In July 2025, the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) was signed into law, representing the first federal law regulating stablecoins. Stablecoins are digital currencies designed to maintain a stable value (often pegged 1:1 to the relevant currency, for example, USDC 1:1 with the U.S. dollar). The GENIUS Act aims to introduce a clear legal framework with strict rules on who can issue stablecoins and how they must operate. U.S.-based fintech companies, especially those in payments, banking and crypto, face significant regulatory, operational and market changes under the GENIUS Act. This article explores the act’s key impacts and how fintech companies may consider adapting their business models, compliance strategies and technology to align with the new law.
New Rules Under the GENIUS Act
The GENIUS Act creates formal licensing rules for permitted payment stablecoin issuers. Under the new law, only regulated entities can issue stablecoins in the U.S. going forward.
- An insured bank can issue stablecoins, but only with approval from the appropriate federal banking regulator. For example, a major bank's fintech arm could launch a stablecoin once its regulator approves.
- A fintech or other non-bank company can apply to become a qualified stablecoin issuer and obtain a federal license to issue stablecoins.
- Smaller fintech startups can apply for a state license to issue stablecoins, but the state's rules must conform to strict federal requirements. Large issuers (over $10 billion in stablecoins) will face federal oversight even if state-chartered.
Properly issued stablecoins are no longer treated as securities or commodities under U.S. law. As stablecoins are not classified as securities or investment products, they are not subject to SEC or CFTC regulations as if the coins were stocks or futures. This means fintech companies can issue or use regulated stablecoins without fear of violating securities laws. Regulations have classified stablecoins as regulated digital payment assets.
The GENIUS Act’s new rules will take effect in early 2027. The law gives a further buffer until mid-2028 before unapproved stablecoins can no longer be offered or traded in the U.S. This means fintech companies have a transition window (around 2-3 years) to seek licenses, modify products, or wind down non-compliant stablecoin offerings. By July 2028, however, only stablecoins from permitted issuers will be allowed in U.S. markets, which marks a pivotal shift that fintech companies must plan for.
Assessment Under the GENIUS Act
The GENIUS Act imposes strict operational rules on stablecoin issuers, including fintech companies. Those involved in issuing or handling stablecoins will need to reassess their compliance programs and day-to-day operations in several ways:
- 100% Reserve Backing: Every stablecoin issued must be backed one-to-one by high-quality, liquid assets. In practice, this means that each digital dollar a fintech puts into circulation must hold an equivalent value in actual U.S. dollars or cash equivalents, such as short-term U.S. Treasury bills, in reserve. Reserves have to be kept in segregated accounts (separate from the company's own funds) for safekeeping. A fintech issuer cannot invest customer-backed funds in risky assets or lend them out.
- Monthly Disclosures and Audits: To enforce the above, issuers must publish monthly reports detailing their reserve composition (i.e., how much is in cash vs. treasuries). These reports need to be verified by independent auditors, and very large issuers (over $50 billion in coins) are subject to annual PCAOB audits. Fintech companies issuing a stablecoin must invest in robust accounting systems and regularly work with auditing firms to provide transparent and accurate financial information.
- Redemption at Par: The law requires that stablecoins be freely redeemable at face value (1 stablecoin = $1) upon request. Fintech issuers must maintain clear redemption policies and enough liquidity to honor withdrawals quickly. Fintech companies must have adequate cash on hand or liquid assets ready for potential stablecoin redemption. Companies may need to set up automated banking processes to facilitate frequent redemptions without delay.
- Activity Limitations: A company that becomes a permitted stablecoin issuer is restricted largely to issuing and managing stablecoins. The GENIUS Act limits what activities these entities can engage in, preventing stablecoin issuers from straying into risky ventures. For fintech companies, this might mean separating stablecoin operations into a dedicated entity. For example, a fintech that also lends or invests might spin off the stablecoin function into a subsidiary that focuses only on the coin issuance and custody functions to maintain compliance.
