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The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which was signed into law in July 2025, is federal legislation that aims to create a comprehensive regulatory regime for stablecoins.
It imposes a range of requirements on stablecoin issuers, including 1:1 reserve backing in USD or high-quality equivalents, regular auditing, anti-money laundering and counter-terrorism financing (AML/CTF) checks and governance standards.
The goal of the act is to move stablecoins from a regulatory grey zone into the mainstream of financial infrastructure, distancing them from the reputation of digital assets more widely as lawless and highly risky.
The creation of the regulatory framework is intended to encourage banks and other traditional financial institutions (FIs) that have previously been wary of digital assets because of their poor reputation to enter the market.
On the global stage, by introducing legislation in this area early, the US has been able to position itself as a rule-setter in digital finance, which aligns with the priorities of the enthusiastically pro-crypto Trump administration.
The GENIUS Act could disrupt both digital assets and traditional finance by accelerating the adoption of stablecoins for multiple purposes.
We are already seeing its impact in the US and around the world, and it is vital for banks and other FIs to understand how it affects them and their operations.
The bigger picture
The domestic impact so far of the GENIUS Act can be seen in two key areas.
First, major US banks, including Bank of America and Citi, have signalled plans to launch their own stablecoins.
Bank of America CEO Brian Moynihan said publicly in July that the bank is trying to understand client demand and will likely roll out a stablecoin, possibly in partnership with other players.
Citigroup CEO Jane Fraser made a similar statement, telling analysts that her organisation is considering issuing a stablecoin to facilitate digital payments, provided the conditions are favourable.
The openness of such banks to using stablecoins suggests that incumbents view them as a new product line, not just a threat.
The second key domestic effect of the GENIUS Act can be seen in Wyoming’s launch of the first state-backed stablecoin.
Although plans for the Frontier Stable Token (FRNT) were already in place well before the implementation of the federal framework, its introduction in August 2025 is an indication of states’ willingness to experiment with what stablecoins can offer.
Internationally, the Asia-Pacific region has been leading the way on stablecoins regulation in the period since the GENIUS Act was passed.
For example, Hong Kong rapidly rolled out its own framework, rushing it into effect as of August 1, 2025.
The Stablecoins Ordinance requires stablecoin issuers to obtain a licence from the Hong Kong Monetary Authority (HKMA), and is regarded as a more restrictive, top-down approach to regulating digital assets than the US regime.
Like the GENIUS Act, it aims to safeguard financial stability while building retail investors’ confidence in the jurisdiction’s emerging crypto-asset ecosystem.
However, it focuses more on consumer protection and fostering a sustainable virtual asset ecosystem than the US framework, which emphasises innovation and consolidating the market around USD-backed stablecoins.
Japan, which introduced its own regulatory framework in 2022, reportedly approved the first licensed yen-backed stablecoin in August 2025.
The move by the Financial Services Agency (FSA) clears the way for JPYC to issue a digital currency pegged to the JPY, perhaps before the end of the year. The fintech plans to act as a transfer service provider for the stablecoin, which will in turn operate as a payment instrument for international money transfers and corporate payments.
Western jurisdictions have made less progress on stablecoins regulation so far.
The UK’s proposed framework is still under discussion, but has been criticised for imposing requirements that are more onerous than those in other jurisdictions.
In August 2025, key industry figures wrote an open letter to the UK finance minister, Rachel Reeves, expressing frustration at the country’s slow progress towards regulatory clarity on stablecoins and warning that unless a supportive framework is introduced, innovation may migrate to more welcoming jurisdictions.
They argued that the UK risks missing a “transformative moment” in financial services innovation if it fails to embrace stablecoins.
The EU’s digital assets framework, the Markets in Crypto-Assets (MiCA) Regulation, passed in 2023 and came into effect at the end of 2024, and was regarded as trailblazing at the time.
However, the advantage of moving early has given way to criticism that it does not properly consider the possibilities of stablecoins and instead imposes unduly stringent rules that could hinder uptake.
Although not all the developments on stablecoins in the US and around the world in recent weeks have been driven directly by the introduction of the GENIUS Act, they have all occurred in the context of digital assets going mainstream and the US setting a benchmark.
Why should you care?
The introduction of the GENIUS Act has immediate business implications for FIs in the US. Stablecoins are moving from a niche type of digital asset into mainstream finance, and organisations including banks, asset managers and payment firms will all be directly affected.
A key concern for banks is that a loophole in the act means exchanges offering yield on stablecoins could compete with their deposit products. The Bank Policy Institute is leading the fight to close the loophole and preserve banks’ advantage in this area.
Another use case for stablecoins that will affect FIs in the short term is cross-border payments. These can be transacted quickly and cheaply using the digital assets, with significant implications for FX providers, remittance services and correspondent banks.
A more strategic question is that of stablecoins versus central bank digital currencies (CBDCs). The US has issued a ban on the development of CBDCs, making a digital dollar unlikely for the foreseeable future and boosting the case for stablecoins.
In contrast, China, the EU, the UK and Russia are all among the many jurisdictions pressing ahead with CBDCs. These digital currencies vary widely in their goals and formats, yet they all add to the complexity in the space.
Similarly, FIs operating in multiple countries are going to have to come to terms with a high degree of regulatory fragmentation. Different jurisdictions are experimenting with different rules, with some, such as the US, favouring a light-touch, innovation-friendly approach, but others leaning towards implementing more strictly regulated models.
Looking ahead, financial services organisations will be asking a number of questions. For example, will USD-backed stablecoins dominate globally? This seems a distinct possibility, given the positive steps the US has taken towards building a regulatory framework, as well as the existing dominance of Circle and Tether.
A similarly key question is whether US-style market-led models will set the de facto international standard, or if we will see continued regional variations such as Hong Kong’s tightly supervised regime and Japan’s licensed approach.
The chances are that we will see considerable fragmentation in the short term, followed by the consolidation of standards and providers over time.
At this point, FIs should consider the following actions as they build their plans for stablecoins:
- Assess their competitive positioning by evaluating how stablecoins could affect their core business lines, particularly deposits, payments, FX and remittances.
- Explore issuance opportunities, aiming to determine whether launching a proprietary stablecoin or partnering with an issuer fits into their product strategy.
- Review their regulatory compliance, mapping the requirements of the GENIUS Act against existing controls and identifying gaps.
- Monitor global developments, including established and proposed frameworks in jurisdictions such as Hong Kong, Japan, the EU and the UK to prepare for regulatory fragmentation across jurisdictions.
- Engage with policymakers by contributing to consultations and industry groups to influence future rulemaking, especially around competitive loopholes.
- Develop cross-border strategies that can meet client demand for faster, cheaper international payments, potentially via partnerships with stablecoin providers.
- Benchmark against CBDC initiatives, comparing the purpose and operation of stablecoins and state-backed digital currencies to inform their long-term strategy.
- Invest in client education, including creating materials explaining stablecoins’ use cases, risks and regulatory safeguards to customers, institutional investors and corporates.
Ultimately, it may be that the GENIUS Act is not just a piece of US regulation, but a landmark in a strategic shift in global finance.
This means the stakes are high for FIs, and understanding which models are likely to prevail could shape their competitive positioning, compliance and cross-border strategy over the coming decade.
