The GENIUS Act Explained: What US Stablecoin Rules Mean

The GENIUS Act is the first US federal law governing payment stablecoins, signed by President Trump on July 18, 2025, and it sets who can issue a dollar-pegged stablecoin, how it must be backed, and — crucially for holders — whether issuers can pay you interest. The short answer to that last point: they can't. For anyone who holds, sends, or earns on stablecoins, this law reshapes the rules of the road. This guide breaks down what the GENIUS Act does, the yield ban everyone is talking about, and what it actually means for you.

What is the GENIUS Act?

The GENIUS Act — short for "Guiding and Establishing National Innovation for U.S. Stablecoins" — is the first comprehensive US federal law for payment stablecoins. It was enacted as S.1582 in the 119th Congress and signed into law on July 18, 2025.

Before it, stablecoin issuers navigated a patchwork of state money-transmitter rules with no single federal standard. The GENIUS Act replaces that with one national framework defining who may issue a stablecoin, how it must be backed, and which regulator oversees it. It also clarifies that compliant payment stablecoins are neither securities nor commodities — settling a long-running legal gray area.

A "payment stablecoin" here means a digital asset the issuer commits to redeem at a fixed value (like $1) for payments or settlement. If the term is new, our beginner's guide to stablecoins covers the basics.

One important date: the law isn't fully in force yet. It takes effect the earlier of January 18, 2027 (18 months after enactment) or 120 days after regulators finalize implementing rules, per Eco.

What the GENIUS Act requires

The Act sets four core requirements that any compliant stablecoin issuer must meet. Here's the breakdown:

On the last point, three categories of entity can issue: bank subsidiaries, nonbank issuers supervised by the Office of the Comptroller of the Currency (OCC), and state-qualified issuers — the last capped at $10 billion in circulation, per Eco. Larger issuers also face annual independent audits and must comply with anti-money-laundering rules.

The reserve rules are the heart of the law. By requiring full 1:1 backing in only the safest assets and monthly public attestation, the Act aims to make a "depeg" far less likely — the scenario where a stablecoin slips below its $1 target.

The yield ban: the part that affects holders most

The GENIUS Act prohibits stablecoin issuers from paying any interest or yield to holders based solely on holding the coin — whether in cash, tokens, or any other form. This is the provision most likely to touch everyday users directly.

Here's the logic: regulators wanted payment stablecoins to be exactly that — payment instruments, not investment products that compete with bank deposits or money-market funds. Issuers still earn interest on their reserves (billions sit in Treasury bills), but under the law they keep those earnings rather than passing them to holders.

What this does not do is ban you from earning yield on stablecoins entirely. There's a key distinction:

• Banned: the issuer of a payment stablecoin paying you interest just for holding it.
• Not directly banned: separate products and protocols — like yield-bearing tokens (Ondo's USDY is one example) or DeFi lending — that generate a return through a distinct financial arrangement.

That's why yield-bearing products are increasingly structured as their own instruments, legally separate from payment stablecoins. If you want to understand how those differ, our explainer on stablecoin types is a good starting point.

Regulators are still tightening the edges, though. The OCC published a Notice of Proposed Rulemaking on March 2, 2026 that introduces a "rebuttable presumption" against arrangements where an issuer routes yield to holders through an affiliate or third party, per Perkins Coie. The comment period closed May 1, 2026, and final rules are still pending — so exactly how far the yield restriction reaches is not fully settled.

What the GENIUS Act means for you

For most stablecoin users, the GENIUS Act is a trade-off: stronger safety guarantees in exchange for losing issuer-paid yield. Here's how it shakes out depending on who you are.

If you hold stablecoins for payments or savings: The upside is credibility. A GENIUS-compliant stablecoin is fully reserved in safe assets with monthly public proof, which reduces the risk of a depeg. The downside is that the issuer won't pay you interest — so a bare stablecoin balance earns nothing on its own.

If you were earning issuer rewards: Programs where a payment-stablecoin issuer paid you a percentage just for holding are being wound down or restructured. You'll increasingly need to use a separate, clearly-structured yield product to earn a return.

If you're outside the US: The Act is a US law, but its reach is global because so many stablecoins are dollar-pegged. Access to foreign stablecoins in the US will depend on the Treasury determining whether a foreign regime is "comparable" to US standards, per Eco. Domestic compliance strengthens the USD-stablecoin ecosystem, but it doesn't automatically guarantee global access.

If you use DeFi and self-custody: The law targets issuers, not your right to hold your own keys. Self-custody wallets and permissionless protocols aren't the subject of the issuer licensing rules — though the yield question above is the area to watch.

Where to hold stablecoins under the new rules

Whatever the regulatory backdrop, the safest way to hold a stablecoin is one where you control the keys. A GENIUS-compliant stablecoin is only as safe to you as the place you store it — a self-custody wallet like the Coin98 Super Wallet keeps your stablecoins in your control rather than on a custodial platform whose solvency you have to trust. For the wider regulatory picture — including the CLARITY Act moving alongside it — Coin98's weekly crypto roundup tracks how the rules are developing.

FAQ

When does the GENIUS Act take effect? It was signed on July 18, 2025, but takes effect the earlier of January 18, 2027 (18 months after enactment) or 120 days after regulators finalize implementing rules. So the framework is law, but full enforcement is still phasing in.

Does the GENIUS Act ban stablecoin yield? It bans issuers of payment stablecoins from paying interest or yield to holders just for holding the coin. It does not directly ban earning yield through separate products like DeFi lending or distinct yield-bearing tokens — though the OCC is proposing rules to close affiliate-routing loopholes.

Are stablecoins securities now? No. The GENIUS Act clarifies that compliant payment stablecoins are neither securities nor commodities, which removes a major source of legal uncertainty.

Does the GENIUS Act apply to me if I'm outside the US? It's a US law, but because most stablecoins are dollar-pegged, it shapes the whole market. Whether foreign stablecoins can be used in the US depends on the Treasury judging their home regime "comparable" to US standards.

Does it make stablecoins safer? For compliant issuers, yes — full 1:1 reserves in safe assets plus monthly public disclosure make a depeg less likely. It doesn't remove all risk, and it doesn't change how you should secure the coins you hold.

The takeaway

The GENIUS Act trades issuer-paid yield for stronger safety: full reserves, monthly transparency, and a clear federal rulebook that treats compliant stablecoins as payment tools rather than investments. For everyday users, the practical shift is that a plain stablecoin balance won't earn interest from its issuer — but the coin backing it should be more trustworthy. Wherever the rules land, holding your stablecoins in a self-custody wallet keeps you in control.

Last updated: July 2026