Page 20 - Fall 2025 - Single Pages

GENIUS Act –

Ushering in a Transformative Era of Digital Assets

BY FORVIS/MAZARS

• Meet capital, liquidity, and risk management requirements to be
On June 17, 2025, the U.S. Senate passed the
GENIUS Act (Guiding and Establishing Na�onal Innova�on for U.S. prescribed by the federal and state regulators.
Stablecoins of 2025) with strong bipar�san support. The GENIUS Act s�ll • Apply the Bank Secrecy Act for an�-money laundering and related
has a way to go before it is signed into law; the U.S. House of purposes.
Representa�ves is expected to pass a similar measure in the coming
weeks, with final legisla�on provided to President Donald Trump for In addi�on, payment stablecoin issuers are prohibited from paying any
signature later this summer. Nonetheless, the GENIUS Act is form of interest or yield on the stablecoin if such payments are solely in
transforma�ve legisla�on that signals a genera�onal change in the connec�on with the holding, use, or reten�on of the payment stablecoin.
rela�onship between digital assets and the mainstream financial system. Further, the issuer is prohibited from tying and, as such, may not require
the customer to obtain an addi�onal paid product or service from the
issuer or any of its subsidiaries, and may not prohibit the customer from
Background
The GENIUS Act sets out a regulatory framework that permits the obtaining addi�onal products or services from a compe�tor.
issuance of payment stablecoins and allows for their integra�on into the
U.S. financial system. The act broadly defines a payment stablecoin as a Special Requirements for Nonbank Payment Stablecoin Issuers
digital asset that can be used as a means of payment, redeemable for a If a firm that is not predominantly engaged in financial ac�vi�es
fixed monetary value, and is designed to maintain a stable value over (nonbank) would like to issue payment stablecoins, the firm must receive
�me. When fully adopted, payment stablecoins generally are expected to unanimous approval from the Stablecoin Cer�fica�on Review Commi�ee
have a constant value of $1 and can be used by individuals and established under the act. In addi�on to mee�ng the requirements
businesses for the same purposes as physical currency, checks, ACH, and discussed above, the nonbank would be required to demonstrate to the
debit and credit card transac�ons. review commi�ee that the nonbank:
However, unlike many of these tradi�onal forms of payment, payment • Would not pose a material risk to the safety and soundness of the
stablecoin transac�ons will se�le nearly instantaneously, can occur banking system, the financial stability of the U.S., or the Deposit
around-the-clock, do not require an intermediary between the payor and Insurance Fund.
payee, and are limited in payment size only by the amount of stablecoins • Will comply with data use limita�ons requiring customer consent
that the payor owns. For more informa�on on the benefits and usage of before nonpublic personal informa�on is used to target, personalize,
stablecoins, click here or rank adver�sing or other content; sold to any third party; or
. shared with non-affiliates.
Overview • Will comply with the tying prohibi�ons.
To reduce the risks that payment stablecoins pose to the safety and
soundness of the financial system, the GENIUS Act provides requirements Risks Posed to Issuers
that issuers of payment stablecoins must meet. Only those payment Many of the risks associated with payment stablecoins will be quite
familiar to banks and other financial ins�tu�ons—liquidity, interest rate,
stablecoins that meet these requirements can be issued for use by U.S. financial crimes, and cybersecurity. However, there are new facets to
persons. Among other requirements, a payment stablecoin issuer these risks that have yet to be fully explored as issuers will need to
must: address these topics in a new digital asset sphere that seeks to operate
• Be organized as a subsidiary of an insured depository ins�tu�on, as a around the clock, across borders, and with as much individual anonymity
federal-qualified nonbank payment stablecoin issuer, or as a state- as possible.
qualified payment stablecoin issuer.
• Be subject to either federal or state regula�on by a regulator Within this environment, issuers will need to adeptly manage liquidity
designated under the act. and interest rate risk so that stablecoins constantly maintain their
• All issuers may choose federal regula�on; however, only those that currency peg and holders can promptly redeem at all hours of the day.
issue $10 billion or less in stablecoins may choose state regula�on. Since payment stablecoins se�le in real �me with minimal
• Maintain an adequate level of reserves to meet a 100% minimum intermedia�on, payment stablecoin systems will be hot targets for
reserve requirement for the payment stablecoins. fraudsters and cybercriminals. Managing the financial crimes and
• Reserves must be comprised of U.S. currency, short-term U.S. cybersecurity risks in such a dynamic and expansive environment will
Treasury securi�es, or other similarly liquid assets. Issuers also are require strong systems and controls designed for the unique risks
required to publicly disclose their redemp�on policy and publish associated with payment stablecoins.
details of their reserves on a monthly basis.
• The accuracy of reserves must be cer�fied by the issuer’s CEO and Risks Posed to Non-Issuer Banks & Financial Market Par�cipants
CFO and be subject to examina�on by a registered public accoun�ng As payment stablecoins gain popularity, they may replace a significant
firm. por�on of the ac�vity currently undertaken on tradi�onal payment rails,
• Meet specific requirements related to (1) limita�ons on the reuse of diver�ng important sources of fee income away from non-issuer banks
reserves; (2) the safekeeping services of stablecoins; and (3) and financial ins�tu�ons. Importantly, payment stablecoins could result in
regulatory supervision, examina�on, and enforcement.
drama�c changes to non-issuer deposit franchises. For example,

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