S. 1582 — GENIUS Act

This section defines 22 terms for purposes of the Act, including "digital asset" (i.e., any digital representation of value recorded on a cryptographically secured distributed ledger); "digital asset service provider" (i.e., a person engaged in the business of exchanging, transferring, or custodianship of digital assets, with specified exclusions); "distributed ledger"; "distributed ledger protocol"; "Federal qualified payment stablecoin issuer" (i.e., certain nonbank entities, uninsured national banks, or Federal branches approved by the Comptroller to issue payment stablecoins); "foreign payment stablecoin issuer"; "insured credit union" (cross-referencing 12 U.S.C. 1752); "insured depository institution"; "lawful order"; "national currency"; and "payment stablecoin."

This section prohibits any person other than a permitted payment stablecoin issuer from issuing a payment stablecoin in the United States and, beginning three years after enactment, prohibits digital asset service providers from offering or selling payment stablecoins to persons in the United States unless issued by permitted issuers (with additional restrictions on foreign issuers lacking compliance capabilities for U.S. orders). It authorizes the Secretary of the Treasury to provide limited safe harbors from the issuance prohibition for de minimis transaction volumes or unusual and exigent circumstances (with congressional notification); requires Treasury rulemaking to implement the section; asserts extraterritorial effect for offers or sales to U.S. persons; and imposes penalties for knowing violations of up to $1 million in fines, five years imprisonment, or both (with regulator referral authority to the Attorney General). The section further provides that payment stablecoins not issued by permitted issuers are ineligible as cash or cash equivalents for accounting purposes, as margin or collateral for specified financial entities (i.e., futures commission merchants, derivative clearing organizations, broker-dealers, registered clearing agencies, and swap dealers), or as settlement assets for wholesale payments among banking organizations. Exemptions apply to direct individual-to-individual transfers without intermediaries, certain intra-individual international transfers, and self-custody wallet transactions; the section preserves existing Treasury blocking authority for U.S. dollar-referenced stablecoins.

This section directs the Comptroller of the Currency, in coordination with other relevant regulators and consistent with section 13 of the GENIUS Act, to issue regulations and orders as necessary to ensure financial stability and implement section 4(a) of that Act for Federal qualified payment stablecoin issuers. Section 4(a) requires permitted payment stablecoin issuers to (1) maintain reserves backing outstanding stablecoins on a 1-to-1 basis using specified liquid assets (i.e., U.S. coins/currency or Federal Reserve deposits; demand deposits or insured shares at insured depository institutions subject to safety/soundness limits; Treasury bills/notes/bonds with remaining maturity of 93 days or less; overnight repos or reverse repos backed by short-term Treasuries; government money market funds; or other approved Federal assets, including tokenized forms); (2) publicly disclose redemption policies with clear procedures, fees (changeable only with 7 days' notice), and monthly reserve composition reports (including outstanding stablecoins, reserve amounts/types, average tenor, and custody locations); (3) prohibit rehypothecation of reserves except for limited margin, custody, or liquidity purposes (e.g., short-term Treasury repos cleared by SEC-registered agencies); and (4) provide monthly CEO/CFO certifications of reserve reports subject to criminal penalties under 18 USC 1350(c), plus tailored capital, liquidity, and risk management requirements set by regulators.

This section requires each primary Federal payment stablecoin regulator to (1) receive, review, and consider for approval applications from insured depository institutions seeking to issue payment stablecoins through a subsidiary and from nonbank entities, Federal branches, or uninsured national banks chartered under title LXII of the Revised Statutes seeking to issue as Federal qualified payment stablecoin issuers; and (2) establish a process and framework for licensing, regulation, examination, and supervision of such entities prioritizing safety and soundness. It further directs regulators, before the date specified in §13, to issue regulations to implement these requirements and, pursuant to those regulations, accept and process applications, including mandatory evaluation of substantially complete applications within 120 days using the following factors: (1) the applicant's (or subsidiary's) financial ability to meet requirements under §4; (2) absence of officers or directors convicted of specified felonies (i.e., insider trading, embezzlement, cybercrime, money laundering, terrorism financing, or financial fraud); (3) competence, experience, integrity, regulatory compliance record, and ability to meet commitments of officers, directors, principal shareholders, subsidiaries, and parent company; (4) compliance of redemption policy with §4(a)(1)(B); and (5) other regulator-established safety and soundness factors. Regulators must notify applicants within 30 days whether an application is substantially complete (and, if not, what additional information is needed), with substantial completeness lasting unless materially changed. Denials are permitted only if activities would be unsafe or unsound per these factors (issuance on open, public, or decentralized networks is not grounds); denied applicants receive a written explanation within 30 days specifying shortcomings and recommendations, and may request a written or oral hearing, to be held within 30 days.

