The GENIUS Act grew to become legislation on July 18 after Congress settled that stablecoins ought to be regulated.
What occurs subsequent is a two-year rulemaking warfare that determines whether or not $250 billion in present stablecoins flows into bank-wrapped constructions or fragments into offshore silos, and whether or not Bitcoin and Ethereum seize the fallout or get buried beneath it.
Justin Slaughter, Paradigm’s VP of regulatory affairs, said on Nov. 6:
“Little identified truth—after the laws is enacted, the actual battle begins.”
His agency simply filed feedback on the Treasury’s advance discover of proposed rulemaking. The central battle is whether or not associates of stablecoin issuers pay yield to holders by means of separate merchandise, and Congress already determined they’ll. But, Treasury may attempt to rewrite that.
The flexibility to supply yield by way of wrappers is the place the following battle will happen. If regulators win, stablecoins change into neutered financial institution merchandise. If the trade wins, they compete with banks on charges.
Though the legislation is finished, the principles aren’t. And the principles resolve all the things.
When compliance turns into necessary
GENIUS builds a fringe over three years, then locks the gates. The framework takes impact on Jan. 18, 2027, or 120 days after the ultimate rules are revealed, whichever comes first.
Federal companies have one yr from enactment to situation these rules.
A 3-year grace interval expires July 18, 2028. After that, US exchanges, custodians, and most DeFi entrance ends can’t supply “fee stablecoins” except a permitted fee stablecoin issuer or a Treasury-blessed overseas equal points them.
Issuers beneath $10 billion can use authorized state regimes, whereas bigger issuers should migrate into the federal monitor. International issuers want “comparable regime” determinations, OCC registration, and US-held reserves.
This timeline signifies that regulators will publish the rulebook by early 2027. By mid-2028, anybody touching US clients will both comply or exit.
What “into banks” really means
GENIUS defines a protected class referred to as “fee stablecoins” and restricts US distribution to cash issued by permitted issuers.
These issuers have to be financial institution subsidiaries, federally licensed nonbanks supervised by the OCC, or state-qualified entities beneath tight federal oversight.
Reserves have to be held in money, financial institution deposits, or T-bills, with no rehypothecation allowed. Disclosures submissions are made month-to-month, and issuers have to be compliant with full prudential supervision, in addition to BSA/AML compliance.
The cash are pulled right into a banking-style regulatory perimeter with out being referred to as banks.
For the $304 billion stablecoin market, this creates a fork. US-touching liquidity migrates into bank-like wrappers, whereas all the things else will get fenced off.
Offshore issuers can exist globally, however US platforms will drop them to keep away from legal responsibility. There’s $300 billion at stake, break up between entities that meet federal requirements and people that don’t.
The rulemaking battle: yield, definitions, and scope
Slaughter’s remark zeroes in on affiliate yield. GENIUS prohibits issuers from paying curiosity however says nothing about associates doing so. Paradigm argues that banning affiliate yield would violate the statute’s plain language.
This issues as a result of, if associates pays aggressive charges, customers get high-yield financial savings accounts with prompt settlement. That creates strain on banks really to return curiosity.
If regulators block affiliate yield, stablecoins change into worse than financial institution deposits, with a full compliance burden, however no upside.
Different battlegrounds embrace the definition of the time period “digital asset service supplier” and whether or not DeFi protocols are exempt from statutory carve-outs, in addition to what constitutes a “comparable regime” for overseas issuers.
Regulators might implement GENIUS as written or twist it into financial institution protectionism that chokes something not carrying a federal constitution.
Winners and losers
Massive US banks and quasi-bank stablecoin issuers emerge as winners. GENIUS creates the primary clear federal pathway for regulated establishments to situation greenback tokens with preemption over state guidelines.
Circle, Paxos, and PayPal rush to safe permitted issuer standing. The expectation is that main banks will launch tokenized deposits and transfer instantly onto public blockchains, quite than staying behind with ACH.
The US greenback and Treasury market additionally win. GENIUS mandates one-to-one backing in T-bills, making each compliant stablecoin successfully a mini T-bill fund. If this scales into the trillions, it deepens international demand for US debt.
Ethereum and layer-2 blockchains seize settlement infrastructure. US-regulated issuers overwhelmingly select mature EVM environments.
In response to rwa.xyz, Ethereum, zkSync, and Polygon have the most important participations on the real-world asset (RWA) market, amounting to $15.7 billion (44%).
Ethereum turns into the impartial rail for bank-grade greenback tokens, gaining price circulation and legitimacy as “regulated plumbing.” A big, compliant tier of DeFi builds on permitted stablecoins, coexisting with the permissionless international layer.
However, offshore issuers lose US distribution. After mid-2028, US platforms will be unable to supply any “fee stablecoin” that’s not issued by a permitted issuer. Tether and related gamers can serve non-US clients however lose seamless integration with Coinbase, Kraken, or main US venues.
Smaller or experimental issuers get crushed. Algorithmic stablecoins, undercollateralized experiments, and thinly capitalized startups both pivot into area of interest markets or shut down.
Consequently, DeFi faces a break up. GENIUS exempts underlying protocols and self-custody, however rulemaking will outline what counts as “providing” to US individuals.
If regulators stretch definitions, giant elements of DeFi both filter to permitted-stablecoin-only swimming pools for US site visitors or drift into geofenced offshore silos.
How flows reroute
The primary part, from now to mid-2026, is characterised as a positioning interval. Issuers and banks foyer over eligible reserves, overseas comparability, affiliate yield, and definitions. Draft guidelines flow into, and trade war-games compliance paths.
