Capital and financial resources
The Act addresses capital requirements as calibrated to an issuer’s unique risk profile, ensuring that each issuer maintains sufficient financial resources to support ongoing operations. These requirements must not exceed what is necessary for safety and soundness, though federal regulators retain discretion to impose a targeted capital buffer if warranted by the issuer’s risk characteristics.8
This approach reflects a deliberate balance that effectively protects stablecoin holders, yet flexible enough to avoid imposing bank-like capital burdens on entities that do not engage in traditional lending or maturity transformation activities.
Liquidity and reserve requirements
Perhaps the most prominent requirement under the Act is that every payment stablecoin must be backed one-to-one by a high quality, highly liquid asset. This ensures that payment stablecoin holders can redeem stablecoins at any time, even during periods of market stress, with full assurance of value. Complementing this are reserve diversification and interest-rate risk management standards tailored to the issuer’s business model and designed to ensure continuity of operations. These provisions address concerns about concentration risk, explicitly noting deposit concentration at banking institutions, as well as the potential volatility of short-duration government securities.9
To meet this standard, issuers are required to maintain reserves composed of specific categories of instruments as described in Table 1.10
Redemption transparency and reserve disclosure
The statute places transparency at the center of the payment stablecoin framework, creating a disclosure standard intended to provide consumers, regulators, and market participants with clear, timely, and verifiable visibility into both the redemption rights of payment stablecoin holders and the reserves that underpin every stablecoin in circulation.
The public disclosure of each issuer’s redemption policy must set out clear, conspicuous, and easily understood procedures for redeeming outstanding stablecoins. Any discretionary limitations on timely redemption may be imposed only by a qualified state regulator or the appropriate federal supervisory agency. This ensures that issuers cannot unilaterally restrict access to customer funds.11
The Act also mandates full transparency around fees plainly disclosing all costs associated with purchasing or redeeming stablecoins. Any fee changes must be communicated to consumers at least seven days in advance. These provisions are intended to avoid ambiguity, prevent hidden charges, and reinforce confidence in the reliability of redemption rights.12
The Act pairs these redemption-related disclosures with a robust requirement for monthly public reporting of reserve composition. Issuers must publish on their website the total number of outstanding stablecoins and a detailed breakdown of the assets backing them. This includes the amount and type of each reserve instrument, its average length of contract time remaining or tenor, and the geographic location of custody.13
These transparency and disclosure requirements help to ensure that payment stablecoins operate with the clarity, discipline, and accountability.
Strict Limits on rehypothecation of reserves
To safeguard the integrity of reserves, the Act imposes a broad prohibition on rehypothecating reserves which applies to payment stablecoin issuers. Reserve assets may not be pledged, reused, or otherwise encumbered, directly or indirectly, by payment stablecoin issuers except in narrowly defined circumstances. These narrow exceptions include meeting margin obligations associated with permitted reserve investments, fulfilling obligations tied to standard custodial services, or generating short-term liquidity to meet reasonable redemption demands.14
"The statute places transparency at the center of the payment stablecoin framework, creating a disclosure standard intended to provide consumers, regulators, and market participants with clear, timely, and verifiable visibility."
These guardrails are designed to prevent reserve assets from being exposed to undue counterparty or market risk while still allowing issuers to meet redemption needs efficiently.
Monthly independent review and senior management certification
The statute imposes a recurring, month-end assurance process designed to reinforce the accuracy, reliability, and integrity of stablecoin reserve reporting. Each PPSI must subject its monthly reserve disclosures to independent scrutiny and executive-level certification.
