8 months left until the GENIUS Act! Stablecoin regulatory rules to be finalized by July 2026

The “Guidance and Establishment of New Innovations for U.S. Stablecoins” Act (GENIUS) was passed this summer, requiring agencies to draft rules to implement the new law. On Tuesday, Wisconsin Republican Congressman Bryan Steil pressed regulators for progress updates during a hearing, emphasizing that he simply wants to ensure the work is completed on schedule. The GENIUS Act took effect on July 18, mandating that relevant rules must be finalized within one year, with a deadline of July 18, 2026.

Congressman Presses Regulators to Meet Deadlines

(Source: U.S. House of Representatives website)

On December 2, during a House Financial Services Committee hearing, Congressman Bryan Steil asked attending regulators to report on their progress implementing the GENIUS Act. The hearing focused on regulatory developments from the Federal Reserve, Office of the Comptroller of the Currency (OCC), National Credit Union Administration (NCUA), and Federal Deposit Insurance Corporation (FDIC). Steil’s remarks reflected lawmakers’ concerns about the pace of execution.

“I just want to make sure we get this work done on time,” Steil said. “I think it’s critically important. Over the years, our committee has seen this happen: a bill passes, but the accompanying regulations don’t get issued on time.” This sentiment reflects a common issue in the U.S. legislative process: after Congress passes legislation, agencies often delay or deviate from the legislative intent when drafting implementation details.

The full text of the GENIUS Act stipulates that relevant rules must be completed one year after the bill’s effective date. With the Act officially passed on July 18, this means regulators must finalize and publish all implementing details by July 18, 2026. While the timeline may appear generous, the rulemaking process involves proposal, public comment, revision, and final publication, leaving agencies with less time than it seems.

Prior to the hearing, FDIC Acting Chairman Travis Hill stated that the FDIC plans to propose relevant rules this month to establish the framework for implementing the GENIUS Act. This is the first regulator to provide a clear timeline, indicating the FDIC is actively responding to Congress’s requirements. Proposing rules this month means the FDIC will release its initial draft stablecoin regulations before the end of December 2025, initiating the public comment process.

NCUA Chairman Kyle Hauptman stated during the hearing that credit union agencies have identified their first rulemaking target under GENIUS. “You gave us the deadline of July 18,” Hauptman told Steil. “I am confident my fellow regulators and I are committed to meeting this task. I estimate the first rulemaking you’ll see will be about how to apply to become an issuer.”

GENIUS Act Implementation Timeline

July 18, 2025: Act takes effect

December 2025: FDIC plans to propose framework rules

First half of 2026: Agencies issue draft details in succession

July 18, 2026: Deadline for all implementation rules to be finalized

This phased rulemaking strategy is prudent. Starting with the application process allows potential stablecoin issuers to understand how to enter the market early, followed by progressively introducing more complex rules on reserve requirements, audit standards, and risk management.

Key Requirements and Market Impact of the GENIUS Act

The Act requires stablecoins be fully backed by U.S. dollars or similarly liquid assets, mandates annual audits for issuers with a market cap over $50 billion, and sets guidelines for overseas issuance. These three core requirements will fundamentally reshape the competitive landscape of the stablecoin market.

The full reserve backing requirement is a death blow to algorithmic stablecoins. In the past, algorithmic stablecoins like Terra’s UST tried to maintain their dollar peg through complex arbitrage mechanisms without holding equivalent dollar reserves. This model collapsed in 2022, leading to tens of billions in losses. The GENIUS Act explicitly bans this model, requiring all stablecoins to be backed by real dollars or equivalents.

The definition of “similarly liquid assets” is critical. This could include short-term U.S. Treasuries, money market funds, or other highly liquid, low-risk assets. The specific definition will be clarified in the implementation details, and regulators must tread carefully. If defined too narrowly, it may limit issuers’ ability to earn returns; if too broadly, it could repeat past mistakes and introduce the risk of reserves losing value and becoming unpegged.

