GENIUS Act Compliance for Stablecoin Startups: Licensing, Marketing Traps, and Non-US Issuer Onboarding

Published: October 15, 2025 • Stocks, Crypto & NFTs

 

The GENIUS Act is no longer a bill on crypto Twitter—it’s federal law, signed July 18, 2025, and already shaping how payment stablecoins are supposed to operate in and into the U.S.(Congress.gov)

If you’re running (or planning) a stablecoin project, you’re past the point where a generic “we’ll deal with regulation later” line will fly. The Act hard-codes who is allowed to issue a “payment stablecoin,” what reserves must look like, how you market, what you can not pay in terms of yield, and under what conditions a foreign issuer can touch U.S. users.(skadden)

This post is meant to be the “practical GENIUS memo” you wish someone had handed you six months ago: high-level enough for founders and product teams, but detailed enough for in-house or outside counsel to turn into an implementation plan.

TL;DR – What GENIUS Really Changes

  • Creates a federal category of “payment stablecoin” and “permitted payment stablecoin issuer”. Only those permitted issuers can legally issue payment stablecoins into the U.S. market.
  • Requires 1:1, high-quality reserves and strict redemption and disclosure rules. Reserves must sit in cash, Fed balances, short Treasuries, and similar safe assets; no rehypothecating them to chase yield.
  • Says payment stablecoins are not securities or commodities, but also not deposits, not insured, and have no automatic Fed access. That removes SEC/CFTC registration in many cases, but does not remove all other laws.(Eversheds Sutherland)
  • Bans interest/yield from issuers themselves. Issuers (including foreign ones serving the U.S.) cannot pay yield “just for holding” the stablecoin. Affiliates are a gray zone regulators are openly looking at.
  • Gives foreign issuers a path—but only if they’re comparably regulated, OCC-registered, able to obey lawful orders, and hold U.S. reserves for U.S. users. Otherwise, U.S. digital asset service providers (exchanges, custodians, etc.) can’t make those coins available here.
  • Leaves consumer protection and a lot of implementation detail to regulators and the states. Treasury has an ANPRM out; final rules on capital, liquidity, “comparability” for foreign regimes, etc., are still being written.(Federal Register)

What the GENIUS Act Actually Covers

At its core, the GENIUS Act is about “payment stablecoins”—not every random token with “USD” in its name.

Under the statute, a payment stablecoin is a digital asset that:

  • is used or designed to be used as a means of payment or settlement, and
  • whose issuer is obligated to convert, redeem, or repurchase it for a fixed amount of “monetary value” (e.g., $1),
  • and represents that it will maintain stable value relative to that fixed reference value,
  • and is not a national currency, bank deposit, or a security as defined in the federal securities laws.

The Act then:

  • Creates the status of “permitted payment stablecoin issuer” and bans anyone else from issuing payment stablecoins in the U.S.
  • Treats issuers and many intermediaries as “digital asset service providers” with their own obligations.
  • Clarifies that payment stablecoins are not “securities” or “commodities” under the federal securities and commodities laws (with knock-on effects for advisers, funds, and broker-dealers).(Eversheds Sutherland)

In English: GENIUS gives you a bespoke regulatory box to live in—relatively lighter than full-blown securities regulation, but far more structured than the pre-2025 vacuum.

Who Is Allowed to Issue a Payment Stablecoin?

GENIUS creates a closed universe of entities that can be permitted payment stablecoin issuers:

  • Bank-linked issuers
    • Subsidiaries of insured depository institutions (banks, some credit unions).
    • Primary regulator: the bank’s existing federal banking agency (Fed, OCC, FDIC, NCUA).
  • Federal nonbank issuers
    • Nonbank entities licensed by the OCC as “federal qualified” stablecoin issuers,
    • certain OCC-chartered uninsured banks, and federal branches of foreign banks.
  • State-qualified issuers (for smaller programs)
    • Entities regulated under a state regime that is certified as “substantially similar” to the federal framework by a new Stablecoin Certification Review Committee (SCRC), chaired by Treasury.
    • If a state-qualified issuer’s outstanding stablecoins exceed roughly $10B, it has to transition into federal oversight within a year or stop issuing.
  • Certain foreign issuers and some non-financial public companies
    • Foreign issuers can qualify if they are from a “comparable” regime, register with the OCC, and meet additional conditions discussed below.
    • Public companies outside traditional finance can issue only if unanimously approved by the SCRC under stringent conditions (financial stability, data privacy, anti-tying compliance).(skadden.com)

If you are not in one of these buckets, you can’t be a “permitted payment stablecoin issuer” at all. For many existing projects, that means:

  • either pairing with a bank or state-licensed entity that will be the legal issuer, or
  • restructuring the corporate group to put the issuer into a charterable / licensable entity.

