The U.S. Treasury has opened a public consultation to implement the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins), the first federal law in the United States to establish specific rules for the issuance and use of stablecoins.
Key Aspects of the GENIUS Act
- Legal status and scope. Removes stablecoins from the definitions of securities and commodities;
- Prohibition of yield by the issuer. A stablecoin issuer may not pay interest or any form of remuneration merely for holding the token.
- Reserve backing. Requires stablecoins to be fully backed by high-quality assets (USD, T-Bills and/or other instruments).
- BSA/AML and sanctions. Issuers are subject to the Bank Secrecy Act, with KYC/AML, record-keeping and the expectation of compliance with U.S. economic sanctions.
- Prudential and risk management aspects. Capital, liquidity and risk management rules, aligned with a "bank-like" design for licensed issuers.
- Interoperability. The regulatory architecture signals standards of compatibility and interoperability with other stablecoin issuers and the broader digital financial ecosystem, including accepted communication protocols and blockchains, whether permissioned or public.
Global effects
Although limited to the United States, the framework is likely to serve as an international model, inducing regulatory harmonization and raising the bar of trust in digital payments and 24/7 remittances using USD-backed stablecoins.
Stablecoins in perspective
Stablecoins connect electronic money to instant payments, with the potential to reduce costs and expand reach, especially considering the legal certainty brought by the Genius Act with respect to parity, governance and compliance.
The GENIUS Act signals that the era of regulated stablecoins has arrived, and its lessons will be observed well beyond U.S. borders.