The $50 billion audit threshold targets industry giants like Tether and Circle. Tether’s USDT has a market cap exceeding $140 billion, and Circle’s USDC is around $35 billion—both would be subject to annual audits. These audits aren’t simple financial reviews but independent verifications of reserve assets, ensuring issued stablecoins are indeed backed by corresponding dollars or equivalents.

Guidelines for overseas issuance are a unique aspect of the GENIUS Act. Given the global nature of stablecoins, many issuers are registered or operate outside the United States. The GENIUS Act seeks to bring these overseas entities under regulatory oversight, at least when they serve U.S. users. How this cross-border regulation will be implemented is one of the most complex challenges.

Since the Act took effect, several agencies, including the Treasury Department, have been drafting relevant details and soliciting public input on how to implement them. This public comment process is a standard feature of U.S. administrative law, allowing stakeholders to provide feedback and improving the operability and reasonableness of the rules. Major players in the stablecoin industry are expected to actively participate in this process to try to influence the final rules.

Broader Crypto Legislation and Trump Conflict of Interest Controversy

While lawmakers are working to pass a broader, more comprehensive crypto industry regulatory bill, implementation of the GENIUS Act is moving forward rapidly. The House passed a bill called “Clarity” this summer, and the Senate is drafting its own version. The Clarity Act aims to establish clear regulatory frameworks for the entire cryptocurrency industry, covering security tokens, exchange regulation, consumer protection, and more.

During discussions over the GENIUS Act and broader crypto legislation, many Democrats have raised concerns about President Donald Trump’s interests in crypto and how much he might profit from these investments, including DeFi and stablecoin projects from World Liberty Financial, which lists Trump and his three sons as co-founders.

Maxine Waters, the ranking Democrat on the House Financial Services Committee and a congresswoman from California, asked agency heads during Tuesday’s hearing whether the president should be prohibited from “owning any business he regulates,” such as crypto firms or banks. Waters said, “I believe this represents a huge conflict of interest, and Congress should act to ensure that rules are made and enforced by those who do not personally benefit from their public duties.”

Such conflict of interest questions have sparked heated debate in Washington. Trump’s supporters argue that he built his business empire before entering politics and should not be required to divest entirely from all business interests. Critics point out that when the president’s family business directly benefits from policies he advances, it constitutes a clear conflict of interest and violates the principle of prioritizing the public good.

From the perspective of the GENIUS Act, if World Liberty Financial launches a stablecoin product, it will fall directly under the Act’s regulation. This means Trump’s family business would need to comply with full reserve backing, annual audits (if market cap exceeds $50 billion), and other compliance requirements. In theory, the law applies equally to all, and Trump’s business should not receive special treatment. However, whether there will be favoritism or lenient enforcement in practice will be a focus for Democratic oversight.

Such political controversies could affect the pace and content of GENIUS Act implementation. If Democrats believe regulators are being too lenient or favoring Trump’s interests while drafting rules, they may apply pressure in Congressional hearings or propose amendments. Conversely, if regulation is too strict, Republicans may criticize it as stifling innovation. Finding a balance amid such political tug-of-war will be a challenge for regulators.

Stablecoin Industry Adaptation and Preparation

For stablecoin issuers, implementation of the GENIUS Act means significantly higher compliance costs and adjustments to business models. Existing giants such as Tether and Circle will need to establish or strengthen audit mechanisms to ensure reserve transparency. This may require hiring top accounting firms for annual audits and regularly disclosing detailed reserve compositions.

For new entrants, the application process and compliance requirements will become major barriers to entry. The NCUA chairman’s mention of “rules on how to apply to become an issuer” will determine who can obtain a stablecoin issuance license. This process is expected to include capital adequacy requirements, management team background checks, technical system audits, and risk management program assessments.

Overseas stablecoin issuers face tough choices. To continue serving the U.S. market, they must comply with the GENIUS Act; if they choose to exit, they’ll lose access to one of the world’s largest crypto markets. Tether’s exit from Europe after the EU’s MiCA regulations shows that compliance costs may prompt some issuers to make strategic withdrawals.