What Is the GENIUS Act? US Stablecoin Regulation Explained
The GENIUS Act is America’s first major stablecoin law. Learn what it requires from issuers, how it affects USDT and USDC, and what it means for UK crypto users
The GENIUS Act — Guiding and Establishing National Innovation for US Stablecoins — became the first major US federal legislation specifically governing stablecoins when it passed in 2025. It created a comprehensive regulatory framework for payment stablecoins and set the template for how the world’s largest economy will regulate digital dollar equivalents.
What Is the GENIUS Act?
The GENIUS Act establishes requirements for any entity issuing a “payment stablecoin” — a stablecoin designed to maintain a stable value relative to a fixed amount of monetary value (typically one US dollar). Key provisions:
Reserve requirements: Issuers must back their stablecoins 1:1 with high-quality liquid assets — US dollars, short-term Treasury bills, or equivalent instruments. No fractional reserve stablecoin issuance. Reserves must be segregated from the issuer’s operating funds.
Redemption rights: Holders must be able to redeem stablecoins for the underlying dollars on demand. Issuers must publish redemption procedures and honour requests within a reasonable timeframe.
Licensing: Stablecoin issuers must obtain a federal licence from the OCC (Office of the Comptroller of the Currency) or state licences meeting federal minimum standards. Foreign issuers serving US customers must also comply or be prohibited.
Audit requirements: Monthly attestations and annual audits of reserves by registered accounting firms. Tether’s historical resistance to full audits created significant compliance questions when the Act passed.
Impact on USDT and USDC
USDC, issued by Circle, was well-positioned for the GENIUS Act. Circle had already maintained monthly attestations from Deloitte and structured its reserves in the required instruments. The Act essentially codified the practices Circle already followed, and Circle quickly received the required licensing.
USDT (Tether) faced more scrutiny. Tether’s reserves historically included commercial paper and other assets beyond the narrow set permitted under the GENIUS Act. Tether has restructured its reserves toward Treasury bills since 2022 and has engaged with the licensing process, though the outcome remains in progress as of mid-2026.
The Broader Significance
The GENIUS Act established several precedents beyond its specific provisions. Dollar-backed stablecoins are treated as a new category of financial instrument — neither securities nor bank deposits, but a regulated third category. This resolved years of regulatory uncertainty that had slowed institutional adoption.
The Act explicitly did not apply to algorithmic stablecoins — assets that maintain their peg through code rather than dollar reserves. These remain in regulatory limbo, though the TerraUSD collapse informed clear language in the Act that algorithmic stablecoins cannot be marketed as “payment stablecoins.”
The law also preempted some state regulations, creating a national framework rather than 50 different state rules — reducing compliance complexity for issuers operating nationally.
What This Means for UK Users
The GENIUS Act is US legislation with limited direct effect on UK users. UK stablecoin regulation is handled separately through the FCA under powers granted by the Financial Services and Markets Act 2023. The two frameworks share common goals — reserve backing, redemption rights, auditing — but differ in specific requirements.
For UK users holding USDC or USDT, the GENIUS Act is positive news: it increases the regulatory certainty and reserve quality of the world’s two largest stablecoins, making them more reliable instruments for crypto trading and payments.
This article is for educational purposes only and does not constitute financial advice. Always do your own research.
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