Stablecoins and the GENIUS Act

The one corner that works

The GENIUS Act is the United States’ attempt to put a proper legal frame around the one corner of crypto that has simply kept working. Stablecoins, tokens designed to hold a fixed value against a currency such as the US dollar, hold a market capitalisation of around $310bn, $310.7bn on DefiLlama’s count as of 29 August 2026; Tether’s USDT stands at about $183.4bn and Circle’s USDC at about $74.1bn. What sets this segment apart is that its usage grew through the drawdown that hit the rest of the market, because the demand behind it is payments rather than speculation. People and businesses use stablecoins to move money, and that need does not fade when prices fall. Where much of the market spent the past year in retreat, the stablecoin segment expanded, which is the fact the framework is built around.

What the GENIUS Act requires

The GENIUS Act establishes a federal framework for these tokens, and its requirements read like conventional financial regulation rather than anything exotic. Issuers must hold reserves backing their tokens one for one, so every unit in circulation is matched by real assets. They must be transparent about those reserves and honour redemption rights, meaning a holder can reliably exchange a token for the dollar it represents. They must meet anti-money-laundering and counter-terrorist-financing obligations, and submit to audit and reporting. Oversight is shared across the Office of the Comptroller of the Currency, the Financial Crimes Enforcement Network and the Treasury. Taken together, it aims to make a stablecoin something a cautious institution can use without taking a regulatory gamble.

Why the rules come now

The GENIUS Act became law on 18 July 2025; the reason its rulebook is being written now is that stablecoins have proved their usefulness under stress. When the speculative parts of the market contracted, stablecoin supply held up far better, though June 2026 brought a $7.7bn fall, the largest monthly drop since the Terra collapse of 2022, because the tokens function as dollars that move on blockchain rails: fast, around the clock, across borders. That utility is independent of whether bitcoin or ether is rising or falling, and it is why regulators have treated stablecoin rules as the most pressing part of the digital-asset agenda. The contrast with the rest of the market is what gives the legislation its urgency: rules tend to follow the products people actually use, and stablecoins have become the settlement layer for a growing share of on-chain payments. For a technology often associated with volatility, a dollar token that simply stays worth a dollar has turned out to be its most durable product.

The yield question

Yield is the reason stablecoin policy has become entangled with the rest of crypto legislation, and the statute itself settles the first half of the question. Section 4(a)(11) of the GENIUS Act bars any permitted payment stablecoin issuer from paying holders “any form of interest or yield (whether in cash, tokens, or other consideration)” for holding, using or retaining the coin. What remains disputed is the indirect route: whether an exchange or an affiliate of an issuer may pass the interest earned on reserves through to holders instead. The statute is silent on third parties, and the US Treasury has flagged the point without settling it, asking in its September 2025 consultation whether regulations should clarify “whether, and to what extent, any indirect payments are prohibited”. Treasury’s first proposed rule under the act, published on 18 August 2026 with comments open until 19 October 2026, covers who may issue, offer and sell payment stablecoins and contains no yield provisions; alongside it, FinCEN’s proposed customer identification rule for permitted issuers closed its comment period on 21 August 2026, and the OCC takes comment on its licensing application forms to 25 September 2026. Banks, including Bank of America and Barclays, have lobbied hard against interest-bearing stablecoins, arguing that a token which pays a yield would pull deposits out of the banking system. Deposits fund bank lending, so the banks’ concern is ultimately about where money in the economy sits. That disagreement over stablecoin yield helped stall the CLARITY Act in the Senate, which has now shelved the bill until September over a disputed ethics provision, tying a broad market-structure bill to fights over single features. Our explainer on the CLARITY Act follows that thread.

What to watch

Stablecoins occupy an unusual position in the wider field: the part of crypto with the clearest real-world use and, in the GENIUS Act, some of its most developed regulation. The framework’s one-for-one backing, redemption rights and shared federal oversight give the segment a credibility the rest of the market is still reaching for. What to watch is the indirect-yield question, because how Treasury resolves it will shape not only stablecoins but the market-structure legislation stuck behind it. As of 29 August 2026 the act has barred issuers from paying interest, while yield passed through exchanges or affiliates sits with a rulemaking that has not yet addressed it. How that ruling lands will decide how far the segment can grow inside the regulated system, and how much of the wider crypto rulebook can move with it.