This section establishes supervision and enforcement authorities for the primary Federal payment stablecoin regulator over permitted payment stablecoin issuers other than State qualified payment stablecoin issuers with less than $10 billion in consolidated total outstanding issuance. **Supervision.** The regulator requires reports on financial condition, risk monitoring systems, compliance with the Act, and Bank Secrecy Act and sanctions compliance; conducts examinations of operations, financial condition, risks to issuer safety and soundness or U.S. financial stability, and risk controls; and uses existing reports, avoids duplicative activities, and tailors examinations and reports to those for similarly situated regulated entities. **Enforcement.** The regulator may (1) suspend or revoke registration for willful or reckless violations of the Act, regulations, orders, or written conditions/agreements; (2) issue cease-and-desist orders for violations, attempted violations, or practices, including affirmative corrective actions; and (3) remove or prohibit institution-affiliated parties for knowing violations of the Act, regulations, orders, or specified money laundering laws.

This section establishes supervisory, examination, and enforcement authority for a State payment stablecoin regulator over State qualified payment stablecoin issuers in that state. The section further (1) authorizes the state regulator to enter memoranda of understanding with the Federal Reserve Board for joint supervision, examination, and enforcement; (2) requires ongoing information sharing between the state regulator and the Board, including initial applications; and (3) permits the state regulator to issue orders and rules under section 4 applicable to such issuers, consistent with federal regulators' authority over permitted issuers. The section also provides enforcement authority to the Board and Comptroller of the Currency in unusual and exigent circumstances—defined by future rulemaking—after 48 hours' prior written notice to the state regulator. Such authority allows (1) enforcement actions against violating issuers or institution-affiliated parties; and (2) directives, with the effect of final cease-and-desist orders, imposing restrictions (e.g., on redemptions or affiliate transactions) to address serious risks to an issuer's financial safety, soundness, or stability, subject to administrative review (with automatic lapse after 10 days absent Board/Comptroller action) and judicial review.

This section prohibits digital asset service providers from publicly offering, selling, or making available for trading in the United States any payment stablecoin issued by a foreign payment stablecoin issuer unless the issuer has the technological capability to comply and complies with any lawful order. (Thus, foreign issuers must enable compliance with U.S. anti-money laundering requirements, sanctions, or other orders.) It further (1) authorizes the Secretary of the Treasury to designate a noncompliant issuer after 30 days and notify it in writing, with judicial review in the U.S. Court of Appeals for the District of Columbia Circuit; (2) requires the Secretary, if noncompliance persists for another 30 days, to publish the designation in the Federal Register and prohibit digital asset service providers from facilitating secondary trading of the issuer's payment stablecoins (effective 30 days after publication), with the prohibition expiring upon a published determination of compliance based on forthcoming Treasury criteria; and (3) imposes civil monetary penalties of up to $100,000 per violation per day on violating digital asset service providers and up to $1,000,000 per violation per day on continuing foreign issuers, plus authority to seek injunctions in U.S. district court and rules for counting multiple violations. The Secretary may also issue case-by-case waivers, general licenses, or specific licenses for secondary trading if prohibiting it would harm the U.S. financial system or the issuer is remedying noncompliance.

This section directs the Secretary of the Treasury, beginning 30 days after enactment for a 60-day period, to seek public comment on innovative methods (e.g., application program interfaces, artificial intelligence, digital identity verification, blockchain monitoring) used or potentially used by regulated financial institutions to detect illicit activity such as money laundering involving digital assets. Upon completion of the public comment period, the section requires the Secretary to conduct research on identified methods—evaluating them against existing methods based on factors including detection improvements, costs, privacy risks, operational challenges, cybersecurity risks, and effectiveness at mitigating illicit finance—and to incorporate a risk assessment into the national strategy for combating terrorist and other illicit financing under sections 261 and 262 of the Countering America's Adversaries Through Sanctions Act (i.e., considering sources and gaps in detecting digital asset-related illicit activity such as money laundering and sanctions evasion, regulatory impacts on innovation, and high-risk foreign jurisdictions). (Thus, FinCEN must evaluate innovations' potential to enhance AML detection amid rising digital asset risks.) Not later than three years after enactment, FinCEN must issue public guidance and notice-and-comment rulemaking on (1) implementation of such innovative methods by regulated financial institutions; (2) standards for payment stablecoin issuers to identify and report illicit activity (e.g., fraud, cybercrime, money laundering, terrorism financing, sanctions evasion, insider trading) involving their stablecoins; (3) standards for stablecoin issuers' monitoring of blockchain transactions, digital asset mixing services, tumblers, or similar obfuscation tools; and (4) tailored risk management standards for financial institutions interacting with decentralized finance protocols. Not later than 180 days after enactment, the Secretary must submit a report to the Senate Banking Committee chairs and ranking members and House Financial Services Committee chairs and ranking members containing (1) legislative and regulatory proposals to enable innovative AML detection methods for digital assets; (2) research and risk assessment results; (3) support efforts for financial institutions' adoption of such methods; (4) analysis of how distributed ledgers, mixers, tumblers, or similar services facilitate illicit activity; and (5) legislative recommendations on the scope of "digital asset service provider" as applied to decentralized finance (with an optional classified annex). The section includes a rule of construction preserving the Secretary's and primary federal payment stablecoin regulators' existing authorities (e.g., exemptive relief, no-action letters, rulemaking) to encourage adoption of innovative AML methods prior to the report.