The second part, spanning 2026 and 2027, is when regulatory sorting takes place. Closing guidelines are launched, early approvals are granted to giant, compliant entities, and names are revealed. US platforms migrate quantity towards “soon-to-be permitted” cash, whereas noncompliant issuers file, geo-fence US customers, or lean into offshore venues.
The third part, spanning from 2027 to 2028, is the hardening of routes. US-facing exchanges, brokers, and plenty of DeFi entrance ends primarily listing permitted stablecoins, with potential for deeper liquidity on Ethereum and layer-2 blockchains.
Noncompliant stablecoins persist on offshore exchanges and gray-market DeFi however lose connectivity to completely regulated US rails.
The anticipated result’s a bigger share of “crypto {dollars}” turning into absolutely reserved, supervised, KYC’d, and sitting inside or adjoining to financial institution stability sheets. On-chain settlement begins to look much less like a pirate market and extra like Fedwire with APIs.
| Stage | Date / Window | Key Motion | Lead Businesses & Milestones |
|---|---|---|---|
| Passage (GENIUS Act turns into legislation) | July 18, 2025 | GENIUS Act (Public Legislation 119–27) signed. Establishes “permitted fee stablecoin issuer” regime, bans yield on fee stablecoins, units 3-year distribution clock, and hardwires the efficient date because the earlier of (i) 18 months after enactment or (ii) 120 days after closing regs by major regulators. | Treasury + “major Federal fee stablecoin regulators” (Fed, OCC, FDIC, NCUA) are formally tasked with constructing the rulebook (Part 13). |
| ANPRM – Implementation Kickoff | Sept 19, 2025 | Treasury points Advance Discover of Proposed Rulemaking (ANPRM) on GENIUS Act implementation. It asks detailed questions on issuer eligibility, reserves, overseas/comparable regimes, illicit finance, tax, insurance coverage, and knowledge—that is the opening shot in defining how strict or versatile GENIUS shall be. | Treasury leads docket TREAS-DO-2025-0037 and indicators coordination with Fed, OCC, FDIC, NCUA, and state regulators. These companies start inside workstreams (FSOC/FDIC/NCUA speeches flag GENIUS implementation as a precedence). |
| Proposed Guidelines (NPRMs) | Anticipated 1H 2026 | Subsequent step: Treasury plus every major regulator publish proposed guidelines (NPRMs) translating GENIUS into concrete necessities: licensing requirements for PPSIs, capital/liquidity, reserve composition, examinations, overseas issuer “comparability,” and situations for digital asset service suppliers. These should come early sufficient to finalize inside the statutory one-year rulemaking window. | Statute (Sec. 13) requires Treasury, Fed, OCC, FDIC, NCUA, and state regulators to “promulgate rules” inside 1 yr of enactment → sensible strain to get NPRMs out in early 2026 so finals can land by July 18, 2026. That is the core battleground Justin Slaughter & others are pointing to. |
| Closing Guidelines | Statutory deadline: by July 18, 2026 | Closing rules by the “major Federal fee stablecoin regulators” + Treasury lock in who could be a PPSI, how reserves work, supervision expectations, and the way overseas and state regimes are acknowledged. These closing guidelines additionally begin the 120-day clock that may speed up GENIUS’s efficient date. | Fed, OCC, FDIC, NCUA every finalize regs for issuers beneath their jurisdiction; Treasury finalizes cross-cutting guidelines (secure harbors, comparability, illicit finance). Collectively, these guidelines are what can begin the effective-date countdown beneath Sec. 20. |
| Earliest GENIUS Efficient Date | Earlier of: (a) Jan 18, 2027 (18 months after enactment), or (b) 120 days after closing regs | GENIUS framework (and amendments) “activate” at whichever comes first. If regulators slip on closing guidelines, the 18-month mark (Jan 18, 2027) turns into the default efficient date. In the event that they transfer quick and finalize early, the 120-day rule can pull the efficient date ahead. | Virtually: that is the pivot level your article ought to spotlight—when stablecoin issuance and U.S.-facing distribution should start lining up with PPSI guidelines, and when markets begin rerouting towards bank-like, GENIUS-compliant |
What it means for Bitcoin and Ethereum
For Bitcoin, GENIUS is a story tailwind. As stablecoins change into extra bank-like and topic to regulation by US authorities, Bitcoin stands out because the censorship-resistant asset that is still outdoors this perimeter.
Brief-term liquidity is okay, as permitted stablecoins shall be in every single place US-regulated BTC venues are. If noncompliant stablecoins shrink, some high-friction flows will pivot to BTC pairs.
In the long run, GENIUS domesticates the greenback aspect of crypto, making Bitcoin the cleanest approach to step outdoors the brand new perimeter.
For Ethereum, GENIUS doubtlessly brings a brand new stage of scale if issues stay as they’re at the moment. Permitted issuers favor EVM chains with mature infrastructure and deep DeFi capabilities.
That’s structurally supportive of ETH as gasoline and settlement infrastructure for regulated stablecoin funds and tokenized belongings.
Consequently, a two-tiered DeFi ecosystem may emerge. One tier consists of permissioned, GENIUS-compliant swimming pools with institutional capital, and permissionless international swimming pools internet hosting any coin. Censorship threat exists on this tier, however that will increase the worth of credible neutrality on the protocol stage.
The opposite tier is fashioned by bank-grade, trillion-scale greenback tokens selecting Ethereum, making blockspace a worthwhile infrastructure.
The battle is over the principles. Treasury, the Fed, and the OCC write them between now and mid-2026. By 2027, the market learns what GENIUS really constructed. By 2028, capital will circulation into banks, onto Ethereum, or offshore.
