GENIUS Act: Important Time Nodes and Core Content Analysis

Source: Morgan Lewis; Translation: Jinse Finance xiaozou

On July 17, 2025, the U.S. House of Representatives passed the "GENIUS Act," a landmark piece of legislation that has been submitted to President Trump for signing. This act will establish a comprehensive regulatory framework covering both federal and state levels to supervise and enforce regulations on payment stablecoin issuers.

There is a divergence between supporters of the bill and lawmakers advocating for the inclusion of the provisions of the House's "STABLE Act" into the "GENIUS Act."

This article details the key time points since the enactment of the bill, interprets the core content of the passed "GENIUS Act", and focuses on analyzing the main differences between it and the STABLE Act. It also outlines the relevant tasks and deadlines for institutions intending to issue payment stablecoins or provide custodial services.

1. Important Timeline

After the passage of the "GENIUS Act", key timelines have been clarified. First, the Act prohibits the issuance of payment stablecoins, but this ban will only officially take effect after the "effective date" of the Act (expected to be November 2026). During this period, banking regulators, state-level stablecoin regulators, and the Treasury Secretary must formulate supporting rules and submit reports to implement the Act.

The key timeline is as follows:

Effective Date of the Bill: The bill and its amendments will take effect on the earlier of the following two dates: 18 months after the bill is enacted, or 120 days after the primary federal regulatory agency for payment stablecoins issues its final implementation regulations. Thereafter, payment stablecoin issuers within the United States must comply with the obligations of the bill, the most important of which is to obtain approval for issuance from the regulatory agency.

Anti-Money Laundering Innovative Mechanism: A public consultation lasting 60 days will be initiated within 30 days of the bill's enactment. The Secretary of the Treasury must collect innovative methods/technologies/strategies currently used or potentially adopted by regulated financial institutions to detect illegal activities involving digital assets (such as money laundering). Within three years of the bill's enactment, the Financial Crimes Enforcement Network (FinCEN) must issue public guidance or legislative proposals regarding illegal activities involving digital assets based on research findings of innovative detection methods.

Rulemaking and Regulatory Requirements: Major federal payment stablecoin regulators, the Secretary of the Treasury, and state-level payment stablecoin regulators must issue implementing regulations within one year of the enactment of the bill, through appropriate notice and comment procedures. Within 180 days after the bill takes effect (approximately one year after the final rules are issued), a report must be submitted to the relevant committees of both the House of Representatives and the Senate, confirming and explaining the regulatory rules issued to implement the bill.

Exemption Clause for Foreign Payment Stablecoin Issuers: Within one year of the enactment of the law, the Secretary of the Treasury must establish rules to determine whether the foreign stablecoin regulatory framework is compatible with the U.S. federal system, thereby deciding whether stablecoin issuers in that jurisdiction may be exempt from compliance with U.S. regulations regarding licensing requirements for payment stablecoin issuers. After the relevant rules are issued, foreign payment stablecoin issuers (or foreign regulatory authorities) may submit a compatibility determination application to the Secretary of the Treasury, who must make a compatibility determination (i.e., whether to exempt from applicable U.S. regulatory requirements) within 210 days of receiving the application.

Certification and Review Mechanism: State-level payment stablecoin regulatory agencies must submit preliminary certification documents within one year after the law takes effect (approximately two and a half years after the law is enacted), demonstrating that their state-level regulatory system is substantially similar to the federal framework. The Stablecoin Certification Review Committee must make an approval or rejection decision within 30 days of receiving the certification documents.

Sales Ban on Unapproved Payment Stablecoins: While issuers of payment stablecoins must meet compliance requirements by the effective date (approximately one and a half years after the bill is enacted), the bill provides a longer grace period for entities providing payment stablecoin trading or custody services. Three years after the bill is enacted, any institution engaged in payment stablecoin trading or custody services must restrict its business scope to only payment stablecoins issued by issuers approved under the bill.

2. Core Content of the "GENIUS Act"

**(1)**Key Definitions of the GENIUS Act

The "GENIUS Act" establishes a comprehensive regulatory framework for payment-type stablecoins in the United States. As the act is about to be promulgated, stakeholders need to pay special attention to several key definitions within the act, which clearly delineate the boundaries of the regulatory scope.

Definition of Payment Stablecoin

The core definition of the "GENIUS Act" is "payment stablecoins," which includes both their usage and clearly defines their value attributes. The Act stipulates that payment stablecoins are: 1) digital assets (i.e., digitized representations of value recorded on a digital ledger secured by cryptographic technology); 2) used or designed as a means of payment or settlement (rather than for investment purposes); 3) redeemable or exchangeable for a stable fixed amount of equivalent fiat currency or deposits. This definition explicitly excludes fiat currency/deposit-type digital assets and securities-type digital assets, and other provisions of the Act further clarify that payment stablecoins do not fall under the category of commodities.