This section establishes custody and safekeeping requirements for payment stablecoin reserves, payment stablecoins used as collateral, and private keys used to issue permitted payment stablecoins. It permits only supervised entities—those regulated by a primary Federal payment stablecoin regulator, specified primary financial regulators under the Dodd-Frank Act, or State bank supervisors (as defined in 12 U.S.C. 1813) or State credit union supervisors who share required information with the Board—to provide such services, subject to customer property protections that (1) treat assets as belonging to customers and shield them from the custodian's creditors and (2) prohibit commingling except in limited cases (e.g., omnibus accounts at insured depository institutions or national banks, or for transaction settlements). Custodians must submit operational and asset-protection information to their primary regulator, customer claims receive priority over other non-customer claims, and the requirements do not apply to hardware or software providers enabling customer self-custody.

This section establishes special insolvency rules for permitted payment stablecoin issuers (i.e., entities authorized under the GENIUS Act to issue payment stablecoins backed by required reserves), including priority claims for stablecoin holders, exceptions to the automatic stay, and related Bankruptcy Code amendments (11 USC 101, 362, 507, 541, and 1109). Specifically, it (1) deems payment stablecoin holders to have claims with ratable priority over all other claims solely with respect to required reserves under GENIUS Act §4, including superpriority for any shortfall claims ahead of all other priorities and administrative expenses under new 11 USC 507(e); (2) excludes such reserves from the bankruptcy estate under 11 USC 541(b)(11), while preserving the automatic stay; (3) excepts redemptions of stablecoins from reserves from the automatic stay under 11 USC 362(a)(9), with relief available under 362(d)(5) if reserves are available for ratable distribution (court to issue final order within 14 days of hearing); (4) adds definitions of "payment stablecoin" and "permitted payment stablecoin issuer" to 11 USC 101(40C), cross-referencing GENIUS Act §2; and (5) authorizes the Comptroller of the Currency or a state payment stablecoin regulator to intervene in any Chapter 11 case involving such an issuer under 11 USC 1109(c). The section further specifies resolution paths—depository institutions by FDIC, NCUA, or state regulators; subsidiaries or nonbanks under the Bankruptcy Code—and directs primary federal payment stablecoin regulators to study insolvency gaps, payout protections, and needed authorities, with a report due within three years. (Thus, stablecoin holders gain enhanced protections to facilitate prompt, pro rata redemptions from reserves ahead of other creditors.)

This section directs the primary Federal payment stablecoin regulators, in consultation with the National Institute of Standards and Technology, other relevant standard-setting organizations, and State bank and credit union regulators, to assess and, if necessary, prescribe—pursuant to the Administrative Procedure Act (5 U.S.C. §553) and consistent with the National Technology Transfer and Advancement Act of 1995 (Public Law 104-113)—interoperability standards for permitted payment stablecoin issuers to promote compatibility with (1) other permitted payment stablecoin issuers and (2) the broader digital finance ecosystem, including accepted communications protocols and blockchains, permissioned or public.

This section requires each primary federal payment stablecoin regulator, the Secretary of the Treasury, and each state payment stablecoin regulator to promulgate regulations implementing the Act through notice-and-comment rulemaking not later than one year after enactment of the Act. It directs those entities to coordinate, as appropriate, in issuing such regulations. It further requires each federal banking agency to submit to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services, not later than 180 days after the effective date of the Act, a report confirming and describing the promulgated regulations.

This section directs the Secretary of the Treasury, in consultation with the Federal Reserve, OCC, FDIC, SEC, and CFTC, to conduct a study of non-payment stablecoins—including endogenously collateralized payment stablecoins—and to submit a report with specified findings to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services within 365 days of enactment. The report must analyze (1) categories of such stablecoins, including benefits and risks of their technological features; (2) participants; (3) utilization; (4) reserve compositions; (5) algorithms; (6) governance structures, including decentralization; (7) public promotion; and (8) consumer disclosures; and it may include a classified annex. The section defines endogenously collateralized payment stablecoin as a digital asset represented to be convertible, redeemable, or repurchaseable for a fixed monetary value and that relies solely on the value of another digital asset from the same originator to maintain that price.

