Stablecoin Legislation: An Overview of S. 1582, GENIUS Act of 2025
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CRS INSIGHT Prepared for Members and Committees of Congress
INSIGHTi
Stablecoin Legislation: An Overview of S. 394919, GENIUS Act of 2025
March 10, 2025
On February 4, 2025, Senator Bill Hagerty introduced S. 394
, which. The bill would establish a regime to regulate stablecoins, as described below.
Requirements for Issuing Payment Stablecoins
S. 919 would establish a regime to regulate stablecoins. Currently, existing state and federal laws and regulations are applied to aspects of the stablecoin industry based on the nature of activities and individual stablecoin features.
The bill’s proposed regulatory framework and licensing process are described below.
Requirements for Issuing Payment Stablecoins
S. 394 defines payment stablecoins as digital assets, issued for payment or settlement (including as margin or collateral) and redeemable at a predetermined fixed amount (e.g., $1), that hold assets in reserve and that can be liquidated only to redeem the stablecoins. Issuers would be required to hold at least one dollar of permitted reserves for every one dollar of stablecoins. The bill would limit permitted reserves to coins and currency; insured, insured deposits held at banks and credit unions, including foreign banks; short-dated Treasury bills; , repurchase agreements ("repos" (“repos”) and reverse repos backed by Treasury bills;, money market funds invested in certain of these assets; or, central bank reserve deposits. Additionally, thereserves, and any other similar government-issued asset approved by regulators. Issuers would be restricted to using reserve assets for certain activities, including to redeem stablecoins and serve as collateral in repos and reverse repos. The bill would require federal and state regulators, respectively, to issue tailored capital, liquidity, and risk management rules for federal and state stablecoin issuers, but it exempts stablecoin issuers from the regulatory capital standards applied to traditional banks.
Issuers would be required to establish and disclose stablecoin redemption procedures and to issue periodic reports of outstanding stablecoins and reserve composition. The bill would require the reports be “examined”—as opposed to audited—by a registered public accounting firm, and it would require that issuers’ executives certify the reports. Issuers would be subject to the Bank Secrecy Act.
Applications and Regulatory, Supervisory, and Enforcement Regimes
Issuers would be subject to the Bank Secrecy Act, and the Financial Crimes Enforcement Network would be required to write tailored anti-money laundering rules. Foreign stablecoins not licensed in the United States would be able to be traded on secondary markets provided they have the technological capacity to freeze transactions and comply with the Department of the Treasury's lawful orders.
The bill would create a federal or state regulatory option for stablecoin issuers, whowhich could be subsidiaries of insured depository institutions (IDIs, e.g., banks and credit unions) or nonbanks (the bill does not restrict nonbanks) or nonbanks (which would not be restricted to financial firms). The bill would allow any issuersissuer with fewer than $10 billion
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outstanding stablecoins to be subject to a state regulatory regime, provided thatregulated by a state—provided the state regulatory regime was “is "substantially similar” to its federal counterpart. State regulatory agencies would be required to certify annually to the U.S. Treasury that their regime meets these criteria. The bill would clarify that payment stablecoins are not securities" to its federal counterpart. Treasury's criteria of what constitutes "substantially similar" would be subject to notice-and-comment rulemaking.
Various sections of the bill appear to provide federal regulators with rulemaking authority over federally regulated stablecoin issuers and state regulators with rulemaking authority over state-regulated issuers.
Subsidiaries of Insured Depository Institutions and Credit Unions, and Nonbank Federal Issuers
Stablecoin issuers that are the subsidiaries of insured depository institutions would be required to apply to, receive approval from, and be supervised by and subject to enforcement authority of the same federal banking regulator as that of the IDI for compliance with the bill’s requirements. (The bill appears to provide federal and state IDIs the option of applying with federal regulators but opting to be subject to state regulation, supervision, and enforcement.)
A nonbank stablecoin issuer could apply for state or federal approval. Under the federal option, nonbank issuers would be regulated and supervised “exclusively” by the Office of the Comptroller of the Currency (OCC). Federal nonbank stablecoin issuers would be required to file reports with, and may be subject to exams by, the OCC, to evaluate issuer financial condition and nature of operations; the risks to safety and soundness of the entity and financial stability derived by issuance; and the systems used for controlling these risks.
Applications would be evaluated on whether the stablecoin issuer has the financial condition and resources to meet the baseline requirements (described above). An application not acted on within 120 days would be deemed approved. Regulators would have to justify denied applications and permit an applicant to request an appeal hearing and to reapply.
