assets approved for use as payment stablecoin reserves under the bill include U.S. dollars, bank deposits, short-term Treasury bills, certain repurchase agreements backed by Treasuries, and certain money market funds.

To provide transparency over reserves, the bill would require issuers to publish on their website monthly reports detailing their total number of outstanding payment stablecoins and the amount and composition of their reserves. The bill would also classify permitted payment stablecoin issuers as financial institutions under the Bank Secrecy Act, which would require them to maintain anti-money laundering and customer identification programs, among other requirements.

A late addition to the bill would impose additional requirements on public companies that are not “predominantly engaged in 1 or more financial activities,” as such activities are defined in the Bank Holding Company Act. Such companies would not be permitted to issue payment stablecoins unless they obtain a unanimous vote from the Stablecoin Certification Review Committee finding that the stablecoin would not impose a material risk to the safety and soundness of the U.S. banking system and that the company would comply with certain data use limitations.

What Requirements Would Custodians of Payment Stablecoins Face?

The bill would require persons engaged in “the business of providing custodial or safekeeping services” for the private keys used to issue payment stablecoins, as well as the reserves backing them, to adhere to a separate set of requirements from issuers. Entities would only be permitted to provide custodial or safekeeping services if they are subject to supervision or regulation by a federal banking agency, the SEC, or the CFTC, or if they are subject to supervision by a state banking regulator.

The bill would generally prohibit payment stablecoin custodians from comingling payment stablecoins or their reserves with funds beyond other such stablecoins or reserves. The bill requires custodians to treat payment stablecoins and reserves held in custody as property of the owner and gives the owner priority over any other claims to the assets.

These requirements would not apply to a person solely on the basis that such person engages in the business of providing hardware or software to facilitate a customer’s own custody of the customer’s payment stablecoins or private keys, carving out certain digital wallet providers from the scope of the bill’s requirements for custodians.

How Would the Bill, If Enacted, Interact with Existing State Law?

While there is currently no federal law or regulation specific to stablecoins, certain state laws are relevant to stablecoin issuers. Both New York and Louisiana require entities engaged in “virtual currency business activities,” including exchanging, transferring, storing, or administering virtual currency, to be licensed to perform such activities in those states or with respect to their residents. On July 1, 2026, a similar cryptocurrency regulatory regime will take effect in California. Additionally, a number of other states require licensure for certain cryptocurrency activities, such as cryptocurrency issuance and custody, under money transmission laws.

The GENIUS Act would preempt any state requirements for a “charter, license, or other authorization” to do business with respect to a federal qualified payment stablecoin issuer or subsidiary of an insured depository institution or credit union. The bill would not affect a state’s ability to license, regulate, or supervise an insured depository institution or credit union chartered in that state or to supervise a subsidiary of such an institution that is a permitted payment stablecoin issuer. The bill also states that, for state qualified payment stablecoin issuers, the laws of states other than the state where they are licensed (that is, the law of “host states”) apply only to the same extent such laws would apply to activities in the host state conducted by an out-of-state federal qualified payment stablecoin issuer. Moreover, the laws applicable to state qualified payment stablecoin issuers under that provision exclude laws governing chartering, licensure, or other authorization to do business in the host state.

What Are Next Steps for Stablecoin Legislation?

The GENIUS Act’s passage of the Senate is an important step toward stablecoin legislation being signed into law. While the full House of Representatives has not passed a stablecoin bill, the House Financial Services Committee passed a bill in April 2025 that would regulate payment stablecoins, known as the STABLE Act. Congress will ultimately need to reconcile these proposals to pass legislation.

If signed into law as currently drafted, the bill would become effective on the earlier of either 18 months after enactment, or 120 days after federal regulators issue implementing regulations. The bill would require the federal banking agencies to issue those implementing regulations in coordination with one another for areas including permissible reserves, licensing, examination, and supervision for permitted payment stablecoin issuers. The bill would require each federal banking agency to submit to Congress a report confirming and describing such regulations no later than 180 days after the bill’s effective date.

The GENIUS Act comes at a rare moment where regulation is aligning with innovation, presenting opportunities for crypto innovators.

Wilson Sonsini advises fintech companies on how to strategically navigate the novel, evolving legal issues raised by stablecoins and crypto generally. Please do not hesitate to contact Amy Caiazza, Jess Cheng, or any member of the firm’s Fintech and Financial Services practice for more information.