A stablecoin is a digital token designed to hold a stable value against a reference asset, most often a national currency, and redeemable from its issuer. US law defines a payment stablecoin as a digital asset used, or designed to be used, as a means of payment or settlement; in the EU, the MiCA regulation covers comparable tokens as e-money tokens and asset-referenced tokens.
Why It Matters
Stablecoins are now regulated instruments in both the US and the EU, which makes them something banks, payment firms and corporate treasurers have to plan for rather than watch. The GENIUS Act, Public Law 119-27, approved on July 18, 2025, limits US issuance to permitted payment stablecoin issuers; requires reserves backing outstanding coins on at least a one-to-one basis in listed assets; requires the issuer to publish the composition of its reserves monthly, with the reports examined by a registered public accounting firm; and bars issuers from paying holders interest or yield solely for holding the coin. In the EU, ESMA keeps the register of authorized issuers of e-money tokens and asset-referenced tokens under MiCA.
How It Works in Practice
- 1A permitted issuer creates tokens when a customer delivers money and destroys them when the customer redeems.
- 2The issuer holds reserves in the asset classes the law lists, including US coins and currency, balances at a Federal Reserve Bank, demand deposits at insured depository institutions, and short-dated Treasury bills, notes and bonds.
- 3The issuer publishes the composition of its reserves monthly, including the number of coins outstanding, and has the reports examined.
- 4The issuer publicly discloses its redemption policy, and holders redeem tokens with the issuer for money under that policy.
Common Pitfalls
Treating any token labeled a stablecoin as a payment stablecoin. The statutory definition, and whether the issuer is permitted, decide how a token is treated.
Building a product around holder yield. The GENIUS Act bars issuers from paying interest or yield, in cash, tokens or other consideration, solely for holding, using or retaining a payment stablecoin.
Planning against a fixed effective date. The Act takes effect on the earlier of a set period after enactment or a set period after the regulators issue final implementing rules, so the operative date depends on rulemaking.
Assuming a coin compliant in one market is compliant in the other. MiCA and the GENIUS Act are separate regimes with separate authorization.
Sources
- Public Law 119-27, the GENIUS Act (S. 1582) — US Government Publishing Office (govinfo)
- Markets in Crypto-Assets Regulation (MiCA) — European Securities and Markets Authority
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