Institution Definition

To achieve regulatory coverage, the "GENIUS Act" provides clear definitions for relevant institutions:

Approved Payment Stablecoin Issuer (PPSI): As the primary regulatory target of the bill, entities can become a PPSI through three methods, all of which require submitting an application and obtaining regulatory approval: 1) Depository institutions can issue through a subsidiary approved by the federal payment stablecoin regulatory agency; 2) Non-bank institutions, uninsured national banks, and foreign bank federal branches can apply to the Office of the Comptroller of the Currency (OCC); 3) Non-bank institutions with a total issuance below $10 billion can choose to apply to state-level regulatory agencies.

Digital Asset Service Provider: The bill simultaneously defines the category of entities engaged in the transfer and custody of digital assets, referring to any entity conducting transactions or custody of digital assets (including payment stablecoins) for profit. This definition explicitly excludes developers of distributed ledger protocols, specific custody software interfaces, and entities that solely provide liquidity pool services.

Government-related Definitions

The "GENIUS Act" establishes a regulatory framework consisting of federal or state banking regulatory agencies. The definition of "appropriate federal banking agency" is consistent with Section 3 of the Federal Deposit Insurance Act (12 USC 1813). The clearly defined federal regulatory agencies include: the Federal Reserve Board ("Board"), the Office of the Comptroller of the Currency ("OCC"), and the Federal Deposit Insurance Corporation ("FDIC"). The National Credit Union Administration is designated as the primary federal regulatory agency for insured credit unions and their subsidiaries regarding payment stablecoins.

The regulatory entities specifically defined by the bill include: 1) the primary federal regulator for payment stablecoins (which includes the National Credit Union Administration for credit unions), as well as the Stablecoin Certification Review Committee composed of the Secretary of the Treasury, the Chair of the Committee, and the Chair of the Federal Deposit Insurance Corporation; 2) state-level regulators for payment stablecoins, which are the state-level agencies that have primary regulatory authority over payment stablecoin issuers. Although states are not required to establish such regulatory bodies, if they do, they must complete synchronization with federal regulators within one year.

It is worth noting that the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Consumer Financial Protection Bureau (CFPB) are not included in the regulatory framework for payment stablecoin issuers, and these agencies do not bear relevant regulatory functions under the framework of the GENIUS Act.

(2) Core Obligations for the Issuance and Trading of Payment Stablecoins

Issuance and Circulation Standards

Chapter 3, Section 3(a) of the Act clearly stipulates that it is illegal for non-permitted payment stablecoin issuers (PPSI) to issue payment stablecoins within the United States.

However, the bill sets a grace period for certain obligations. Chapter 3 stipulates that entities can only trade or custody payment stablecoins issued by PPSI, but this requirement will not take effect until three years after the bill is signed. This transitional period may be based on considerations of the existing market—payment stablecoins have become an important part of financial services, with an estimated daily trading volume in the U.S. reaching up to $70 billion.

Issuance Access Requirements

Chapter 4 specifies the compliance conditions for the issuance of payment stablecoins: issuers must maintain a 1:1 reserve, publicly disclose redemption policies, and report reserve composition monthly. The bill prohibits reserve re-hypothecation except in specific circumstances, and sets capital adequacy, liquidity, and risk management requirements based on the issuer's business model and risk characteristics. Additionally, it explicitly prohibits the payment of interest or returns to stablecoin holders.

(3) Requirements for custodians of payment stablecoins, reserves, and related assets

Entities can provide custody services for payment-type stablecoins, even if the custody institution is not an authorized payment-type stablecoin issuer (PPSI), but must meet the following conditions: 1) Subject to federal or state financial regulation; 2) Treat the custodial assets as the assets of customers holding stablecoins, rather than the custody institution's own assets; 3) Isolate custodial assets from the custody institution's other assets.

For custodians acting as deposit institutions, the "GENIUS Act" stipulates that deposit institutions are not required to list the custodial payment stablecoin assets as liabilities in their financial statements or balance sheets.

(4) Federal and State Regulation of Approved Payment Stablecoin Issuers

Chapters 4 to 7 of the "GENIUS Act" establish a complete regulatory enforcement system, covering requirements such as financial condition reporting and handling of violations (including the possibility of revoking registration qualifications). Subsidiaries of deposit-taking institutions and federally qualified payment stablecoin issuing institutions must submit issuance applications to the primary federal payment stablecoin regulatory agency. The Act specifies the time limits for application reviews in detail and grants applicants the right to request a reconsideration of any denial decisions.