On a monthly basis PPSIs must engage a registered public accounting firm to examine the information contained in the prior month’s reserve report. This review provides an external check on the completeness and accuracy of the issuer’s disclosures, ensuring that reserve composition, outstanding stablecoin amounts, and related data are validated by an independent professional subject to established auditing standards.15
In addition to the independent review, the Chief Executive Officer and Chief Financial Officer for each PPSI must certify the accuracy of the report. This certification will be submitted to the PPSI’s primary federal payment stablecoin regulator, or state payment stablecoin regulator, depending on an issuer’s supervisory framework.16
This requirement places direct accountability on senior leadership, aligning stablecoin reporting obligations with the governance expectations applied to public companies and regulated financial institutions. Moreover, the statute attaches significant consequences to false reporting. Any individual who knowingly submits a false certification is subject to the same criminal penalties established under 18 U.S.C. § 1350(c), the provision governing false certifications under the Sarbanes-Oxley Act. This includes potential fines and imprisonment, underscoring the seriousness of accurate, transparent, and truthful reporting.17
Operational, compliance, and information technology risk management
Regulators are required to establish principles-based operational, compliance, and information-technology risk-management standards, including expectations for Bank Secrecy Act ("BSA") and sanctions compliance. These requirements acknowledge that operational resilience and financial-crimes compliance are as essential to stablecoin stability as capital and liquidity.
The statute preserves broad regulatory discretion allowing regulators to differentiate among PPSIs based on factors such as size, complexity, capital structure, business model, and the activities of subsidiaries. This tailoring authority applies regardless of whether an issuer is supervised at the state or federal level, ensuring a consistent prudential baseline across the industry.18
BSA and sanctions compliance oversight — Domestic and foreign issuers
The Act incorporates PPSIs directly into the U.S. financial crimes compliance framework, affording full financial institution status under the BSA and all related Anti-Money Laundering ("AML") and sanctions laws. Issuers will be expected to maintain a comprehensive AML program, conduct formal risk assessments, designate a compliance officer, retain required records, monitor for suspicious activity, and file reports consistent with BSA requirements. Issuers will also have to maintain the technical capability to block, freeze, or reject transactions that violate federal or state law, including real-time responses to sanctions directives. Robust customer identification, verification, enhanced due diligence, and sanctions-screening programs are mandatory, with Treasury directed to issue tailored rules calibrated to issuer size and risk.
These obligations extend to foreign-issued stablecoins offered or traded in the United States. Foreign issuers must possess the technological ability to comply with U.S. lawful orders. Digital asset service providers are prohibited from listing foreign stablecoins that fail this threshold. Treasury may formally designate a foreign issuer as noncompliant, triggering a ban on secondary trading in the United States if deficiencies are not remedied within 30 days. Penalties are significant as they can range up to one hundred thousand dollars per day for service providers and up to one million dollars per day for foreign issuers that continue operating after designation.19
Treasury has solicited public input on emerging tools such as application programming interfaces, artificial intelligence-driven analytics, digital identity solutions, and blockchain-monitoring technologies. FinCEN will evaluate these methods for effectiveness, privacy implications, operational feasibility, and cybersecurity risk. Findings will be documented in a national illicit-finance risk assessment and inform future guidance and rulemaking. Within three years, FinCEN will issue standards for monitoring blockchain activity, including transactions routed through mixers, tumblers or other obfuscation tools, and develop tailored expectations for institutions interacting with decentralized finance protocols.20
Blocking of property and technological readiness
The Act includes a significant national-security provision requiring stablecoin issuers to coordinate with federal authorities when digital assets must be blocked under sanctions or other lawful orders. Treasury will coordinate with issuers before taking action when practicable but retains full authority to act immediately when circumstances demand.21
Issuers may operate only if they maintain the technological capacity to freeze or restrict transactions upon lawful direction, making operational readiness a prerequisite for participation in the regulated stablecoin ecosystem.22
Limitations on permitted stablecoin activities
The Act sharply defines the permissible activities of stablecoin issuers, ensuring they remain focused on the core functions of issuance, redemption, and safeguarding of reserves. Issuers may create and redeem stablecoins, manage eligible reserve assets, and provide custodial services for stablecoins, reserves, and private keys.
Ancillary activities are permitted only when directly supporting these core functions and only with regulatory approval.23
"For banks, the implications are strategic and immediate, as stablecoins threaten to erode legacy revenue streams even as they create new opportunities in custody, treasury services, and real-time settlement."