Reserves, Redemption, and Activity Limits: The Non-Negotiables

GENIUS hard-codes what “fully reserved” actually means.

Reserves & asset eligibility. Payment stablecoins must be backed 1:1 by high-quality, liquid assets, including:

  • U.S. cash and currency,
  • balances at a Federal Reserve Bank,
  • demand deposits at insured depository institutions,
  • short-term Treasuries (≤ 93-day maturity),
  • certain fully collateralized repo / reverse repo backed by Treasuries,
  • money market funds that themselves only hold the above,
  • tokenized versions of those instruments.

Key practical consequences:

  • No “backing” with corporate bonds, long-duration Treasuries, equities, real-estate, or DeFi yield strategies.
  • Rehypothecation or pledging of reserves is tightly constrained; you can’t quietly run a leveraged fixed-income fund behind the scenes.

Redemption & disclosures.

  • Issuers must redeem at par and maintain policies that actually make that credible.
  • Larger issuers (e.g., >$50B out) must provide audited financials, and all issuers must publish regular breakdowns of reserve composition and key risk disclosures.(Eversheds Sutherland)

Activity limits.

Issuers are largely restricted to:

  • issuing and redeeming payment stablecoins,
  • managing and safekeeping reserve assets and stablecoins,
  • activities directly supporting those core functions,
  • anything else only if expressly permitted by the primary regulator.

From a structuring standpoint, that almost forces a “narrow bank / narrow issuer” model: product teams who want to experiment with other digital asset activities should plan on separate affiliates, not the issuer itself.

Are Payment Stablecoins Securities, Commodities, or Bank Deposits?

One of the biggest “headline wins” of GENIUS is definitional clarity:

  • Not securities. GENIUS amends the Securities Act, Exchange Act, Investment Company Act, and Advisers Act to exclude “payment stablecoins” from the definition of “security.”(Eversheds Sutherland)
    • For advisers, that means holding payment stablecoins doesn’t trigger the usual personal trading restrictions or Code of Ethics reporting as a “security transaction”.
    • For funds, it simplifies whether stablecoin positions trigger ’40 Act issues.
  • Not commodities. GENIUS likewise amends the Commodity Exchange Act to exclude payment stablecoins from “commodity,” which narrows CFTC jurisdiction (though not entirely—derivatives on stablecoins remain in scope).(Eversheds Sutherland)
  • Not deposits and not insured. The Act makes clear that payment stablecoins are not “deposits” and do not have federal deposit insurance or automatic access to Fed services. It is illegal to market them as though they did.(Brookings)

This is a double-edged sword:

  • You get cleaner, purpose-built regulation instead of decades of securities/commodities case law being force-fit.
  • But you lose any argument that “we kind of look like a bank deposit so surely we’re safe.” From a consumer-protection perspective, you need to over-disclose the lack of insurance and central bank backing.

Yield and Interest: Product-Design Landmines

GENIUS directly attacks one of the most popular selling points in early stablecoin projects: “park your stablecoins here and earn yield.”

The Act prohibits permitted payment stablecoin issuers and foreign payment stablecoin issuers from paying interest or yield to holders simply for holding, using, or retaining the stablecoin—whether paid in cash, tokens, or any other consideration.

Policy groups are already urging Treasury to extend that prohibition to affiliates and digital asset service providers that might try to “route around” the rule by paying yield on behalf of issuers.(Bank Policy Institute)

Practical implications:

  • A straight “savings account”-style stablecoin product where the issuer itself pays a yield is off the table.
  • “Rewards” programs need to be clearly linked to separate services or activities (e.g., liquidity provisioning, staking in a different protocol, card spend), not just passive holding.
  • If yield is offered via an affiliate or third-party protocol, expect regulators to scrutinize whether that’s functionally equivalent to issuer-paid interest.

