GENIUS Act Becomes Law, Establishes U.S. Stablecoin Rules and Puts Up to $6.6T in Bank Deposits in Play

The U.S. stablecoin market has long operated in a regulatory gray zone, with issuers largely setting their own standards as Congress debated oversight. That dynamic has now shifted. The GENIUS Act, signed into law on July 18, 2025, delivers the first comprehensive federal framework for payment stablecoins. The bill cleared the Senate 6830 and the House 308122, marking it as one of the most bipartisan crypto measures in U.S. history. Under the new law, certain nonbank fintechs and crypto firms can issue stablecoins under federal and state supervision. Issuers must hold 1:1 reserves in liquid assets such as cash, shortterm Treasuries, and repurchase agreements, and they are prohibited from paying interest on their tokens. Regulators have already begun rolling out the framework. The Office of the Comptroller of the Currency moved to implement the law and, as of December 2025, granted conditional national trust bank charters to Circle, Paxos, and three other firms. In April 2026, the U.S. Treasury proposed AML and sanctions compliance rules for permitted issuers. The FDIC is also advancing proposals covering application standards for nonbank stablecoin issuers. Banks are increasingly focused on the competitive implications. Traditional lenders still hold two major advantages stablecoin issuers lack: FDIC insurance and the ability to lend customer deposits. By contrast, stablecoin issuers operating under the GENIUS Act cannot lend their reserves; they must hold them in safe assets. Even so, stablecoins compete for the same consumer and business cash that sits in bank deposit accounts. Banks estimate that up to $6.6 trillion in deposits could face outflows as nonbank stablecoin issuers scale. Before the GENIUS Act, firms such as Circle and Paxos relied on a patchwork of state money transmitter licenses and voluntary reserve attestations. The absence of a federal standard created uncertainty for institutions that wanted exposure but were unwilling to accept regulatory ambiguity. For investors, the conditional charters for Circle, Paxos, and others could reshape the competitive landscape. Companies that secure national trust bank status gain credibility and potential access to federal payment infrastructure. Firms that cannot meet reserve and compliance requirements may be pushed to the margins. The interest ban is the key provision to watch. If future legislation or regulatory interpretation ever relaxes that restriction, the competitive pressure on bank deposits could shift from a manageable risk to a far more immediate threat.