The GENIUS Act: Preparing Banks for the Digital Dollar Era

On July 18, 2025, the United States took a landmark step toward regulating digital finance with enactment of the Guiding and Establishing National Innovation for US Stablecoins Act (“GENIUS Act”).[1] As the first federal framework for stablecoins, the GENIUS Act marks a decisive shift in how the financial system will integrate blockchain-based payment infrastructure. For banks, this legislation presents both opportunities and challenges that demand early strategic planning. 

Key Provisions

The GENIUS Act establishes a federal regulatory regime for payment stablecoins—defined as “a digital asset that is, or is designed to be, used as a means of payment or settlement.” These tokens are designed to serve as a medium of exchange and unit of account, rather than as appreciating assets. Under the GENIUS Act, digital asset service providers face daily fines of up to $100,000 for unlawful issuance.

PPSIs and Custodians: A New Market Structure 

Alongside recent interagency guidance on crypto-asset safekeeping by banking organizations, the GENIUS Act signals a clearer split of roles between permitted payment stablecoin issuers (PPSIs) and custodians. Under the act, only PPSIs may issue payment stablecoins to US persons, subject to prudential requirements and supervision; banks may also act as custodians, providing key management and related safekeeping services in a “safe and sound” manner.[2], [3]

PPSIs that control the token smart contract can—and, when required by law, must—restrict movement of tokens by blocking sanctioned addresses at the contract level and freezing tokens held at those addresses. Major issuers already disclose and exercise these powers at law enforcement’s request.[4] Transfers to or from a blacklisted address will fail at the token contract level, even though other wallet functions may remain unaffected.  

As federal rulemaking proceeds, regulators have signaled that token-level restrictions could eventually extend beyond sanctions (e.g., confirmed exploits or court orders) implemented through supervisory guidance and issuer policies. Monitoring upcoming Officer of the Comptroller of the Currency (OCC)/Federal Reserve/Treasury rulemaking will be essential. 

Becoming a PPSI 

Pursuant to the act, only PPSIs are allowed to issue stablecoin tokens to US persons. Three types of PPSIs exist: 

• Insured depository institutions (IDIs) such as federally regulated banks and credit unions 
• Nonbank federal PPSIs, newly chartered by the OCC 
• State-qualified PPSIs, operating under state regulatory regimes certified by federal regulators as “substantially similar”[5] to the GENIUS Act’s requirements, and limited to under $10 billion in circulation 

Applicants must demonstrate financial, operational, and governance readiness. Section 5(c) requires regulators to assess factors including management competency, redemption policies, and any prior felony convictions among directors or officers. Specifically, the following factors are to be considered:  

• The ability of the applicant to meet all stablecoin issuer requirements 
• Whether an officer or director of the applicant has been convicted of any felony financial crime [6]
• The competency and experience of key personnel 
• Whether the redemption policy matches Section 4(a)(1)(B) 
• Any other factors the primary federal payment stablecoin regulator deems necessary 

These provisions appear to be aimed at shifting stablecoins to regulated, asset-backed vehicles designed for payment and settlement utility by requiring both bank and nonbank issuers to place them into transparent, fully collateralized structures, effectively prohibiting the consumer use of algorithmic and unbacked “stablecoins.”  

Implementation Timeline 

The GENIUS Act includes an implementation window until January 18, 2027—or 120 days after final rules are issued, whichever comes first. Joint rulemaking from the OCC, Federal Reserve, and Treasury is expected in 2026, with compliance obligations likely to take effect in early 2027. Restrictions on noncompliant stablecoins are expected about a year later. 

Banks should not wait. Early steps include: 

• Mapping potential use cases (wholesale payments, treasury tokens, retail products) 
• Conducting gap analyses of reserves, redemption systems, and AML/KYC 
• Monitoring which states seek and receive federal certification 
• Preparing charter application materials and engaging regulators early 
• Identifying technology partners for issuance, reserve management, and cybersecurity 

Strategic Opportunities and Risks 

The GENIUS Act creates a federally sanctioned entry point for banks to offer stablecoins—unlocking new opportunities in settlement, cash management, and cross-border liquidity. 

But it also imposes stringent obligations that exceed traditional deposit structures: one-to-one reserves, daily redemptions, monthly attestations, and ongoing regulatory supervision. Banks lacking token operations capabilities may struggle to compete with fintech-native PPSIs. 

