Introduction
The United States has passed its first federal stablecoin law. The Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025—better known as the GENIUS Act—was signed into law in July 2025. It marks a turning point in how payment stablecoins are governed, classified, and deployed within the U.S. financial system.
For years, stablecoin issuers operated in a patchwork of state money transmitter regimes, subject to ad hoc guidance from the SEC, CFTC, and the Office of the Comptroller of the Currency (OCC). The GENIUS Act replaces that uncertainty with a licensing regime that draws clear lines around who can issue stablecoins and how they must operate.
But buried within the statute are mandated studies that signal what regulators may target next: algorithmic models, offshore issuance, and potential risks to monetary policy. These studies may not be binding today—but they point to tomorrow’s legal perimeter.
This article provides a structured breakdown of the GENIUS Act’s legal framework, analyzes its compliance requirements, and highlights what founders, investors, and general counsel must prepare for in 2025 and beyond.
You can access the full GENIUS Act text here.
What the GENIUS Act Does
Creates a Federal Licensing Path for Stablecoin Issuers
The Act prohibits any person or entity from issuing a payment stablecoin in the United States unless they qualify under one of three categories:
- Insured depository institutions (e.g., national banks)
- Nonbank financial institutions licensed by the OCC
- State-qualified issuers with under $10 billion in total assets
Entities that do not fit these categories—such as offshore issuers, decentralized protocols, or unlicensed fintechs—are effectively banned from issuing stablecoins to U.S. users.
Requires 1:1 Reserve Backing and Monthly Audits
Every dollar of a GENIUS-compliant stablecoin must be backed by a dollar of reserve assets. The law restricts acceptable reserves to:
- U.S. dollars
- U.S. Treasury bills with under 90 days to maturity
- Certain repurchase agreements backed by Treasuries
- Funds held at insured depository institutions
Monthly public attestations are required, along with annual audits by an independent registered public accounting firm.
Mandates Disclosures and Redemption Terms
Issuers must clearly disclose to users:
- How the stablecoin is backed
- How redemptions are processed
- Who holds and manages the reserves
- Legal terms and risks, including insolvency protections
These disclosures must be accessible in user interfaces and submitted to the OCC. Redemption must be made available at par, with timelines and procedures specified in advance.
Key Areas of Study: What Comes Next
The GENIUS Act doesn’t just regulate. It directs multiple federal agencies to conduct studies on the future risks and policy trade-offs surrounding stablecoins. These studies will inform the next wave of regulation. Here’s what’s on the radar.
1. Treasury Study on Illicit Finance and Foreign Issuers
Within 180 days, the Treasury must publish a study on how stablecoins may be used to facilitate:
- Money laundering
- Terrorism financing
- Sanctions evasion
- Unlicensed issuance by offshore entities targeting U.S. users
This study may lead to new restrictions on wallet providers, exchanges, or protocols interacting with non-U.S.-licensed stablecoins.
Implication: Projects operating outside the U.S. but serving U.S. users should anticipate a perimeter tightening, especially for wallets or protocols facilitating swaps, mints, or redemptions.
2. Federal Reserve Study on Monetary Policy Impact
The Board of Governors is required to submit a report on:
- The impact of payment stablecoins on the Fed’s ability to manage interest rates
- Potential interference with monetary policy tools
- Risks to payment system stability
The Fed’s findings could influence future limitations on stablecoin usage in Treasury or repo markets.
Implication: Even fully licensed issuers may face future limits on how and where their stablecoins circulate—especially if stablecoins begin to displace commercial bank money.
3. Study on Algorithmic Stablecoins
The Act calls for an interagency review of algorithmic models, including those not backed 1:1 with fiat reserves. The study must analyze:
- Market volatility
- Redemption risk
- Failure modes during depegging events
- Whether additional legislation is needed to ban or restrict algorithmic issuance
Implication: This opens the door to a formal federal ban or additional regulation of algorithmic designs. Projects using partial collateralization, rebasing mechanisms, or synthetic pegs may be permanently excluded from U.S. markets.
Strategic Risks and Blind Spots
Redemption Friction = Legal Risk
If a GENIUS-licensed stablecoin is redeemable in theory but delayed in practice, regulators may treat that as a deceptive practice. UX friction, backlogs, or counterparty bank delays must be disclosed and managed through compliant operations.
Reserve Misalignment Across Jurisdictions
Reserves that comply under GENIUS (e.g., U.S. Treasury bills) may violate MiCA or HKMA requirements for local segregation or custodial licensing. Multi-jurisdictional reserve strategies must be coordinated by counsel familiar with U.S., EU, and APAC regulations.
Distribution to Unlicensed Wallets
Even with a GENIUS license, distributing stablecoins to wallets that do not meet Travel Rule standards—or interacting with protocols that do not implement OFAC screening—can trigger enforcement. Distribution control is as important as issuance control.
What to Do Now: General Counsel Action Items
For projects issuing or integrating stablecoins:
- Confirm issuer qualification. Determine whether you are eligible under the GENIUS Act’s three-tier licensing system. If not, cease U.S. issuance or restructure accordingly.
- Review reserve instruments. Vet your reserve portfolio against the Act’s eligible asset list. Eliminate yield-bearing or synthetic positions that introduce redemption mismatch risk.
- Prepare monthly attestation procedures. Select an independent public accounting firm and implement policies for monthly disclosures and annual audits.
- Evaluate redemption flow. Document user experience, timelines, and backend support. Ensure it meets the “par value redemption” standard under federal law.
- Track Treasury and Fed studies. Prepare compliance scenarios based on the potential outcomes of the mandated reports. Especially relevant for projects using offshore foundations or algorithmic designs.
- Map cross-border obligations. Align GENIUS compliance with MiCA, HKMA, and FATF Travel Rule standards. Where overlap is not possible, determine which jurisdictions will govern issuance versus distribution.
Conclusion: GENIUS Is Just the Beginning
The GENIUS Act is not just a licensing framework. It is a regulatory perimeter. Projects that meet its requirements will gain access to institutional rails, bank partners, and U.S. markets. Projects that do not will be excluded from core financial infrastructure, even if they are technically sound or popular abroad.
The mandated studies point to what’s next: heightened scrutiny of offshore issuers, algorithmic designs, and macro-level risks to the financial system. Founders and investors should view GENIUS not as the end of regulatory uncertainty—but the start of an enforcement-first era.
Need help interpreting or aligning with the GENIUS Act?
Veritas Global advises stablecoin issuers, protocol developers, and cross-border fintech operators on how to structure legally compliant frameworks across the U.S., EU, and Asia.
Schedule a strategy call or explore our insights to stay ahead of what comes next.