From a product-lawyering perspective, you want to:

  • separate “payment stablecoin” functionality from anything yield-bearing, ideally with clean entity boundaries, and
  • build marketing and UX so users understand the difference between “cash-like stablecoin” and “investment / yield product.”

Marketing and Disclosure Traps

Genius is not subtle about marketing.

The Act and commentary stress that:

  • You cannot market something as a “payment stablecoin” in the U.S. unless it is issued under GENIUS by a permitted issuer.
  • You cannot imply that a payment stablecoin is insured or backed by the U.S. government, the FDIC, or the Federal Reserve.
  • You cannot tie access to stablecoins to buying other products (e.g., “you only get full functionality if you sign up for our shopping marketplace”).
  • You must avoid misleading claims about stability, liquidity, or redemption, especially if reserves include instruments with any meaningful duration or credit risk.

At the same time, state consumer-protection laws are expressly not preempted.

That means your risk is layered:

  • GENIUS violations (federal banking / payments regulators).
  • UDAP/UDTPA risk under state law for misleading or deceptive marketing.
  • Traditional false advertising / unfair competition claims.

Implementation tips:

  • Build a GENIUS-compliant marketing checklist: every public claim about reserves, stability, redemption, insurance, and regulatory status should map to a specific legal rule.
  • Bake disclosures into UX, not just a PDF—e.g., brief badges in the app clarifying “Not a bank deposit. No FDIC insurance. Not legal tender.”
  • Train sales and BD teams; a single slide deck promising “FDIC-like safety” can undo months of careful lawyering.

Non-US Issuers and Foreign Stablecoins: How to Reach U.S. Users Without Getting Cut Off

GENIUS doesn’t ban foreign stablecoins outright. It does something arguably more intrusive: it conditions U.S. market access on foreign issuers’ regulatory status and technical controls.

Under Section 8 and related provisions:

  • U.S. digital asset service providers (exchanges, custodians, payment processors, etc.) may not offer, sell, or make available a foreign payment stablecoin to U.S. persons unless the foreign issuer:
    • operates under a comparable foreign regulatory regime, as determined by the Treasury Secretary with input from the SCRC;
    • registers with the OCC and is subject to OCC supervision for U.S. activities;
    • holds reserves in U.S. financial institutions sufficient to meet liquidity needs of U.S. customers;
    • has the technological capability to comply with lawful orders to freeze, burn, or otherwise restrict transfers;
    • is not domiciled in a comprehensively sanctioned jurisdiction or one designated as a primary money-laundering concern.
  • Treasury may designate a foreign issuer as “noncompliant”, in which case U.S. persons can be barred from secondary market trading in that stablecoin absent a license or waiver.

If you’re a non-U.S. issuer targeting U.S. users, your onboarding checklist now looks like:

  1. Map your home regime against GENIUS. Are you realistically going to be deemed “comparable”?
  2. Design reserve and redemption policies to meet GENIUS-level standards—1:1 high-quality assets, robust disclosure, no issuer-paid interest.
  3. Prepare for OCC registration and supervision of your U.S.-facing business.
  4. Ensure you technically can and will comply with U.S. lawful orders (OFAC, sanctions, court orders) at the contract and protocol level.
  5. Keep reserves for U.S. users within the U.S. banking system, with counterparties your U.S. partners’ regulators will accept.

From the perspective of a U.S. exchange or fintech, listing a foreign stablecoin without this analysis becomes an increasingly bad idea as regulations firm up.

Digital Asset Service Providers: Listing, Custody, and Secondary Market Obligations

GENIUS hits intermediaries almost as hard as it hits issuers. Digital asset service providers that list, custody, or facilitate transfers of payment stablecoins must:

  • ensure that any U.S.-facing stablecoin they support is:
    • issued by a permitted U.S. issuer, or
    • a foreign issuer that has cleared the comparability and OCC registration hurdles;
  • comply with BSA/AML and sanctions obligations, including monitoring and blocking addresses as needed;
  • rely only on qualified custodians that meet GENIUS standards (federal or appropriately supervised state entities);
  • be ready for Treasury designations of noncompliant foreign issuers that may require delisting or geo-fencing.

For DeFi protocols, the line will be drawn around custody and control: GENIUS is squarely aimed at entities “in the business” of providing safekeeping and facilitating transfers. Purely non-custodial code is a harder case, but once there’s an entity charging fees and branding a front-end, regulators will treat it like a service provider.

