The GENIUS Act and the Future of Stablecoin Regulation

The regulation of stablecoins has quickly become one of the most debated topics in financial services and digital asset policy. At the center of this conversation is the Guiding and Establishing National Innovation for U.S. Stablecoins ("GENIUS") Act, which was passed by the Senate and signed into law in a remarkably short timeframe (just over 11 weeks after introduction). Its rapid passage underscores the urgency policymakers feel around establishing guardrails for stablecoin issuance and use in the United States.

Current State of Stablecoin Regulation

To date, only New York and Texas have implemented state-level regulatory frameworks for stablecoins. However, Wyoming recently made headlines by launching the Frontier Stable Token (FRNT) through its Stable Token Commission. This initiative makes Wyoming the first public entity in the United States to issue a blockchain-based stable token, highlighting the state’s proactive stance in the digital asset space.

Key Provisions of the GENIUS Act

The GENIUS Act establishes clear boundaries on who may issue payment stablecoins. Specifically, it makes it unlawful for any person to issue a payment stablecoin unless they are a permitted payment stablecoin issuer.

Permitted issuers fall into three categories:

• Permitted payment stablecoin issuers
• Federal qualified payment stablecoin issuers
• State qualified payment stablecoin issuers

The Act also allows digital asset service providers, such as exchanges and custodians, to continue offering and selling non-permitted stablecoins for up to three years after enactment, providing a transition period for the market.

A Dual-Track Framework

One of the most significant aspects of the GENIUS Act is its dual-track regulatory framework:

• Issuers with less than 10 billion dollars in consolidated outstanding stablecoin issuance may opt into a state-level regulatory regime, provided the state framework is substantially similar to the federal framework.
• Once an issuer surpasses the 10 billion dollar threshold, they must transition to the federal framework unless granted a waiver to remain under state oversight.

This structure attempts to balance innovation and competition with the need for consistent federal standards, while still giving states a role in oversight.

This state-federal contrast is not just a structural feature of the Act. It will influence where issuers choose to locate, how quickly they can bring products to market, and what kind of supervisory relationship they will have over time. Smaller or emerging issuers may view a state regime as more flexible or tailored to innovation, while larger programs, like banks and institutional users, will look for the predictability and perceived safety of a federal framework. Understanding how these two tracks interact will be central to product design, licensing strategy, and long-term risk management for stablecoin businesses.

Unanswered Questions

A major theme of industry discussions is how states will define what qualifies as substantially similar to the federal framework. This determination will shape whether states can maintain meaningful oversight of stablecoin issuers or whether most activity will inevitably shift to the federal level.

Looking Ahead

The GENIUS Act reflects a significant step toward bringing clarity and uniformity to stablecoin regulation. Its dual-track system could encourage innovation among smaller issuers while ensuring that larger, systemically significant stablecoin programs operate under federal supervision. Still, much will depend on how states implement their regimes and how regulators interpret the Act in practice.

For financial institutions, fintechs, and digital asset firms, the next few years will be critical in adjusting to this new regulatory environment.

Bates Group helps banks, fintechs and digital asset firms understand and operationalize emerging frameworks like the GENIUS Act. Our Fintech and Banking team advises on product and licensing strategy, risk assessment, and controls design for payment stablecoins and related services, and supports clients as they prepare for both state and federal oversight. To discuss how this new framework may affect your business model and roadmap, please contact us today.