On March 13, 2025, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which aims to establish a regulatory framework for payment stablecoins, passed the United States Committee on Banking, Housing, and Urban Affairs with a bipartisan 18-6 vote, paving the way for Congressional approval. The bill was introduced and sponsored by Senator Bill Hagerty (R-Tenn.) and has earned the support of Senator Tim Scott (R-SC), Senator Kristen Gillibrand (D-NY) and Senator Cynthia Lummis (R-Wyo.). Senator Warren (D-Mass) requested that the Act include treating stablecoin issuers as “financial institutions” under the Bank Secrecy Act.
The GENIUS Act seeks to regulate payment stablecoins by limiting US stablecoin business to “permitted stablecoin issuers” who are subject to state and federal licensing and oversight, reserve requirements, and prompt redemption. Stablecoin custodians are also subject to regulation. For purposes of clarity, the draft GENIUS Act specifies that stablecoins are not to be treated as securities.
Currently, the top two stablecoins are Tether with a market capitalization of approximately 143 billion and USDC with a market capitalization of 59 billion, each of which is designed to be linked on a 1:1 basis with the USD. Stablecoins like Tether and USDC allow owners to purchase digital assets like Bitcoin or Ethereum without involving banks to move dollars on and off of exchanges. Circle, which sponsors USDC, is regulated in Bermuda, France, Singapore and the UK, as well as licensed as a money transmitter in 49 states. Tether is based in the Caribbean and is registered with FinCEN as a Money Service Business. According to reports, Tether is not regulated on the state level.
The draft GENIUS Act provides that a “permitted payment stablecoin issuer shall be treated as a financial institution for purposes of the Bank Secrecy Act” (“BSA”). However, issuers of stablecoins are already deemed to be BSA financial institutions. Current 13 USC 5312(a)(2) defines “financial institution” to include “A licensed sender of money or any other person who engages as a business in the transmission of funds, including any person who engages as a business in an informal money transfer system or any network of people who engage as a business in facilitating the transfer of money domestically or internationally outside of the conventional financial institutions system.” In 2019, FinCEN Guidance FIN-2019-G001, made it relatively clear that stablecoin issuers were money service businesses and hence financial institutions. (See related blog posts here and here.) As a result, it appears that both Tether and USDC are already treated as financial institutions for AML purposes and the specific inclusion in the GENIUS Act should be unnecessary. We suspect that Senator Warren was concerned that FinCEN’s interpretation of the BSA could be challenged under Loper Bright, which removed the concept of Chevron deference and the inclusion of specific congressional intent to include stablecoin issuers as financial institutions added certainty.
Overall, from an anti-money laundering perspective, the GENIUS Act is unlikely to have a major impact on issuers who were already subject to regulation as a financial institution.
Next Steps
The future of the GENIUS Act remains uncertain. Proponents of the GENIUS Act stress the importance of regulatory clarity in the crypto space. Circle’s chief strategy officer (an issuer of U.S. stablecoin) lauded the bill and stated that it “provides a pathway for the U.S. to lead rather than be led.” Critics of the bill, however, worry that the passage of the GENIUS Act as is could destabilize banking, increase anti-social access to funds and increase risk overall.
Ballard Spahr will continue to monitor the bill’s progress, which will need bipartisan support to pass in the Senate.
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