- Anti-Money Laundering (AML) and Know Your Customer (KYC): Stablecoin issuers are explicitly subject to the Bank Secrecy Act and must follow banking rules for AML and KYC verification. Fintech companies in the stablecoin space must adapt their compliance departments tailored to digital asset transactions to conduct customer identity checks, monitor suspicious activity and report illegal transactions to regulators. This may involve the integration of transaction monitoring software and the involvement of compliance officers with expertise in crypto.
The GENIUS Act’s Impact
The GENIUS Act has a broad market impact and industry implications that reshape the fintech landscape in the U.S.:
- The GENIUS Act "legitimizes" stablecoins and brings them into the mainstream financial system. Banks, payment companies and investors can now adopt stablecoin technology with greater confidence, knowing these digital dollars are subject to robust oversight. For fintech companies, this opens doors to partnerships with banks and businesses that previously shied away from stablecoins due to regulatory uncertainty. The act legitimizes stablecoins as a recognized part of the U.S. payments infrastructure.
- The GENIUS Act is designed to boost user trust in stablecoins, which can, in turn, expand the market for fintech services built on these coins. By ensuring full backing and regular audits, the new law addresses many of the risks that worried consumers. Such protections make stablecoins far safer for the public, which fintech companies can emphasize as a selling point. For example, a fintech can now legitimately advertise that its stablecoin balance is fully collateralized and legally protected, potentially attracting users who previously feared that digital dollars were too risky. Greater consumer confidence can translate to higher adoption rates for stablecoin-based payment apps and remittance services.
- Abiding by the new rules will not be cheap. Smaller fintech startups might struggle with the compliance costs (legal, accounting, licensing fees) that come with the GENIUS Act, potentially leading them to partner with bigger institutions or merge for scale. There is a risk of industry consolidation, where only well-capitalized firms can afford to be stablecoin issuers, and smaller ones either exit the space. Those that invest early in meeting the standards could pull ahead of less prepared companies. As a whole, fintech companies will operate on a more level regulatory playing field, favoring competition based on service quality and innovation.
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Strategies for Fintech Under the GENIUS Act
To thrive under the GENIUS Act, U.S. fintech companies must strategically adjust their business models, technology and infrastructure. Key adaptation strategies include:
1. Evaluating which regulatory path fits their business. Those aiming to issue stablecoins must decide whether to seek a federal license or a state charter. In some cases, partnering with an existing bank may make the most sense as the fintech can leverage the bank’s infrastructure and regulatory status to issue a stablecoin through the bank’s subsidiary. Fintech companies should now begin engaging counsel and regulators to map out the licensing process. Early movers who secure licenses will gain a head start in the market.
2. Upgrading compliance capabilities to bank-like levels. In addition to tailored KYC, compliance capabilities should include preparing for specific types of audits and monthly reporting and strengthening corporate governance, such as risk and audit committees.
3. Adjusting and upgrading the technical infrastructure of fintech platforms to comply with and succeed under the new law. For example, integrating with stablecoin issuer APIs to enable seamless payments and wallet functionality, setting up real-time dashboards and automated alerts to monitor reserves and transaction risks and upgrading backend systems to handle high-volume stablecoin transactions at scale.
4. Creating strategic partnerships and alliances, such as partnering with banks and credit unions to handle reserve custody, access payment systems or co-issue stablecoins. Banks bring regulatory credibility to the table.
Conclusion
The GENIUS Act ushers in a new regulatory framework for stablecoins. It clarifies who can issue them, how they must be backed and what compliance looks like — eliminating much of the legal ambiguity that’s long plagued the crypto space. For U.S. fintech companies, this means operational challenges and strategic opportunities to build faster, safer and more trusted financial products. With regulatory clarity now in place, stablecoins can finally scale as core infrastructure for mainstream, programmable finance.
Author: Edward Decolongon, CPA | [email protected]
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For more information on this topic, please contact a member of Withum’s Fintech Services Team.
