The GENIUS Act

What is the GENIUS Act?

The GENIUS Act (2025) – Guiding and Establishing National Innovation for US Stablecoins – is the United States’ first comprehensive federal law regulating payment stablecoins. Signed into law by President Trump, who declared it a step toward making the U.S. the “crypto capital of the world,” the Act aims to bring clarity, consumer protection, and innovation to the digital asset space.

Key Provisions of the Act

• Issuer Eligibility: Only federally insured depository institutions (like banks and credit unions) and federally licensed nonbank entities approved by the Federal Reserve can issue stablecoins. This limits market participation to entities with strong regulatory oversight and financial resilience.
• Reserve Requirements: Issuers must maintain 1:1 reserves in high-quality liquid assets such as U.S. Treasuries or cash. These reserves must be segregated from operational funds, subject to monthly public disclosures, and independently audited—a significant step toward transparency and trust.
• Regulatory Clarity: Stablecoins issued under the Act are explicitly excluded from being classified as securities or commodities, removing them from SEC and CFTC jurisdiction. This provides a clear legal framework for their use in financial products and services.
• AML/CFT Compliance: Issuers must comply with the Bank Secrecy Act, including robust anti-money laundering (AML) and counter-terrorism financing (CFT) protocols, customer due diligence, and sanctions screening.
• Consumer Protections: In the event of insolvency, stablecoin holders are granted priority claims on the issuer’s reserve assets, offering a level of protection similar to traditional deposit insurance.

How Does This Compare to EU and UK Equivalents?

Key Differences

• The GENIUS Act offers the clearest legal path for stablecoin integration into financial services by excluding them from securities laws – a major divergence from the EU and UK.
• The EU and UK frameworks are more cautious, emphasising systemic risk and investor protection, but may create more regulatory friction for asset managers.

Implications for Asset Managers and Investment Funds

Regulatory Certainty – Funds can now confidently hold or transact in GENIUS-compliant stablecoins without ambiguity over their legal status.

Liquidity Realignment – Expect a shift away from unregulated stablecoins toward GENIUS-compliant alternatives, which may impact fund liquidity strategies.

Compliance and Due Diligence – Fund managers must:

• Vet stablecoin issuers for GENIUS compliance.
• Monitor reserve disclosures and audit reports.
• Ensure counterparties meet AML/CFT standards.

New Opportunities – The Act may accelerate:

• Tokenisation of fund units and assets
• Real-time settlement using stablecoins
• Development of yield-bearing digital instruments

What’s Next in This Space?

• Global Harmonisation: While the U.S. has taken the lead, the EU, UK, and other jurisdictions are watching closely. Expect further alignment, or divergence, in stablecoin regulation.
• Cross-Border Challenges: Funds operating across jurisdictions will need to navigate differing legal definitions and compliance obligations.
• Innovation in Fund Structures: Tokenised funds and on-chain liquidity mechanisms may become more mainstream, especially in private markets and alternative assets.

Final thoughts

With the introduction of the Genius Act it appears the US is taking the global lead on establishing stablecoin infrastructure and integration into mainstream financial systems, and we are likely to see significant growth in Stablecoin adoption. Combined with tokenisation, real-time settlement, and cross-border liquidity on the horizon, the next few years could be transformative.

As regulation tries to keep pace with innovation, I think we can expect to see a lot more discussion and regulatory governance in this area over the coming months and years.