Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act & the banking industry

By Krystal Martin September 15, 2025

On July 18, 2025, President Trump signed into law the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. This is a sweeping new framework for regulating payment stablecoins, defined as digital tokens backed 1:1 by U.S. dollars or high-quality liquid assets such as short-term Treasury securities, in the United States. As the first federal statute of its kind, the GENIUS Act marks a major shift in how digital assets will be issued, supervised, and integrated into the traditional financial system. 

For the banking sector, this legislation is both a regulatory mandate and a strategic opportunity. It creates a pathway for banks to play a central role in the stablecoin ecosystem while elevating standards for transparency, consumer protection, and financial stability. 

What the GENIUS Act means for banks 

The GENIUS Act explicitly permits FDIC-insured depository institutions to issue stablecoins. This creates a powerful competitive advantage for regulated banks seeking to participate in the fast-growing world of digital payments.  

The legislation establishes some key provisions, including: 

• Exclusive Issuer Designation: Only federally approved institutions, including FDIC-insured banks and Office of the Comptroller of the Currency (OCC)-supervised nonbanks, may issue “permitted payment stablecoins.” This statutory exclusivity gives banks a regulatory edge over unlicensed financial technology (fintech) companies or offshore issuers. 

• Reserve & Audit Requirements: Banks issuing stablecoins must hold 100% of reserves in designated liquid assets and submit monthly public disclosures. For issuers with over $10 billion in circulation, independent annual audits are mandatory. 

• Federal Oversight: Bank-issued stablecoins will fall under the supervision of the Federal Reserve, ensuring consistency with safety-and-soundness standards and systemic risk oversight. This enables seamless integration with broader monetary policy frameworks. 

• Consumer and Compliance Protections: The Act mandates Anti-Money Laundering (AML), Know Your Customer (KYC), and sanctions compliance under the Bank Secrecy Act. It also requires issuers to clearly disclose reserve backing and risks to align digital currencies with existing consumer financial laws. 

Opportunities for the institution and its customers  

The specific provisions in the GENIUS Act have opened up some new opportunities for banking and financial institutions to keep in mind as they consider operating in the digital asset space. 

1. First-Mover Advantage in Digital Currency: For banks willing to invest in the necessary infrastructure, the GENIUS Act provides an opportunity to lead the U.S. stablecoin market. Banks can issue branded or white-label stablecoins for retail clients, corporate treasuries, cross-border payments, or embedded finance partnerships with fintechs. 
2. New Revenue Channels: Stablecoins create new fee and float income opportunities. Banks can monetize digital wallets, smart contract escrow services, or offer stablecoin-based business accounts with real-time settlement features. Transaction data generated from these tools can also enhance credit underwriting and customer personalization. 
3. Strengthening Client Relationships: Offering compliant digital payment tools positions banks as innovative partners to their business clients, especially in sectors like e-commerce, logistics, and global remittances. By leveraging stablecoins, banks can accelerate treasury operations, enable faster payroll processing, and simplify cross-border transactions, ultimately reducing delays and costs for corporate clients. However, as stablecoins gain traction among retail and corporate users, banks may face gradual erosion of traditional deposit bases if clients begin holding value in tokenized form outside of core banking channels.  
4. Mitigating Risk from Shadow Finance: By bringing stablecoin issuance under regulatory control, the GENIUS Act curbs systemic risk from unregulated stablecoins that had previously operated in legal grey zones. This levels the playing field and reduces regulatory arbitrage by non-bank competitors. 

The flip side of the [stable]coin: new risks and responsibilities 

While the GENIUS Act presents strategic upside, it also introduces material compliance responsibilities and risks. Banks intending to issue or have custody of stablecoins must: 

• Establish transparent reserve management processes. 

• Implement digital asset custody solutions (either in-house or through qualified third parties). 

• Develop AML, KYC, and real-time transaction monitoring systems tailored for blockchain-based assets. 

• Maintain secure smart contract and cybersecurity protocols. 

• Assess cross-border regulatory exposure and ensure compliance with international AML and sanctions regimes. 

• Monitor stablecoin liquidity and redemption risks to mitigate potential financial instability. 

• Evaluate competitive impacts from non-bank stablecoin issuers operating outside traditional regulatory frameworks. 

The potential for non-bank issuers to gain access to Federal Reserve payment infrastructure introduces long-term questions about disintermediation and the shifting role of banks within the settlement ecosystem. For many regional and community banks, participation may increasingly rely on partnerships with licensed fintech platforms or consortia that can manage issuance and compliance infrastructure at scale. 

Timeline for implementation  

The Act will take effect 18 months from enactment (January 18, 2027) or 120 days after relevant regulators finalize their rulemaking, whichever comes first. As of August 2025, regulatory agencies have begun to solicit comments for rulemaking.  

The law includes a 3-year grace period for stablecoin issuers to fully comply. However, banking regulators are expected to issue guidance well in advance to allow for early adoption. 

Strategic imperatives for bank executives  

As the financial landscape evolves with the rise of digital assets, bank executives must proactively position their institutions to harness the potential of stablecoins. Successful adoption requires a thoughtful, strategic approach. At BNN, we strongly encourage bank leaders to consider the following imperatives to navigate this transformation effectively. 

1. Assess Use Cases: Evaluate where stablecoins could enhance core banking services, such as cross-border payments, liquidity management, or B2B transaction channels. Stablecoins will not be a good fit in all areas of an institution so understanding the most effective uses is key to success. 
2. Invest in Infrastructure: Begin developing or acquiring the technology needed for digital wallet integration, token issuance, and blockchain settlement systems. 
3. Engage Regulators Early: Work with the Federal Reserve, OCC, and other stakeholders to shape final rulemaking and ensure institutional readiness. 
4. Form Strategic Alliances: Consider partnerships with fintechs, payment processors, and custodians to accelerate entry and share operational risk. 
5. Monitor Broader Policy Trends: The GENIUS Act is expected to be followed by additional legislation—such as the forthcoming Clarity Act, which will delineate regulatory jurisdiction over broader digital assets. Therefore, Banks should plan for a rapidly evolving landscape. 

An evolving digital frontier 

The GENIUS Act represents a rare alignment of innovation and regulatory clarity in the U.S. financial system. 

For banks, it unlocks a new phase of digital transformation, hopefully one where trust, compliance, and real-time efficiency can coexist. Banks that move quickly to integrate stablecoin issuance and blockchain settlement into their operations may find themselves at the forefront of a new era in global finance. 

If you have any questions about the GENIUS Act or other digital considerations for the banking industry, please contact Krystal Martin or your BNN advisor.