There is also a risk of deposit disintermediation if nonbank stablecoins offer more convenience or better yields.[7] Banks must weigh potential growth against heightened compliance, operational, and reputational risk. 

How BRG Can Help 

Our experts—including former New York State Department of Financial Services (NYDFS) regulators, compliance officers, blockchain specialists, and banking executives—have decades of experience helping financial institutions navigate complex regulatory changes. 

We support clients with: 

• PPSI licensing strategy and charter applications 
• Reserve design and Proof-of-Reserves (PoR) attestations 
• Blockchain analytics and AML compliance builds 
• Technology partner evaluations and operational readiness assessments 
• Design of digital-asset business models, token issuance frameworks, and economic incentive structures to support sustainable blockchain ecosystems 

BRG combines deep regulatory expertise with hands-on implementation experience to help banks and PPSIs build safe, compliant, and scalable digital-asset offerings. 

Notes

[1] 119th Congress, Guiding and Establishing National Innovation for U.S. Stablecoins Act or the GENIUS Act, Public Law no. 119-27 (July 18, 2025). https://www.congress.gov/bill/119th-congress/senate-bill/1582

[2] See OCC, Chief Counsel’s Interpretation Clarifying: (1) Authority of a Bank to Engage in Certain Cryptocurrency Activities; and (2) Authority of the OCC to Charter a National Trust Bank, Interpretive Letter 1179 (November 18, 2021). https://www.occ.gov/topics/charters-and-licensing/interpretations-and-actions/2021/int1179.pdf; rescinded by OCC, OCC Letter Addressing Certain Crypto-Asset Activities, Interpretive Letter 1183 (March 7, 2025). https://www.occ.gov/topics/charters-and-licensing/interpretations-and-actions/2025/int1183.pdf, which reaffirmed that the activities described in Interpretive Letters 1170, 1172, and 1174—including crypto-asset custody, stablecoin reserve deposits, and distributed ledger payment activities—remain permissible; and OCC Bulletin 2023-29, Long-Term Debt Requirements for Large Bank Holding Companies, Certain Intermediate Holding Companies of Foreign Banking Organizations, and Large Insured Depository Institutions: Notice of Proposed Rulemaking (August 29, 2023).

[3] GENIUS Act §§ 3(a), definition and limitation on permitted payment stablecoin issuers; 5(a), PPSI licensing; and 4(a)(4)(B)(ii) and 4(c)(5)(B)(ii), requiring that PPSIs and custodians operate in a “safe and sound” manner; also see OCC Interpretive Letter 1179 (November 18, 2021), rescinded by OCC Interpretive Letter 1183 (March 7, 2025); and OCC Bulletin 2023-29 (August 29, 2023).

[4] E.g., Circle, USDC Terms of Service, § 3, “Applicable Laws and Regulations,” requiring Circle to prevent Restricted Persons—those subject to US or other government sanctions—from holding or using USDC, which provides the basis for Circle’s ability to block or freeze tokens held at sanctioned addresses pursuant to law enforcement or sanctions obligations (last updated October 4, 2024). https://www.circle.com/legal/usdc-terms

[5] Per Section 4(c)(4)(A), state payment stablecoin regulators must apply for formal certification by the Stablecoin Certification Review Committee (comprising Treasury, the Federal Reserve, and the FDIC) that a state’s regulatory regime is “substantially similar” to the federal regulator, as outlined in Section 4(c)(2). Only certified states may authorize PPSIs to issue stablecoins under the act. https://www.congress.gov/bill/119th-congress/senate-bill/1582/text

[6] Section 5(c)(2) lists the following offenses: insider trading, embezzlement, cybercrime, money laundering, financing of terrorism, and financial fraud. https://www.congress.gov/bill/119th-congress/senate-bill/1582

[7] See US Department of the Treasury, 2024 National Money Laundering Risk Assessment (February 2024). https://home.treasury.gov/system/files/136/2024-National-Money-Laundering-Risk-Assessment.pdf; and US Department of the Treasury/White House, Strengthening American Leadership in Digital Financial Technology: Digital Asset Policy Framework (January 23, 2025). https://www.whitehouse.gov/presidential-actions/2025/01/strengthening-american-leadership-in-digital-financial-technology/, which discuss risks of deposit disintermediation if nonbank stablecoins offer greater convenience or higher yields; banks must weigh growth potential against heightened compliance, operational, and reputational risk.