Implementation Timeline: What Is in Force Today vs. Coming Next

Key dates and moving pieces:

  • July 18, 2025 – GENIUS signed into law.
  • Effective date – The Act becomes fully effective on the earlier of:
    • 18 months after enactment (around January 2027), or
    • 120 days after the primary regulators issue final implementing regulations, whichever comes first.
  • Treasury’s ANPRM (advance notice of proposed rulemaking) – Published September 19, 2025; comment period closed October 20, 2025. It solicits input on:
    • capital and liquidity rules,
    • foreign issuer “comparability,”
    • how to treat stablecoins in tax and insurance contexts,
    • economic data on costs/benefits.
  • Transitional rules for existing stablecoins – In general, the heavy prohibitions on digital asset service providers offering non-permitted payment stablecoins kick in three years after enactment, with room for Treasury to craft safe harbors or waivers.

So as of November 2025:

  • The statutory framework is set,
  • Regulators are actively designing the operational rules, and
  • Existing stablecoin programs have a finite but meaningful runway to pivot into compliance or decide to stay outside the “payment stablecoin” box.

Practical Compliance Roadmap for Stablecoin Projects

If you’re serious about operating under GENIUS, here’s a pragmatic way to structure the work:

1. Decide what you want to be when you grow up.

  • Are you issuing a pure payment stablecoin for payments/settlement, or are you trying to run a yield product, synthetic dollar, or DeFi governance token?
  • If your core economic proposition is yield, GENIUS may not be your home; you may need a separate, properly regulated investment structure.

2. Pick a licensing path.

  • Bank-affiliated issuer?
  • OCC-chartered or other federal nonbank issuer?
  • State-qualified regime (if you’re small enough and your chosen state can get certified)?
  • Foreign issuer going the “comparable regime + OCC registration” route?

Your entire corporate structure—cap table, governance, risk, compliance—needs to be designed around that choice.

3. Build your reserve and custody stack first, not last.

  • Lock in eligible reserve assets and counterparties.
  • Select or build qualified custodians and wallet infrastructure that can meet GENIUS requirements on segregation and rehypothecation.
  • Design disclosure templates and dashboards that show reserve composition and redemption metrics.

4. Rewrite product and marketing around “no yield from issuer, no insurance.”

  • Strip any suggestion that users are earning interest merely for holding the stablecoin.
  • Make the absence of deposit insurance and Fed backing crystal clear, in UX and docs.
  • Train every client-facing function (sales, BD, marketing) with a GENIUS-safe script.

5. For non-US issuers, run a “comparability” gap analysis.

  • Map your home regime vs. GENIUS on reserves, supervision, AML, sanctions, consumer protection.
  • Model what OCC registration would look like—governance, reporting, examinations.
  • Design technical controls to respond to U.S. lawful orders (address blocking, burns, freezes).

6. For exchanges and fintechs, build a GENIUS stablecoin onboarding policy.

Before listing or integrating any stablecoin:

  • Verify issuer status (permitted U.S. issuer vs comparably regulated foreign issuer).
  • Review reserves disclosures, AML policies, and sanctions controls.
  • Hard-code delisting protocols in case Treasury designates an issuer noncompliant.

Frequently Asked Questions

Does GENIUS apply to all stablecoins, or only USD-backed ones?

GENIUS applies to “payment stablecoins,” which are defined functionally—used for payment/settlement, redeemable at a fixed monetary value, and marketed as having stable value. That certainly includes USD-pegged coins, but also captures other fiat-pegged coins that meet those criteria. It does not cover algorithmic “stability” mechanisms without a redemption obligation, but the more your token looks and acts like a redeemable fiat stablecoin, the less safe that technical distinction becomes.

If we qualify as a permitted federal issuer, do we still need state money-transmitter licenses?

For federally qualified issuers and certain bank-subsidiary issuers, GENIUS expressly preempts state licensing requirements such as money-transmitter laws for their payment stablecoin activities.

But that preemption is narrow:

  • It does not preempt state consumer-protection statutes.
  • It may not cover non-stablecoin parts of your stack (e.g., other digital asset services or card programs).
  • For state-qualified issuers, you’re still fundamentally living in a state licensing regime (just one that has been certified as “substantially similar”).