This section requires the primary Federal payment stablecoin regulators, in consultation with State payment stablecoin regulators as necessary, to submit to the Senate Committee on Banking, Housing, and Urban Affairs, the House Committee on Financial Services, and the Director of the Office of Financial Research, beginning one year after enactment and annually thereafter, a report—which may include a classified annex—on the status of the payment stablecoin industry, including (1) a summary of trends in payment stablecoin activities, (2) a summary of the number of applications for approval as a permitted payment stablecoin issuer under section 5, including aggregate approvals and rejections, and (3) a description of potential financial stability risks posed to the broader financial system by such activities. The section further requires the Financial Stability Oversight Council to incorporate the findings of that report into its annual report required under 12 U.S.C. 5322(a)(2)(N).

This section clarifies that nothing in the Act limits the authority of depository institutions, Federal credit unions, State credit unions, national banks, and trust companies to engage in activities permissible under applicable State and Federal law, including (1) accepting deposits or shares and issuing digital assets representing them, (2) using distributed ledgers for books, records, and intrabank transfers, and (3) providing custodial services for payment stablecoins, private keys, or reserves. It authorizes entities regulated by primary Federal payment stablecoin regulators to conduct payment stablecoin activities and investments (e.g., acting as principal or agent and paying transaction fees) and directs those regulators to review and, if necessary, amend regulations or guidance to affirm such authority. The section prohibits the appropriate Federal banking agency, National Credit Union Administration, and Securities and Exchange Commission from requiring institutions to treat non-owned digital assets held in custody (including payment stablecoins) as balance-sheet liabilities or to hold regulatory capital against them or their reserves, except as needed to address custody-related operational risks as determined by relevant supervisors. It further permits State-chartered depository institutions with permitted payment stablecoin issuer subsidiaries to conduct money transmission or custodial services nationwide if subject to ongoing home State requirements for adequate liquidity and capital (reassessed for financial condition and uninsured deposits), while preserving host State regulators' examination authority over such subsidiaries for applicable consumer protection laws.

This section excludes payment stablecoins issued by permitted payment stablecoin issuers (as such terms are defined in section 2 of the GENIUS Act) from the definition of "security" in the Securities Act of 1933, Securities Exchange Act of 1934, Investment Advisers Act of 1940, Investment Company Act of 1940, and Securities Investor Protection Act of 1970; from the definition of "commodity" in the Commodity Exchange Act; and specifies that such issuers are not investment companies under the Investment Company Act of 1940. (Thus, permitted issuers of qualifying stablecoins—digital assets designed to maintain stable value—are exempt from securities registration, disclosure, investment company, and commodities regulation under these statutes.)

This section establishes an exception to the prohibitions under section 3 for foreign payment stablecoin issuers that (1) are regulated by a foreign regulator with a regime comparable to this Act's requirements (as determined by the Secretary of the Treasury under subsection (b)), (2) register with the Comptroller of the Currency under subsection (c), (3) hold reserves in a U.S. financial institution sufficient for U.S. customers' liquidity demands (unless under a reciprocal arrangement), and (4) are domiciled in a jurisdiction not subject to U.S. comprehensive economic sanctions or designated as a primary money laundering concern. Subsection (b) directs the Secretary of the Treasury, upon recommendation from the Stablecoin Certification Review Committee, to determine foreign regulatory comparability (with Federal Register notice and justification); respond to requests within 210 days; maintain a public list of approved jurisdictions; allow rescission (with 90-day safe harbor for digital asset service providers); and issue implementing rules within one year of enactment. Subsection (c) requires Comptroller registration (deemed approved after 30 days unless rejected based on Treasury determination, U.S. operations' resources, information provision, financial stability risks, or illicit finance risks), with a 30-day appeal process, public list of approved registrants, rulemaking, and ongoing Comptroller reporting, supervision, examination, and U.S. jurisdiction consent for registrants.

This section excludes from executive branch financial disclosure requirements (under 5 U.S.C. 13104(a)(3)) any payment stablecoins issued by a permitted payment stablecoin issuer and held in an aggregate amount of $5,000 or less. (Thus, covered officials need not report such holdings.)

This section establishes the effective date of the Act and its amendments as the earlier of (1) 18 months after the date of enactment or (2) 120 days after the primary Federal payment stablecoin regulators issue final regulations implementing the Act.