Inside the GENIUS Act: What US Stablecoin Rules Mean for Banks.

The Guiding and Establishing National Innovation for US Stablecoins Act, the GENIUS Act, has been law since 18 July 2025. It created the first federal licensing regime for payment stablecoins in the United States, and more than a year on, the GENIUS Act stablecoin rules that will govern banks are still being written. The Office of the Comptroller of the Currency published its notice of proposed rulemaking on 25 February 2026, and as of this month, it remains a proposal rather than a final rule. For banks weighing whether to become a permitted payment stablecoin issuer, that gap between statute and regulation is the whole story.

What the GENIUS Act stablecoin licence requires

The Act sets up a category called the permitted payment stablecoin issuer, or PPSI. A PPSI can be an insured bank, a subsidiary of an insured bank, a federally qualified nonbank issuer, or a state-qualified issuer supervised under an equivalent state regime. Each route brings its own supervisor and its own capital, reserve and disclosure conditions, but every PPSI is subject to the Bank Secrecy Act and must run an anti-money-laundering and sanctions-screening programme as a condition of the licence, not as an afterthought.

Reserves are the other load-bearing requirement. A payment stablecoin has to be backed one-for-one by cash, insured bank deposits, or short-dated US Treasuries, and issuers must publish monthly reserve composition reports. The Act does not let an issuer pay interest directly to stablecoin holders, but it is silent on interest-like rewards paid by an affiliate or a third party, a gap that has become the centre of the current lobbying fight (see below).

Where implementation stands

The Act’s compliance clock runs from the earlier of two dates: 18 months after enactment, which lands in mid-January 2027, or 120 days after a final implementing rule is issued. Because the OCC’s rule is still at the proposal stage, banks do not yet have final answers on licensing mechanics, but they cannot assume the deadline will slip with it.

The OCC’s own proposal gives a sense of scale. It estimates around 12 permitted payment stablecoin issuers affiliated with OCC-supervised banks will be active in 2026, alongside roughly 12 non-bank-affiliated issuers, with combined market value reaching up to $500 billion, of which about $125 billion is attributed to the OCC-bank-affiliated group. Those are the regulator’s own projections, not independent estimates, and they will move once the rule is finalised.

Digital asset custody becomes the compliance centre of gravity

Advisory firm Wolters Kluwer’s 2026 analysis of the Act describes wallet and digital asset custody capability as the operational core of the PPSI model, not a supporting function bolted onto an existing crypto desk. That reframes the build decision for banks: a bank exploring stablecoin issuance is really deciding whether to build or buy institutional-grade custody, key management and transaction monitoring, since the reserve, audit and sanctions obligations above all depend on custody controls a bank can demonstrate to its examiner.

This is where the licensing choice matters most in practice. A bank issuing through its own charter answers to its prudential regulator’s existing examination programme. A bank that instead uses a nonbank or state-qualified subsidiary is adding a second supervisory relationship on top of its own, with its own custody and reporting expectations.

Why banks are pushing back on stablecoin regulation

The American Bankers Association has written formally to House members raising the interest-reward gap as a systemic risk, not a technicality: if a stablecoin issuer’s affiliate can pay reward yields that a bank deposit account cannot legally match, ABA argues the result is a faster shift of retail deposits out of the banking system, with a direct effect on banks’ capacity to extend credit. The Brookings Institution’s review of the Act reaches a related conclusion, noting that when stablecoin reserves themselves sit as deposits at a bank, a problem at that bank could, in principle, transmit into a run on the stablecoin it backs.

State regulators have raised a separate concern. The Conference of State Bank Supervisors has asked federal regulators to make explicit that a state’s own chartering authority decides whether one of its state-chartered banks may set up a stablecoin-issuing subsidiary, pushing back on routes that would let an issuer use a national trust charter to sidestep state oversight altogether. Neither objection blocks the Act; both are shaping the detail of OCC’s rule as it moves toward finalisation.

What this means for a bank’s compliance team now

Waiting for a final rule before starting is not a neutral choice. Reserve reporting, BSA programme design and custody architecture take months to stand up, and the Act’s fixed compliance deadline does not wait for OCC’s rulemaking calendar. Fintechly’s coverage of tokenised collateral shows the same pattern on the asset side of bank balance sheets, where tokenised Treasuries are already moving into everyday collateral workflows, ahead of, not after, the rules that will eventually govern them fully. On the acquisition side, deals like Nium’s acquisition of stablecoin infrastructure provider Cypher show established payments players buying stablecoin capability rather than building every layer of custody and settlement from scratch, a route likely to look more attractive while OCC’s own rule stays unsettled.

A fuller list of active stablecoin and crypto infrastructure providers sits on Fintechly’s crypto sector directory.

Frequently asked questions

Does a bank need a new charter to issue a payment stablecoin under the GENIUS Act?

No. An insured bank can issue through its existing charter, or through a subsidiary. Using a subsidiary adds a second supervisory relationship on top of the bank’s own prudential regulator, so the choice is a compliance-resourcing decision, not a legal requirement.

Can a bank’s stablecoin affiliate pay interest to compete with money market funds?

The Act bars a PPSI from paying interest directly to stablecoin holders, but it does not prohibit an affiliate or third party from paying reward-like yields, a gap the American Bankers Association has flagged as a live risk to bank deposits.

What happens if OCC has not finalised its rule by the Act’s compliance deadline?

The Act’s deadline runs from the earlier of 18 months after enactment (mid-January 2027) or 120 days after a final rule, so a delayed rule does not by itself extend the compliance date; banks are expected to plan against the statutory deadline regardless of where OCC’s rulemaking stands.

Does the GENIUS Act change how stablecoin reserves must be held?

Yes. Reserves must be one-for-one in cash, insured bank deposits or short-dated US Treasuries, with monthly public reporting on their composition, a stricter standard than most stablecoin issuers followed before the Act.

Why are state regulators objecting to parts of the OCC’s proposal?

The Conference of State Bank Supervisors wants it made explicit that a state, not a national trust charter, decides whether a state-chartered bank can run a stablecoin-issuing subsidiary, to stop that route being used to bypass state oversight.