You should assume you’ll spend real time with both federal and state regulators.

Can a DeFi protocol issue a payment stablecoin without an identifiable issuer?

GENIUS assumes there is an “issuer”—a person or entity obligated to redeem the stablecoin and subject to supervision. A purely decentralized protocol with no legally responsible issuer is not obviously compatible with the statute.

In practice, the more a “DeFi” stablecoin has:

  • a foundation, DAO LLC, or other organizing body,
  • front-end operators,
  • teams making discretionary decisions about reserves,

…the more likely regulators are to identify an “issuer” and apply GENIUS. If the design truly has no redeeming party and no reserves in the GENIUS sense, it may fall outside “payment stablecoin” entirely—but then you also lose the benefit of GENIUS clarity and could fall back into securities/commodities territory under other doctrines.

We’re a non-U.S. project. Can we just geo-block and ignore GENIUS?

If you successfully exclude U.S. persons and intermediaries, GENIUS is less of a direct concern. But in reality:

  • Most liquidity comes from global venues where U.S. participation is hard to eliminate.
  • U.S. digital asset service providers may start delisting foreign stablecoins that haven’t gone through the “comparable regime + OCC registration” route to avoid GENIUS risk.

Even if your home regulator is your primary interlocutor, if you want deep USD liquidity, U.S. exchange listings, and U.S. corporate users, planning for GENIUS compliance is usually a rational business decision.

Can exchanges still list Tether, USDC, and other pre-GENIUS coins?

In the near term, yes—GENIUS has transitional periods and rulemaking ahead. In the medium term:

  • U.S. exchanges will have to treat each stablecoin as either:
    • a GENIUS-compliant permitted payment stablecoin,
    • a foreign issuer that has gone through the comparability/OCC process, or
    • a non-compliant asset that may eventually become illegal to offer to U.S. persons once the prohibition dates kick in.

Expect exchanges to use GENIUS as their listing policy backbone and to push non-compliant issuers to either step into the regime or accept reduced U.S. access.

Could we pay “rewards” through an affiliate and argue GENIUS only bans yield from the issuer itself?

The statute’s text clearly bans issuers (including foreign ones serving U.S. markets) from paying yield or interest for merely holding the stablecoin. It does not explicitly prohibit an unaffiliated third party from offering yield.

However:

  • Policy commentary and industry submissions to Treasury are already calling for closing that loophole, arguing that letting affiliates pay yield would undermine Congressional intent.(Bank Policy Institute)
  • From an enforcement standpoint, an affiliate that is economically dependent on the issuer, shares branding, or operates in tight lockstep will be viewed as an extension of the issuer.

If you insist on a yield component, structure it as a separate, clearly risk-bearing product, with its own disclosures and regulatory analysis (potentially under securities/investment rules)—not as a disguised “savings feature” of the payment stablecoin.

How does GENIUS interact with the EU’s MiCA and other foreign regimes?

GENIUS and MiCA are broadly aiming at the same problem—fiat-pegged tokens used as money—but their mechanics differ:

  • MiCA creates “e-money tokens” and “asset-referenced tokens,” with licensing at the EU level and passporting across member states.
  • GENIUS focuses on U.S. permitted issuers and comparability for foreign regimes, with the SCRC and Treasury gatekeeping which foreign frameworks are “good enough.”(Brookings)

If you’re global, assume you’ll need to:

  • meet MiCA standards for EU users,
  • meet GENIUS standards for U.S. users,
  • and harmonize reserves/operations so you’re not running two incompatible regimes out of one balance sheet.

What should banks thinking about issuing a stablecoin focus on first?

For banks and their affiliates, GENIUS is both an opportunity and a trap:

  • You already live under bank-level AML, sanctions, safety and soundness standards.
  • GENIUS gives you a clear federal pathway to issue payment stablecoins as a subsidiary.

But you also need to:

  • isolate the issuer from the rest of the institution so that its narrow activities and capital treatment fit GENIUS;
  • make sure your reserve management doesn’t trip legacy capital rules or internal risk appetites;
  • avoid tying stablecoin access to your broader product suite in ways that could violate both GENIUS and traditional anti-tying rules.

Done right, a bank-affiliated issuer can have a real competitive edge once non-bank issuers have to play by similar rules.