State-level qualified payment stablecoin issuing institutions must accept supervision from the regulatory agency of the state in which they are located (provided that the state's regulatory system has passed the certification review as stipulated by the legislation). Issuers that meet the following conditions may choose to accept state-level rather than federal regulation: 1) entities established under state law; 2) non-depository institutions/uninsured national banks/foreign bank federal branches and their subsidiaries; 3) total issuance of payment stablecoins below $10 billion.

Non-financial listed companies are prohibited from issuing stablecoins unless they have received unanimous approval from the Stablecoin Certification Review Committee, confirming that they meet the following criteria: 1) Do not threaten the safety of the U.S. banking system; 2) Comply with data usage restrictions; 3) Meet the requirements of the bundled transaction prohibition, among others.

(5) Consumer Protection and Anti-Money Laundering Provisions

To prevent false advertising practices, the legislation prohibits approved payment stablecoin issuing institutions (PPSI) from using any combinations of words related to the U.S. government in the names of payment stablecoins. PPSI shall not mislead rational consumers through advertising into believing that its stablecoins have legal tender status or are issued or guaranteed by the U.S. government.

In terms of anti-money laundering, PPSI will be regarded as a financial institution and will be subject to the Bank Secrecy Act. Therefore, PPSI must comply with all legal requirements applicable to financial institutions, including customer identification, due diligence, and the establishment of an effective anti-money laundering system.

(6) Priority of Payment for Holders of Payment Stablecoins in Bankruptcy

Overall, when a payment stablecoin custodian or issuer goes bankrupt, the bill grants stablecoin holders priority claims.

Custodians holding reserves of payment stablecoins must take appropriate measures to ensure that the reserves are not subject to claims from other creditors. In the event of the custodian's bankruptcy, the claims of stablecoin holders on the reserves take precedence over those of other creditors, including depositors.

In the event of PPSI's bankruptcy, the legislation stipulates that holders of stablecoins have an absolute priority claim over the lawful reserves. Furthermore, the legislation makes several amendments to the Bankruptcy Act to protect the rights of stablecoin holders who have not been fully compensated, such as: explicitly stating that the reserves for payment-type stablecoins are not included in the bankruptcy estate; and that the claims of stablecoin holders who have not received reserve compensation take precedence over other ordinary creditors.

(7) Rules Formulation Requirements

In order to implement the requirements of the bill, federal and state regulatory agencies for payment-based stablecoins must collaborate through a notice and comment process to develop and implement detailed rules. In addition to enforcing statutory prohibitions, this rule-making process can also establish interoperability standards for digital financial transactions, including blockchain standards. The implementing regulations must be completed within one year of the enactment of the bill.

This poses a severe challenge to federal regulatory agencies, as such complex regulations often take years to complete the notice and comment process. Approximately one year after the regulation is promulgated (and no later than 180 days before the effective date), federal banking regulators must submit a report on the regulation to Congress.

Regulatory requirements for non-payment stablecoins and Congressional reporting obligations

The "GENIUS Act" regulates only the "payment stablecoins" defined by the Act and does not apply to non-payment stablecoins (such as stablecoins that are pegged to the value of non-statutory currencies — including "endogenously collateralized payment stablecoins" that are linked to the value of other digital assets). The Act requires the Secretary of the Treasury (in conjunction with other federal regulatory agencies) to conduct research on such non-payment stablecoins and submit a research report to Congress within one year of the Act's enactment. This sharply contrasts with the "STABLE Act," which proposes a two-year issuance ban on endogenously collateralized payment stablecoins.

In addition, federal payment stablecoin regulators must submit an industry status report to Congress annually, which must include an overview of industry trends and a risk assessment of the stability of the financial system.

(8) Banking Business Permission Terms

The "GENIUS Act" clearly states that restrictions on payment stablecoin activities do not affect the authority of deposit institutions to conduct other legal banking operations. It also stipulates that state-chartered deposit institutions holding a PPSI subsidiary may engage in funds transfers, custody services, or issuing payment stablecoins nationwide, provided that the state regulatory agency in their state of registration requires the institution to maintain sufficient liquidity and capital to support interstate PPSI operations.

(9) Distinction Between Payment Stablecoins and Securities/Commodity Regulations

The bill passed amends multiple laws to clarify that payment stablecoins do not fall under the category of securities or commodities, and that PPSI does not constitute an investment company, thereby ensuring that the SEC and CFTC do not generally intervene in the regulation of payment stablecoin activities.

