The GENIUS Act stablecoin law, signed on July 18, 2025, as Public Law 119-27, is the first federal framework governing dollar-pegged payment stablecoins in the United States. It sets who can issue them, what has to back them, and what rights you have as a holder.1Congress.gov. S.1582 – GENIUS Act – 119th Congress (2025-2026) Before it passed, stablecoins like USDC and Tether operated in a regulatory gray area, with no single federal agency in charge and a patchwork of state money-transmitter rules filling the gap.
Full Reserve Backing Is Now Required
Every payment stablecoin issuer must hold reserves equal to at least 100 percent of the face value of outstanding stablecoins. A billion dollars of tokens in circulation means at least a billion dollars in qualifying reserve assets on hand.
Qualifying reserves are limited to high-quality, liquid holdings: short-term U.S. Treasury securities, cash deposits at insured depository institutions, and reserves at the Federal Reserve. Corporate bonds, other crypto assets, and riskier investments do not count. The design goal is that if every holder tried to redeem at once, the issuer could pay in full.
Issuers also have to submit to regular audits of their reserves and publicly disclose what those reserves are made of. That transparency piece responds directly to past disputes over whether issuers actually held what they claimed to hold.
Who Is Allowed to Issue Stablecoins
The law creates two paths to legally issue a payment stablecoin. An issuer can obtain a federal license through a banking regulator, or it can operate under a state regulatory regime that meets minimum federal standards laid out in the statute. If a state’s rules fall short of the federal floor, the federal standard controls.
Size matters. Larger issuers with substantial outstanding balances face direct federal oversight regardless of charter type, while smaller issuers have more flexibility to stay under a qualifying state regime. A startup and a firm managing tens of billions in customer value are treated as different problems.
The law also draws a hard line on what can be marketed as a “payment stablecoin.” Unbacked or algorithmically stabilized tokens, which rely on software mechanisms rather than actual dollar reserves to hold their peg, cannot be sold under that label.
What Holders Get Under the Law
If you hold stablecoins from a covered issuer, you have a defined right to redeem them back to U.S. dollars within a set timeframe, rather than relying on the issuer’s goodwill. If the issuer goes bankrupt, stablecoin holders have a priority claim on the reserve assets. That priority did not clearly exist under prior law and is one of the more significant shifts for consumers.
The law also restricts what issuers can do with your data. Public companies that issue stablecoins have to comply with data use limits, and sharing nonpublic consumer data generally requires consumer consent.2Congress.gov. S.1582 – GENIUS Act – 119th Congress (2025-2026) – Text
Anti-Money Laundering Duties for Issuers
Issuers must comply with the Bank Secrecy Act and existing anti-money laundering rules, the same way banks and money services businesses do. That means know-your-customer programs, suspicious activity reports, and screening transactions against sanctions lists maintained by the Treasury Department’s Office of Foreign Assets Control.
The Attorney General and the Secretary of the Treasury owe Congress a report within one year of enactment on how well these requirements handle illicit finance risks, with annual reports after that.2Congress.gov. S.1582 – GENIUS Act – 119th Congress (2025-2026) – Text
What Is Still Unsettled
The law does not make stablecoins risk-free. Issuers can still suffer operational failures, cyberattacks, and other disruptions that the statute cannot prevent. The floor is higher than before, not the ceiling.
Implementing regulations are also still being written by federal agencies, so specific requirements will continue to take shape over the coming months as rulemaking proceeds.1Congress.gov. S.1582 – GENIUS Act – 119th Congress (2025-2026) Until those rules are finalized, some details of how the framework will operate in practice remain open.