GENIUS Act Offers Stablecoin Guidance; Comment Period Now Open

The digital asset industry received a portion of its requested guidance when The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act was signed into law on July 18, 2025. This is the first piece of comprehensive payment stablecoin legislation in the U.S. and is intended to build confidence through regulatory clarity in the mainstream financial market. On September 19, 2025, the Department of the Treasury issued an advance notice of proposed rulemaking to solicit public comment on questions relating to the implementation of the GENIUS Act.

What Is a Payment Stablecoin Under the GENIUS Act?

The GENIUS Act provides a comprehensive framework for the federal regulation of payment stablecoins, beginning with defining what a “payment stablecoin” is under the Act:

• A digital asset is a payment stablecoin if it is, or is designed to be, used as a means of payment or settlement, and
• The issuer of such an asset is obligated to convert, redeem, or repurchase for a fixed amount of monetary value, and represents or creates the reasonable expectation that it will maintain a stable value relative to a fixed amount of monetary value.

A payment stablecoin does not include a digital asset that is a:

• National currency;
• Deposit as defined in the Federal Deposit Insurance Act, including a deposit recorded using distributed ledger technology; or
• Security as defined in the Securities Act, Exchange Act or Investment Company Act.

What are the Key Provisions of the GENIUS Act?

The framework of the GENIUS Act primarily encompasses six key provisions:

1. Only permitted payment stablecoin issuers (PPSIs) may issue a payment stablecoin in the U.S. There are three primary categories, all of which must be formed in the U.S.:
   • Subsidiaries of an insured depository institution,
   • Federal qualified payment stablecoin issuers, or
   • State qualified stablecoin issuers.
2. A payment stablecoin issued by a PPSI is not a “security” under U.S. federal securities laws or a “commodity” under the Commodity Exchange Act, and, therefore, is not subject to the oversight of the SEC or CFTC.
3. PPSIs must maintain reserves backing outstanding payment stablecoins on at least a one-to-one basis — consisting only of certain specified assets, including U.S. dollars and short-term treasuries.
4. PPSIs are required to make monthly, public disclosures of the composition of the reserves.
5. A PPSI may not offer any form of interest or yield to stablecoin holders.
6. Strict marketing rules prohibit any representation that stablecoins are government-backed, guaranteed by the U.S. or federally insured, ensuring clarity for consumers.

The Act becomes effective on the earlier of either 18 months after the date of enactment, or 120 days after the date on which a primary federal payment stablecoin regulator issues final implementing regulations.

Request for GENIUS Act Comment Period Open Through October 17, 2025

The GENIUS Act tasks Treasury, along with various other federal and state agencies, with issuing regulations that encourage innovation in payment stablecoins while also providing an appropriately tailored regime to protect consumers, mitigate potential illicit finance risks and address financial stability risks. Pursuant to the advance notice of proposed rulemaking, the Treasury is requesting comments on multiple sections of the Act relating to the key provisions outlined above, including:

1. Is the scope of the term “payment stablecoin” sufficiently clear as defined in the GENIUS Act? If not, what additional clarification should be provided?
2. Is the scope of the term “digital asset service provider” sufficiently clear as defined in the GENIUS Act? If not, what additional clarification should be provided?
3. Are any regulations or guidance necessary to clarify the scope of the reserve requirements … or the requirement to publish the composition of the reserves?
4. Should any regulations be issued to clarify the meaning of “pay,” “interest,” “yield,” “solely,”? In particular, should any regulations be issued to clarify whether, and to what extent, any indirect payments are prohibited?

Provide your comments on regulations.gov regarding the GENIUS Act through October 17, 2025.

The passage of the GENIUS Act and the forthcoming regulations offer stability for more traditional market users to begin exploring digital assets. While we are still awaiting comprehensive tax guidance, this first step illustrates the commitment regulators are making to solidify the application of digital assets into mainstream economic markets.

Contact Cynthia Pedersen or a member of your service team to discuss this topic further.

In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.