A stablecoin issuer that is a subsidiary of any IDI or federally regulated nonbank issuer would be required to apply to the same federal banking regulator as that of the IDI and the Office of the Comptroller of the Currency (OCC), respectively. (The bill appears to allow federal and state IDI subsidiaries under the $10 billion threshold the option of state or federal regulation, supervision, and enforcement.) An application would be evaluated on whether the stablecoin issuer can meet the baseline requirements (described above). An application not acted on within 120 days would be deemed approved. Regulators would have to justify denials and permit applicant appeals. Any issuer that opts for the federal regime or is not a state-qualified issuer with less than $10 billion in issuance would be supervised by the same regulator as that of the IDI (or by the OCC in the case of nonbanks). All stablecoin issuers under the federal regime would be required to file reports with—and may be subject to exams by—their primary federal regulators, which would evaluate issuer financial condition, risks to firm and financial system safety and soundness, and risk management systems.The regulators would be authorized to stop a previously approved issuer from issuing stablecoins or issue civil money penalties
Federal Regime
Supervision and Enforcement
State-Qualified Payment Stablecoin Issuers
State regulators would “have supervisory, examination, and enforcement authority over a State qualified payment stablecoin issuer of such State.” However, the bill would give state regulators the option of ceding these authorities to the Federal Reserve (Fed). Also, the bill would allow the Fed or OCC to take enforcement actions against issuers that select the state option in “exigent” circumstances.
State Option
The bill would permit all issuers under the $10 billion threshold to opt in to a state regulatory regime, provided it is similar to the federal framework. This would put the stablecoin subsidiaries of IDIs beyond the jurisdiction of their primary federal regulator, with the exception of the application requirement. Issuers that grow above the $10 billion threshold would be required to “transition” to the federal regulatory regime of the appropriate regulator. Subsidiaries of state IDIs transitioning to the federal regime would be regulated by the Fed (as opposed to their primary regulator); subsidiaries of federal IDIs and nonbanks transitioning would be regulated by the OCC.
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Other Provisions
The bill would establish rules for stablecoin asset and reserve custodians, which could be issuers or non- issuers. Securities and Exchange Commission- and Commodity Futures Trading Commission-supervised entities would be permitted to custody reserves. It would also prohibit custodians from comingling their own funds with customers’ funds, with exceptions. The bill would permit banks to custody and reserve assets, use blockchains, and issue tokenized deposits.
Out-of-state stablecoin issuers would be subject to a host state’s consumer protection laws.
The bill would grant stablecoin holders priority over all other claims against the issuer in bankruptcy.
The bill would require that the U.S. Treasury conduct a study on endogenously collateralized stablecoins (colloquially called algorithmic stablecoins) that rely on the value of another digital asset to maintain the fixed price.
The bill would also permit the Fed, in conjunction with Treasury, to establish “reciprocal” agreements with jurisdictions with stablecoin regulatory regimes substantially similar to those of the United States.
Author Information
Paul Tierno Analyst in Financial Economics
Disclaimer
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State Regime
The bill would permit all issuers under $10 billion to opt in to a state regulatory regime. This would presumably put the stablecoin subsidiaries of IDIs beyond the jurisdiction of their primary federal regulators, with the exception of the application requirement. A state-chartered IDI issuer that grows above $10 billion would be required to transition to the regime of the appropriate federal regulator to be administered jointly by the state regulator and the primary federal regulator. Alternatively, nonbanks and subsidiaries of nationally chartered banks that grow above that threshold would seem to be required to transition to the federal regime to be administered solely by the state regulators.
Supervision and Enforcement
State regulators would "have supervisory, examination, and enforcement authority over all" state issuers. However, the bill would allow state regulators to cede these authorities to the Federal Reserve (Fed). The bill would also allow the Fed or OCC to take enforcement actions against state issuers in "exigent" circumstances after providing state regulators 48 hours' notice.
Other Provisions
The bill would establish rules for stablecoin asset and reserve custodians, which could be issuers or non-issuers, so long as they are regulated by federal or state banking regulators, the Securities and Exchange Commission, or the Commodity Futures Trading Commission. It would also prohibit custodians from comingling their own funds with customers' funds, with exceptions. The bill would permit banks to custody stablecoins and reserve assets, use blockchains, and issue tokenized deposits.
An out-of-state stablecoin issuer would be subject to its host state's consumer protection laws.
The bill would grant stablecoin holders priority over all other claims against the issuer in bankruptcy, and it updates the bankruptcy code.
The bill would permit the Treasury, to establish "reciprocal" agreements with jurisdictions with regulatory regimes substantially similar to those of the United States.
The bill would clarify that payment stablecoins are not securities and are not federally insured. The bill would prohibit a stablecoin issuer from tying stablecoin issuance to the purchase of another service, misrepresenting insured status, and using deceptive names.