Prohibition on tying arrangements
To protect consumers and maintain fair competition, the Act prohibits tying practices. Issuers may not condition access to any service on a customer’s agreement to purchase additional products, nor may they restrict customers from using competitors’ services. This mirrors long-standing banking law principles designed to prevent coercive sales tactics.24
The statute provides that regulators may craft limited exceptions, but only where consistent with the Act’s consumer-protection and market-integrity goals.25
Prohibition on use of deceptive names
The statute establishes strict limitations on how PPSIs may name and market their products to prevent consumer confusion and avoid any implication of government backing. In real terms, this prohibition means that a PPSI may not use terminology associated with the United States Government, including phrases such as "United States," "United States Government," or "USG" in the name of any payment stablecoin; or market a payment stablecoin in a manner that could lead a reasonable person to believe that the stablecoin is legal tender under 31 U.S.C. § 5103; issued by the United States; or guaranteed or approved by the U.S. Government.26
It is important to note here that the statute clarifies that abbreviations directly referencing the currency to which a stablecoin is pegged such as "USD" are not subject to these naming restrictions.27
Annual audited financial disclosure and regulatory oversight
Large PPSIs face a heightened audit and reporting regime designed to bring public-company-grade transparency into the sector. Any issuer with more than $50 billion in outstanding stablecoins and not subject to reporting under Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, must prepare annual financial statements in accordance with U.S. Generally Accepted Accounting Principles, including full disclosure of related-party transactions.28
Those financial statements must be audited by a registered public accounting firm, with the engagement conducted under the full suite of Public Company Accounting Oversight Board ("PCAOB") auditing standards.29 This includes requirements governing auditor independence, evaluation of internal controls, and scrutiny of related-party arrangements.30
To reinforce market discipline, audited financial statements must be posted publicly on the issuer’s website and submitted annually to the issuer’s primary Federal payment stablecoin regulator.31 Regulators, in turn, are authorized to consult with the PCAOB to refine audit oversight practices and strengthen the detection of fraud, material misstatements, and other financial irregularities that could mislead stablecoin holders.32
Prohibition on interest and restrictions on non-financial public companies
The Act draws a line around the economic features of permitted payment stablecoins, beginning with a strict prohibition on interest or yield. Issuers are barred from paying any form of return, in cash, tokens, or other considerations, solely for holding, using, or retaining a payment stablecoin.33
Limits on stablecoin issuance by non-financial public companies
The Genius Act imposes strict limits on who may issue stablecoins and how they may operate. Public companies that are not primarily engaged in financial activities and their affiliates are barred from issuing payment stablecoins unless they receive unanimous approval from the SCRC. Approval requires demonstrating that issuance will not threaten U.S. financial stability, that consumer transaction data will not be exploited for advertising or shared without consent, and that the issuer will comply with federal tying prohibitions. These restrictions also apply to foreign companies not predominantly engaged in financial activities.34
Custody standards for stablecoin reserves and collateral
The statute establishes strict custodial requirements to protect the reserves, collateral, and private keys supporting permitted payment stablecoins. Custody may be provided only by federally supervised institutions or qualified state-regulated banks and credit unions, all of which must meet uniform customer asset protection standards.35
To protect customer assets, the statute prohibits custodians from commingling stablecoin reserves or customer property with their own assets. However, recognizing operational realities, the statute permits limited, carefully defined exceptions. For example, custodians may hold customer assets in omnibus accounts at insured depository institutions or trust companies and may temporarily withdraw or apply customer assets to settle transactions or pay lawful charges associated with custodial services.36
In an insolvency, customer claims receive priority over all other creditors, reinforcing the Act’s focus on asset protection. Custodians must also provide ongoing reporting to their primary regulator to ensure supervisory visibility into safeguarding practices.37
Insolvency treatment of stablecoin issuers
The Act creates the first dedicated insolvency framework for PPSIs, designed to protect consumers, preserve market confidence, and ensure that required reserves remain untouched even if an issuer fails. At the center of the framework is a statutory priority for stablecoin holders. In any federal or state insolvency proceeding, claims tied to payment stablecoins sit ahead of all other creditors with respect to required reserves and share on a ratable basis with one another. The Act also clarifies that every stablecoin holder is deemed to have a valid "claim" eliminating ambiguity about their standing.38
Interoperability standards
The Act makes clear that stablecoins can only reach their full potential if they move seamlessly across platforms, issuers, and technologies. To achieve this, federal regulators, working in conjunction with the National Institute of Standards and Technology, standardssetting bodies, and state supervisors, must evaluate whether common technical requirements are needed and, where appropriate, establish formal interoperability standards.39
In effect, the Act elevates interoperability from an industry aspiration to a regulatory expectation, positioning it as a foundational requirement for the next generation of regulated stablecoins.
