Stablecoins and the GENIUS Act: how regulated dollar tokens work

What a payment stablecoin is

A stablecoin is a digital token, recorded on a public blockchain, that aims to keep a steady price against a reference asset, almost always the US dollar. The GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins Act, Public Law 119-27) defines a narrower category, the payment stablecoin: a token used for payment or settlement that the issuer is obliged to redeem for a fixed amount of money.

The economic model is simple. A holder hands the issuer one dollar and receives one token. The issuer invests that dollar in safe, short-dated assets and keeps the interest. When the holder returns the token, the issuer pays back the dollar and destroys the token.

How the GENIUS Act regulates issuers

The law limits issuance of payment stablecoins in the US to permitted payment stablecoin issuers. There are three routes: a subsidiary of an insured bank or credit union, a federally qualified nonbank issuer supervised by the Office of the Comptroller of the Currency (OCC), or a state-qualified issuer under a state regime that federal authorities certify as “substantially similar” to the federal one.

Core requirements in the statute include:

• One-to-one reserves. Every token must be backed by at least one dollar of high-quality liquid assets: cash, bank deposits, Treasury bills maturing in 93 days or less, overnight repurchase agreements (repo) backed by Treasuries, and government money market funds.
• Disclosure and attestation. Issuers must publish their reserve composition monthly, have it examined by a registered public accounting firm, and have senior executives certify it.
• No interest to holders. Issuers may not pay interest or yield to holders simply for holding the token.
• Holder priority. In an issuer insolvency, token holders have a priority claim on the reserves ahead of other creditors.
• Size threshold. A state-qualified issuer with more than $10 billion outstanding must generally move to federal supervision within 360 days, unless granted a waiver.

Payment stablecoins issued under the Act are not treated as securities or commodities, which places them outside SEC and CFTC jurisdiction. Foreign issuers can reach US users only if their home regime is judged comparable.

Who supervises, and where rulemaking stands

Supervision follows the charter. The OCC covers national bank subsidiaries and federal nonbank issuers, the FDIC covers subsidiaries of state nonmember banks, the Federal Reserve covers subsidiaries of state member banks, and the NCUA covers credit unions. Treasury, through the Stablecoin Certification Review Committee (the Treasury Secretary, the Fed Chair and the FDIC Chair), decides whether state regimes qualify.

The statute asked regulators to finalize rules within a year of enactment, a July 2026 target that passed without final rules. The status as of early October 2026:

• OCC. Comprehensive proposed rule published in the Federal Register on March 2, 2026, followed by a separate Bank Secrecy Act proposal in June. Comptroller Jonathan Gould said in August that a final rule would be out by November.
• FDIC. Proposed rule for FDIC-supervised issuers and insured banks published April 10, 2026.
• Federal Reserve. Proposed rule on reserves, capital, risk management and tying restrictions published September 29, 2026, with comments due November 30, 2026.
• Treasury. Interim procedural rules for state certifications took effect September 30, 2026, though certifications will not be accepted until paperwork approvals are complete. A substantive proposal on the “substantially similar” criteria, issued in April, remains pending.

Because final rules would need to be issued by about mid-September 2026 for the 120-day trigger to come first, the January 18, 2027 backstop is now the likely effective date. On the licensing side, the OCC conditionally approved national trust bank charters for five crypto firms, including Circle, Paxos and Ripple, in December 2025.

The market and the main issuers

Dollar stablecoins are a large and concentrated market. The table shows the six largest by circulating supply, using DefiLlama data as of October 6, 2026. Not all of them are fiat-reserve tokens of the type GENIUS regulates: USDe is a synthetic dollar backed by derivatives positions, and DAI and USDS are crypto-collateralized.

The two leaders are structured differently. Circle says, as of September 24, 2026, that most USDC reserves sit in the Circle Reserve Fund, an SEC-registered government money market fund managed by BlackRock, with the rest in bank deposits. Tether is incorporated outside the US. Its attestation by BDO for June 30, 2026 reported about $187.8 billion of assets against $183.6 billion of liabilities, with roughly $115 billion in US Treasury exposure, and excess reserves halved to $4.1 billion after losses on gold and bitcoin holdings. Tether has launched a separate US token, USAT, intended to fit the domestic regime.

Why banks and payment firms care

For payment companies, stablecoins offer near-instant, around-the-clock settlement and cheaper cross-border transfers, which is why card networks, processors and fintechs are building on them. For banks, the picture is mixed. A licensed path lets banks issue their own tokens and earn custody and reserve-management fees. But every dollar moved from a checking account into a stablecoin can leave the bank’s deposit base.

The live policy fight is over yield. GENIUS bars issuers from paying interest, but, as the Congressional Research Service noted in March 2026, issuers can share reserve income with exchanges or affiliates that then reward holders. Bank groups want that path closed; crypto firms call the restriction anticompetitive.

Risks to understand

• Run risk. A stablecoin is only as stable as its reserves and its redemption process. A loss of confidence can trigger rapid redemptions and forced asset sales, as with money market funds.
• Issuer and reserve risk. Holders depend on what the issuer actually holds and on attestations, which are narrower than full audits. Reserves outside the permitted list, such as gold or bitcoin, can lose value.
• Concentration. Two issuers account for most supply, so problems at either would ripple across the market.
• Regulatory transition. Final rules are still pending. Offshore issuers face uncertainty over comparability findings and US distribution.
• Operational and illicit-finance risk. Smart contract bugs, key compromise and sanctions evasion remain concerns; issuers must be able to freeze tokens on lawful order.

Sources and further reading

• OCC proposed rule implementing the GENIUS Act (Federal Register, March 2, 2026)
• Federal Reserve proposed rule under the GENIUS Act (Federal Register, September 29, 2026)
• FDIC proposed rule for FDIC-supervised issuers (Federal Register, April 10, 2026)
• Congressional Research Service: The stablecoin yield debate (March 2026)
• DefiLlama stablecoin dashboard (figures as of October 6, 2026)
• Circle USDC transparency and reserves page