GENIUS Act: Legal Framework for Stablecoins in the U.S.

What is the GENIUS Act?

In July 2025, the United States passed the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) — the first federal law to create a comprehensive regulatory framework for payment stablecoins. These are digital assets pegged to a fixed value and intended for use in payments and settlements.

The Act marks a transition from a regulatory vacuum to a structured legal environment, reshaping the landscape for the digital asset industry, financial institutions, and consumers.

What is a Stablecoin?

Stablecoin is a type of cryptocurrency with a fixed value that is backed by certain assets. The GENIUS Act establishes requirements for asset backing, which are intended to increase the security of using stablecoins alongside traditional (fiat) currencies.

Main Goals of the GENIUS Act

• Bring stablecoin issuance and circulation under a legal framework.

• Protect consumers from under-collateralized or risky digital assets.

• Ensure financial stability by imposing strict requirements on issuers.

• Stimulate innovation without stifling technological growth.

• Define clear powers for regulators, including the U.S. Treasury and federal banks.

Additional aims (not related to jurisprudence) may be:

1. Letting new players (issuers) to enter the financial market.

2. Additional collateral for US national currency, US securities, and shares in certain companies.

3. Creating measures to influence foreign cryptocurrency emission centres.

Key Provisions

• Licensing: Only companies licensed by federal or state authorities may issue stablecoins.

• Asset Backing: Stablecoins must be backed 1:1 with safe, liquid assets.

• Audit & Oversight: Regular audits and compliance checks are mandatory.

• Ban on Algorithmic Stablecoins: Non-backed models such as TerraUSD (LUNA) are prohibited.

• Foreign Issuers: Allowed to operate in the U.S. only if compliant with the Act.

• AML & Cybersecurity: Strict anti-money laundering, cybersecurity, and KYC measures apply.

• Bankruptcy Protection: Holders of stablecoins have priority over other creditors in case of issuer insolvency.

Practical Impact for Businesses

1. For Issuers: Legal issuance of stablecoins becomes possible but limited to large companies capable of meeting collateral and compliance requirements.

2. For Foreign Players: Non-compliance may result in fines of up to $1,000,000 for stablecoins marketed in the U.S.

3. For Businesses & Consumers: Stablecoins now serve as a legally recognized settlement instrument, reducing transactional risks.

4. For Investors: Due diligence must now include an assessment of compliance with the GENIUS Act.

5. For IT & Developers: Fintech, DeFi, and CeFi projects targeting U.S. clients must integrate GENIUS Act requirements into their systems from inception.

Zilver Law’s Perspective

The GENIUS Act is a milestone in building mature digital asset regulation. It balances innovation and protection, paving the way for a more transparent and secure financial ecosystem.

At the same time, it reshapes market dynamics: strengthening compliant players while limiting the role of non-collateralized crypto assets. Issuers, crypto banks, and exchanges must now conduct a legal audit to ensure compliance.

At Zilver Law Firm, we monitor global crypto legislation and provide legal support for:

• U.S. and EU licensing of digital asset projects.

• Compliance with new stablecoin regulations.

• Structuring international transactions and tax optimization.