Conclusion
Despite its sweeping scope, the Act leaves several of the most consequential elements of the stablecoin regime to future rulemaking and industry standards organizations. Core operational, prudential, and market-integrity standards, ranging from liquidity management and redemption mechanics to interoperability, tokenized deposit treatment, cross-border supervision, and secondary-market oversight, remain open questions. These unresolved areas will ultimately determine how stablecoins function in practice, how risks are contained, and how seamlessly they integrate into the broader financial system. In many respects, the most influential chapters of the regulatory framework have yet to be written.
At the same time, the case for stablecoins has never been clearer. Stablecoins have evolved far beyond speculative crypto instruments, emerging instead as global settlement tools, programmable payment rails, and corporate liquidity mechanisms that increasingly compete with traditional banking products. Their rapid adoption signals a structural shift in how money moves and how financial institutions deliver value.
For banks, the implications are strategic and immediate. Stablecoins threaten to erode legacy revenue streams in payments and deposits, even as they create new opportunities in custody, treasury services, and real-time settlement. Institutions that leverage their regulatory credibility, customer trust, balance-sheet strength, and established payments infrastructure will be well-positioned to lead. Those that hesitate risk losing ground to faster-moving entrants who are already shaping the next generation of digital money.
Endnotes
1. https://www.occ.treas.gov/news-issuances/federal-register/2026/91fr10202.pdf
2. https://www.fdic.gov/board/federal-register-notice-approval-requirements-issuance-payment-stablecoins-subsidiaries-fdic
3. https://www.govinfo.gov/content/pkg/FR-2026-02-12/pdf/2026-02868.pdf
4. 12 USC Chapter 56
5. 12 USC 5901(23)
6. 12 USC 5904
7. FDIC Approves Proposal to Establish Genius Act Application Procedures for FDICSupervised Institutions Seeking to Issue Payment Stablecoins | FDIC.gov
8. 12 USC 5903(a)(4)(A)(i)
9. 12 USC 5903(a)(4)(A)(ii)
10. 12 USC 5903(a)(1)(A)
11. 12 USC 5903(a)(1)(B)(i)
12. 12 USC 5903(a)(1)(B)(ii)
13. 12 USC 5903(a)(1)(C)
14. 12 USC 5903(a)(2)
15. 12 USC 5903(a)(3)(A)
16. 12 USC 5903(a)(3)(B)
17. 12 USC 5903(a)(3)(C)
18. 12 USC 5903(a)(4)(A)(iv)
19. 12 USC 5907
20. 12 USC 5908
21. 12 USC 5903(a)(6)(A)
22. 12 USC 5903(a)(6)(B)
23. 12 USC 5903(a)(7)
24. 12 USC 5903(a)(8)(A)
25. 12 USC 5903(a)(8)(B)
26. 12 USC 5903(a)(9)(A)
27. 12 USC 5903(a)(9)(B)
28. 12 USC 5903(a)(10)(A)(i)
29. 12 USC 5903(a)(10)(A)(ii)
30. 12 USC 5903(a)(10)(A)(iii)
31. 12 USC 5903(a)(10)(B)
32. 12 USC 5903(a)(10)(C)
33. 12 USC 5903(a)(11)
34. 12 USC 5903(a)(12)
35. 12 CFR 5909(a)(1); 12 CFR 5909(b)
36. 12 USC 5909(c)
37. 12 USC 5909(c)(3)
38. 12 USC 5910 12 USC 5912
