What is the GENIUS Act?

Although it isn't the first cryptocurrency regulation, the GENIUS Act does something no other regulation has done before. It's the first crypto bill that creates a national regulatory framework for the use of stablecoins as a means of payment.

This is a major step that solidifies the role of cryptocurrency, specifically stablecoin, in the financial system. It has the potential to broaden the adoption of stablecoins, create a more active market for this type of cryptocurrency and bolster the U.S. dollar as the global reserve currency.

Signed into law on July 18, 2025, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act created a comprehensive set of federal rules for a type of cryptocurrency called stablecoins. To grasp how the new law may affect you, it helps to understand how cryptocurrencies work and how stablecoin differs from other types of crypto.

Cryptocurrencies are digital tokens that are used to conduct transactions. Unlike traditional currency (such as the U.S. dollar), which is managed by a central authority like the Federal Reserve, cryptocurrency operates on decentralized computer networks secured by cryptography. Digital records are maintained on a ledger called a blockchain.

Stablecoins are distinct from other types of cryptocurrencies like Bitcoin because their value is pegged to a stable asset, making them much less volatile. The U.S. dollar is the most common asset pegged to stablecoins.

Lawmakers crafted the GENIUS Act after years of uncertainty over stablecoin regulation. It is designed to deliver clear and consistent rules, consumer protections and transparency for stablecoins, while also blocking the federal government from issuing a central bank digital currency (CBDC). This preserves financial choice in the free market.

Before the GENIUS Act, regulation of stablecoins was largely left to each individual state, creating an uncertain environment that was inefficient and cumbersome to navigate for crypto investors. The GENIUS Act creates a single federal framework aimed at boosting confidence in digital money while making sure issuers operate responsibly. Key elements of the GENIUS Act include issuer eligibility, reserve requirements, bankruptcy protection and anti-money laundering.

Only certain entities, called permitted payment stablecoin issuers, can issue stablecoins. These include federally regulated banks, qualified nonbank companies that meet oversight standards and state-chartered issuers that operate under regimes deemed compatible with federal rules.

Every stablecoin must be backed one-to-one with safe, liquid assets such as U.S. dollars or short-term Treasury bills. This means that 100% of the value of issued stablecoins is backed by one of these assets. Issuers also must publish monthly reports that are verified by independent auditors so investors can see that coins are fully backed.

If a stablecoin issuer goes under, stablecoin holders are first in line to get their money back from reserve assets. This ensures everyday investors aren't left behind other creditors in bankruptcy.

Stablecoin issuers are now classified as financial institutions under the Bank Secrecy Act (BSA). This means they must follow the same strict anti-money laundering and counter-terrorism financing rules as banks, further integrating crypto into the regulated financial system and making it more difficult to use it for illicit activities and scams.

Diversifying your assets

Cryptocurrency is just one type of financial asset. A properly diversified portfolio contains different types of investments and can provide greater stability. Learn more about commodities, real estate, precious metals and ETFs to see how you may be able to integrate them into your investment plan.

The GENIUS Act has the potential to impact the crypto market, individual investors and stablecoin users in a meaningful way. By creating a clear federal framework, the GENIUS Act reduces the need to navigate multiple state rules that often don't answer basic questions about what protections exist and how regulators might respond to new products. That alone will likely boost investor confidence and encourage issuers, because they now can make decisions knowing the rules are uniform across the country.

By requiring issuers to back their coins with safe, liquid reserves and submit to regular audits, the law can help protect the public from fraud and ensure stablecoins remain trustworthy and reliable. Placing limits on a potential government-issued cryptocurrency matters because it preserves the private market, ensuring stablecoin issuers aren't crowded out by a government-mandated alternative. These standards could encourage more participants in the stablecoin market, making the cryptocurrency more widely available and accepted among investors.

Also, the fact that this was the first federal crypto regulation and it passed with bipartisan support could be a good sign for crypto investors. It may be an indication that the political and regulatory environment is shifting to be more supportive of cryptocurrency.

While the GENIUS Act doesn't eliminate the risk in stablecoins, it does provide a clearer and potentially safer environment for investors.

With the GENIUS Act now law, the cryptocurrency industry must begin adapting to this new set of unified rules. Current issuers will need to adapt their operations no later than January 18, 2027, but possibly sooner, to meet the law's reserve, disclosure and compliance standards. This could disrupt the market in the short term, as some issuers may find the new regulations overly burdensome, while others adapt more quickly. However, new institutions are likely to seek federal approval to issue their own tokens now that the rules are clearer.

The GENIUS ACT may open the door to additional legislative developments, as well. By showing that bipartisan agreement on crypto regulation is possible, lawmakers may be more inclined to address broader questions around exchanges, custody rules or tax reporting for digital assets.