Banks have moved from cautious observation to active execution in stablecoins after the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) became law on July 18, 2025. Stablecoins are now framed as a regulated payment instrument, and that clarity is catalyzing strategic initiatives across banks and payments firms.
What the GENIUS Act changes for stablecoin issuance
The GENIUS Act establishes a federal regime for “payment stablecoins,” defining who can issue them and how they must be backed. The law requires one-to-one reserves and prohibits paying interest or yield to holders, materially reducing legal ambiguity for incumbent financial institutions.
Under the Act, permitted issuers must maintain identifiable reserves that back outstanding payment stablecoins on at least a one-to-one basis and publish monthly reserve-composition reports subject to audit by a registered public accounting firm. The framework also allows a federal qualified payment stablecoin issuer to be a nonbank entity, an uninsured national bank, or a federal branch of a foreign bank, provided it receives Office of the Comptroller of the Currency approval. State-qualified issuers become subject to federal oversight once they cross a $10 billion threshold. This creates a clear escalation path from state regimes into federal supervision as stablecoin scale increases.
This statutory perimeter drives two immediate shifts in market incentives. Banks now have a defined compliance pathway to either partner with permitted issuers or issue regulated stablecoins directly, depending on their operating model. Separately, the ban on yield reshapes competitive dynamics versus nonbank platforms that previously used returns on dollar-pegged tokens as a customer-acquisition lever. By removing yield as a differentiator, the law re-centers competition on trust, distribution, and regulated operational capability.
Stablecoins also offer operational benefits that align with bank and corporate treasury priorities. Around-the-clock settlement, lower cross-border costs, and improved transparency for treasury flows position tokenized cash as a payments modernization lever. In this framing, tokenized settlement can shorten cycles and reduce correspondent-bank friction while opening revenue opportunities such as custody, reserve management, and issuer services. For banks, the commercial upside is tied to staying relevant in payment rails while productizing regulated infrastructure.
The new regime also makes the risk agenda explicit for boards, risk committees, and compliance teams. Deposit disintermediation and liquidity stress can emerge if client funds shift into stablecoins, changing the funding mix and increasing wholesale concentrations. Banks must also absorb compliance and implementation costs tied to capital, liquidity, AML/CTF, auditing, and reporting requirements embedded in the Act. Run risk, cybersecurity exposure, and fraud vectors specific to digital-asset rails add additional layers to the control environment.
Banks are exploring joint ventures and tokenized deposits, while large payments firms are rolling out settlement services that integrate stablecoin rails. Visa has announced stablecoin settlement initiatives, and some banks, including named participants in pilots, are testing issuer and custody roles to maintain payment relevance. The directional signal is a shift from experimentation to structured pilots with clearer regulatory guardrails.
Liquidity on token rails may reduce transaction costs, but it requires stronger operating controls for on-chain settlement, custodial reconciliation, and reserve transparency. Product teams are positioned to prioritize auditability and integration with core ledger systems, while compliance teams must plan for monthly reporting and external audits mandated by the Act. Execution readiness will hinge on governance, control design, and integration quality rather than on speed alone.
The GENIUS Act’s enactment on July 18, 2025 realigns incentives across the ecosystem. Stablecoins now sit inside a defined regulatory perimeter that encourages bank participation while raising the bar on compliance, reporting, and risk management.
