GENIUS Act Signed: What’s Next For Digital Assets?

TLDR: The GENIUS Act, now set to go into effect within the next 18 months, is the first major U.S. law to regulate stablecoins. The Act creates a clear framework for licensed issuers, strict reserve requirements, and consumer protections. For BitGo, it affirms our long-held approach to security, transparency, and compliance, positioning us to effectively support institutions as the stablecoin market gains mainstream adoption via regulatory clarity.

The GENIUS Act, short for the Guiding and Establishing National Innovation for U.S. Stablecoins Act was officially signed into law recently, marking the first major piece of U.S. federal legislation focused on regulating stablecoins. For BitGo and the digital asset infrastructure space, this legislation brings long-awaited clarity and new responsibilities, finally defining what compliance will be required of stablecoins in the United States. This level of clarity is a major step forward for digital assets, and will help foster a higher level of confidence in the technology as digital assets integrate with our financial infrastructure.

A New Era for Stablecoins

At its core, the GENIUS Act establishes a regulatory framework for what it terms “payment stablecoins”, digital tokens pegged to the U.S. dollar, typically backed by short-term U.S. Treasuries or similarly liquid assets, and used for payments and settlements.

Under the law, only “permitted stablecoin issuers,” entities that meet certain licensing and regulatory criteria, will be allowed to issue dollar-backed stablecoins in the U.S. The framework offers a dual-path option: federal licensure for banks and large institutions, and a state-supervised track for non-bank issuers operating under regimes deemed “substantially similar” to the federal standard. Any stablecoin not issued under one of these pathways will be prohibited from circulation after the bill’s three-year transition period.

This effectively sets a regulatory perimeter around the stablecoin market, forcing out unregulated or opaque issuers and creating a more secure environment for end users and institutions alike.

Key Provisions of GENIUS Act Explained

The GENIUS Act establishes a comprehensive federal framework for the regulation of payment stablecoins. It will take effect 120 days after the primary federal payment stablecoin regulators issue any final regulations implementing the Act or after 18 months, whichever comes first. At its core, the legislation introduces a federal licensing regime for stablecoin issuers, allowing both traditional financial institutions and nonbank entities to obtain licenses from the Federal Reserve, the OCC, or another designated federal agency.

Once licensed, issuers will be subject to ongoing supervision and enforcement by the Federal Reserve Board. The Act also preserves state-level authority by allowing state-licensed issuers to continue operations without a federal license, provided they meet key federal requirements. These include notifying the Federal Reserve, adhering to reserve and redemption mandates, and remaining under state regulatory oversight. The Fed retains limited backup authority to intervene only in cases of systemic risk or regulatory failure at the state level.

To preserve financial stability and maintain confidence, the Act mandates that all stablecoins be backed by 100% reserves in cash, U.S. Treasuries, or other highly liquid, low-risk assets. Issuers must honor one-to-one redemptions and publish monthly disclosures attested by an independent accountant, detailing reserve composition, maturities, and custodians. 

Consumer protection is also a central pillar of the legislation. The Act prohibits the lending or rehypothecation of customer reserves, limits custodianship of those reserves to regulated financial institutions, and bans the commingling of customer assets with corporate funds. It also requires transparent user disclosures outlining rights and risks associated with stablecoin usage. In short, the GENIUS Act creates a clear path forward for the development of a transparent and innovation-friendly stablecoin ecosystem in the United States.

A Clear Compliance Mandate

Perhaps the most impactful aspect of the GENIUS Act is its emphasis on anti-money laundering and sanctions compliance. Issuers must now implement full Bank Secrecy Act programs, including Know Your Customer (KYC), transaction monitoring, and the ability to freeze or destroy assets when required by court order. Custodians and infrastructure providers like BitGo must ensure the tools and systems are in place to support these obligations. That includes integrating controls that allow issuers to meet their legal requirements, while maintaining secure and reliable custody for end-users.

As one of the few digital asset infrastructure providers with deep regulatory experience and global infrastructure, BitGo is ready to support stablecoin issuers in building compliant, transparent systems from the ground up.

Enabling the Next Wave of Adoption

The law also raises the bar for compliance. Unregulated or poorly backed stablecoins will face increasing pressure as the transition period winds down. Exchanges, custodians, and platforms will need to reassess their offerings and prioritize stablecoins that meet the new legal standards. This could lead to a more consolidated and trusted stablecoin landscape.

By tying stablecoin oversight to consumer protection and financial stability, the United States is taking a leadership role in setting standards for digital dollars.

Ultimately, the Act’s passage reaffirms BitGo’s long-term strategy: building trusted infrastructure for a compliant digital economy. Our Stablecoin-as-a-Service platform, launched well before the Act’s final form, was designed with exactly this level of oversight in mind, offering turnkey support for fully reserved, transparent, and regulated stablecoins.

What it Means for BitGo

As a regulated custodian and digital asset infrastructure provider, BitGo is no stranger to operating with industry standards of security, compliance, and transparency. The new legislation validates that approach and makes many of our long-standing practices a legal baseline across the industry.

The law requires custodians to ensure they only support stablecoins issued under the permitted framework. 

Additionally, the Act mandates strict segregation of reserve assets backing stablecoins and prohibits their commingling with other funds. As a qualified custodian, BitGo is well-positioned to manage this requirement. We’ve long operated under similar principles, offering multi-signature security, segregated accounts, and institutional-grade controls to safeguard client assets.

USD1 is BitGo’s blueprint for Stablecoin-as-a-Service, offering secure custody, 1:1 redeemability, and turnkey infrastructure for institutions to launch and manage stablecoins with confidence.

Learn more about USD1 here.

The law also demands greater transparency from issuers, including monthly reserve disclosures and independent audits. Custodians may play a supporting role here as issuers seek to validate their reserves through trusted third parties. BitGo is a digital asset infrastructure provider, built with auditability and operational transparency in mind, makes us a natural partner for issuers looking to comply with these new standards.

Looking Ahead

The GENIUS Act is a turning point for the digital asset industry; one that replaces legal ambiguity with enforceable standards and opens the door to responsible innovation. For BitGo, it reaffirms our belief that trust, transparency, and strong security are not only good business, they are the foundation of a sustainable digital financial system.

As the stablecoin market matures under this new framework, BitGo will continue to serve as a trusted partner to clients navigating the regulatory shift, delivering the infrastructure that underpins safety, compliance, and growth in the digital asset space.

Learn more about how BitGo supports stablecoins.