(10) Special Regulations for Foreign Payment-Linked Stablecoin Issuers

The "GENIUS Act" establishes a mechanism for foreign regulatory-approved stablecoin issuers to operate in the U.S., allowing them to issue payment-type stablecoins without becoming a PPSI. Core requirements include: 1) The Secretary of the Treasury must determine that the regulatory framework of the foreign jurisdiction is comparable to the requirements of the "GENIUS Act"; 2) Foreign issuing entities must register with the Office of the Comptroller of the Currency; 3) U.S. financial institutions must hold sufficient reserves to meet the liquidity needs of U.S. customers. For issuing entities not recognized by the Treasury as operating under a comparable regulatory jurisdiction, the act also establishes a specific recognition application process.

3. Comparison of Core Differences Between the GENIUS Act and the STABLE Act

(1) Differences in State-Level Regulatory Systems

The "GENIUS Act" establishes detailed state-level regulatory certification and complaint procedures, while the "STABLE Act" stipulates that state-level certification automatically takes effect upon submission (unless rejected) and provides for consultation and rectification opportunities. The "GENIUS Act" requires a committee composed of three agencies to make explicit certifications/denials, whereas the "STABLE Act" essentially grants veto power only to the Secretary of the Treasury, with all other certifications presumed valid.

According to Article 4(c)(5)(A) of the GENIUS Act, when state regulatory agencies formulate regulations for payment stablecoins, the state must demonstrate that its system is "substantially similar" to the federal system, and then submit the regulatory provisions to the Stablecoin Certification Review Committee. The committee must review and explicitly approve (or reject) whether the provisions meet the substantial similarity standard within 30 days.

In contrast, Article 4(b)(2) of the STABLE Act stipulates that state-level payment stablecoin regulatory agencies may submit certifications to the Secretary of the Treasury (only to the Treasury Department and not to a third-party review committee) to prove that the state regulatory system "meets or exceeds" the standards for statutory rulemaking requirements. This certification takes effect upon submission and remains valid unless the Secretary of the Treasury rejects it on the grounds of "insufficiently meeting federal standards."

(2) Differences in Bankruptcy Procedures for Issuers of Payment Stablecoins

The "GENIUS Act" stipulates that in the event of bankruptcy of a Payment-Pegged Stablecoin Issuer (PPSI), holders of payment-type stablecoins have priority repayment rights over the stablecoin reserves. In contrast, the "STABLE Act" does not include any provisions regarding the bankruptcy of payment-type stablecoin issuers. The two acts are generally similar in their provisions regarding the priority of claims for stablecoin holders in the event of bankruptcy of stablecoin custodians.

(3) Regulatory Differences between Public Companies and Foreign Non-Financial Institutions

The regulatory differences for non-financial listed companies and foreign enterprises between the two bills constitute the core point of contention. The "GENIUS Act" strictly restricts such enterprises from becoming approved Payment Stablecoin Issuers (PPSI) (only through unanimous approval by the certification review committee), while the "STABLE Act" does not impose any restrictive clauses on such enterprises.

(4) Terms for the Suspension of Issuance of Endogenous Collateralized Stablecoins

The "STABLE Act" stipulates a two-year moratorium on the issuance of endogenous collateralized stablecoins, while the "GENIUS Act" does not explicitly set a moratorium period but requires the Secretary of the Treasury to conduct a special study on non-payment stablecoins (including endogenous collateralized stablecoins) and to complete it within one year of the enactment of the act.

"Endogenous collateralized stablecoins" are typically defined as digital assets that are pegged to the value of other digital assets (rather than fiat currencies as is the case with payment stablecoins). Regulators are primarily concerned that such stablecoins may be used to evade federal legislative framework regulations. For example, if an issuing entity issues derivative stablecoins pegged to an approved payment stablecoin, it may evade the stringent reserve, audit, and other requirements set forth by the legislation.

4. Overview of the Admission Process for Issuers of Payment-type Stablecoins and Custodian Service Providers

For institutions intending to issue payment-type stablecoins under the framework of the "GENIUS Act", a series of procedures must be completed at key time points: including submitting an application to the relevant payment-type stablecoin regulatory authority to demonstrate that the institution has the capacity to meet the requirements of the Act. Relevant institutions can start submitting applications no earlier than one year after the promulgation of the Act. Once regulatory approval is obtained, the approved payment-type stablecoin issuing institution (PPSI) must establish and implement a strict compliance program, including the auditing, reporting, and compliance supervision mechanisms stipulated by the Act. The application process for foreign payment-type stablecoin issuing institutions differs and requires submitting an application to the Secretary of the Treasury to demonstrate that the payment-type stablecoin regulatory system of their home country is mutually recognized by the U.S.