For years, digital asset industry participants have pressed the federal government to establish a regulatory framework and provide the market with the clarity it needs to continue growing. This week, Congress took the first step toward delivering that clarity, passing a bill that reinforces requirements for permitted payment stablecoin issuers. The bill is just one piece in the broader U.S. digital asset regulatory puzzle that the industry hopes will soon be completed.
Licensing pathways for stablecoin issuers
Yesterday, one month after the Senate passed the bill, the House of Representatives passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act, also known as the GENIUS Act. Today, President Trump signed the bill, which garnered bipartisan support in both legislative chambers.
The GENIUS Act prohibits any person or entity other than a “permitted payment stablecoin issuer” from issuing payment stablecoins in the U.S. The bill outlines federal and state licensing pathways for entities seeking to become permitted issuers.
Subsidiaries of entities insured by the Federal Deposit Insurance Corporation — known as insured depository institutions (IDIs) — along with nonbank entities, federal branches of foreign banks, and national banks not insured by the FDIC are eligible to be licensed as federal issuers. An IDI’s federal banking agency — which could be the FDIC or Federal Reserve — will serve as the primary regulator for any IDI subsidiaries that become permitted issuers. The Treasury Department’s Office of the Comptroller of the Currency will serve as the primary regulator for all other permitted federal issuers.
Issuers with $10 billion or less in consolidated total outstanding stablecoins may pursue state-only regulatory licensing, provided that two conditions are met:
The state regulatory agency with primary regulatory and supervisory authority over payment stablecoin issuers certifies that its regulatory framework is “substantially similar” to the federal regime.
The newly formed Stablecoin Certification Review Committee (SCRC) — comprised of the treasury secretary and the chairs of the FDIC and the Federal Reserve — does not deny the certification within 30 days.
A state-qualified issuer with more than $10 billion in consolidated total outstanding stablecoins must transition to federal oversight within 360 days of reaching this threshold.
In order to offer, sell, or otherwise make available in the U.S. a payment stablecoin, a foreign issuer must:
Have the technological capability to comply, and will comply, with lawful orders to seize, freeze, burn, or prevent the transfer of outstanding stablecoins.
Be subject to a “comparable” regulatory regime, as determined by the treasury secretary upon a recommendation by each of the other members of the SCRC.
Register with the OCC and be subject to OCC supervision.
Hold reserves in U.S. financial institutions sufficient to meet liquidity demands of U.S. customers.
Not be domiciled and regulated in a jurisdiction subject to U.S. economic sanctions or determined by the treasury secretary to be a jurisdiction of primary money laundering concern.
The GENIUS Act also mandates that payment stablecoins be backed on at least a one-to-one basis; in essence, this introduces a 100% reserve requirement. Reserves are limited to certain eligible asset types, including U.S. cash and currency, demand deposits at IDIs, and short-term Treasury bills.
The bill will take effect 120 days after final regulations are issued or 18 months after its enactment, whichever comes first.
What’s next?
The GENIUS Act is a huge win for the digital asset space. The Act provides the comfort that many traditional financial institutions have been awaiting, and is expected to prompt more institutions to enter the stablecoin arena. And while its provisions are limited to stablecoin issuance, the bill is a first step towards greater regulatory clarity across the digital asset ecosystem — a significant development for the industry and those supporting it, including insurers.
Entities seeking to become permitted stablecoin issuers should review the law’s provisions and work with their insurance brokers to inform underwriters of their plans. Be as transparent as possible regarding your regulatory journey — the more detail you provide to underwriters, the more engaged your underwriters will be. This can yield stronger partnerships, which can support better insurance outcomes today and in the future.
Potential stablecoin issuers and others in the digital asset space should also watch for additional activity by Congress. On the same day the House passed the GENIUS Act, it also passed two other cryptocurrency-related bills:
The Digital Asset Market Clarity Act (known as the CLARITY Act), which passed with bipartisan support, would establish that the Securities and Exchange Commission and Commodity Futures Trading Commission have jurisdiction over digital assets and define each regulator’s role.
The Anti-CBDC Surveillance State Act, which narrowly passed the chamber, would prohibit any Federal Reserve bank from issuing a central bank digital currency.
These two bills now go to the Senate, which has the opportunity to deliver additional regulatory clarity — a potential boon for the digital asset industry, financial institutions looking to enter the space, and the economy as a whole.
For more information, please email Lockton's Emerging Asset Protection (LEAP) team: LEAP@Lockton.com (opens a new window) or visit our webpage by clicking here (opens a new window).
