Research — SEPTEMBER 19, 2025
GENIUS and Clarity Acts: A Legal Framework for U.S. Stablecoins and Digital Assets
Public Law 119-27, the Guiding and Establishing National Innovation for U.S. Stablecoins Act, more commonly known as the GENIUS Act, was signed into law on July 18th 2025, and establishes a path for the adoption of regulated stablecoin transactions in the U.S., both by U.S. and foreign issuers.
The GENIUS Act is a significant development for the digital asset industry, being the first stablecoin-specific law at U.S. federal level, providing guidelines for how stablecoins can be issued, regulated, backed and used. At the time of writing, total stablecoins market cap exceeds $280bn, with the technology promising increased speed, efficiency and transparency in comparison to traditional payments infrastructure.
What is a Stablecoin?
Stablecoins are digital tokenized representations of fiat currencies which circulate on a public blockchain ledger. Stablecoin tokens are typically backed by liquid fiat reserves such as cash and treasuries.
The GENIUS Act defines the term Payment Stablecoin as a digital asset that is designed to be used as a means of payment or settlement. The issuer of which is obligated to convert, redeem, or repurchase for a fixed amount of monetary value and that the issuer will maintain the relative value of the digital asset. This does not include a digital asset that is a national currency; a deposit, including a deposit recorded using distributed ledger technology; or is a security.
Who can issue Stablecoins in the U.S.?
Only “Permitted Payment Stablecoin Issuers” can issue stablecoins in the U.S., with some limited exceptions. Permitted issuers include banks, approved non-banks and regulated state entities. Foreign payment stablecoin issuers are allowed but must meet the requirements of the Act and receive permission to transact in the U.S. Individual U.S. States may also issue stablecoins
Requirements for Stablecoins
The GENIUS Act is prescriptive on reserve requirements for stablecoins to reduce the risk of a stablecoin losing its peg against the U.S. dollar.
Stablecoin issuers must maintain identifiable reserves backing the outstanding payment stablecoins of the permitted payment stablecoin issuer on an at least 1:1 basis, with each stablecoin token backed by high-quality reserves. These can include cash, bank deposits and short-term, low-risk government securities such as U.S. treasuries. The use of other digital assets or cryptocurrencies is strictly prohibited to ensure each stablecoin token is backed by a corresponding dollar’s worth of asset on a 1:1 basis.
The GENIUS Act requires stablecoin issuers to disclose their redemption policies and previous month-end reserve breakdowns in report which must be examined by a registered public accounting firm in addition to annual reporting obligations. This transparency is intended to allow users and regulators to verify the solvency of stablecoin issuers on a regular basis.
Implications and next steps
Crucially, the GENIUS Act provides that certain payment stablecoins are not “securities” or “commodities” as defined in federal securities laws, or the commodities exchange act. The regulator for these stablecoins will be the newly established Stablecoin Certification Review Committee. This provides a clear legal framework for stablecoin issuers to operate and expand business offerings in the digital asset industry.
Clarity Act
In addition to the GENIUS Act, on July 17, 2025 the House passed the Clarity act which defines digital asset categories, assigning where regulatory oversight lies for digital assets between the SEC and CFTC. The roles assigned to each regulatory body are determined by the characteristics and uses a particular digital asset.
Under the Clarity Act, Investment Contract Assets remain under the jurisdiction of the SEC, whereas Digital Commodities whose value is tied to the function or operation of a blockchain system will be governed by the CFTC. Exchanges, brokers and dealers that deal with digital commodities will need to register with the CFTC.
The Act contains direct consumer protection measures such as mandatory public disclosure obligations for digital commodity issuers which are intended to offer greater transparency to investors. Notably, the Clarity Act also refers to whether a blockchain is a “mature blockchain” in determining whether an asset ends up being treated as a digital commodity or investment contract, with mature blockchain tokens aligning to digital commodities. The criteria for a mature blockchain refers to the function, adoption and decentralization of a blockchain in determining whether tokens on a mature blockchain are digital commodities.
As a next step, the industry is waiting for a broader Market Structure bill to be passed which will provide a broader industry-wide operational framework for crypto and digital assets.
How are S&P involved in digital assets?
Regulation requires controls, procedures and documented compliance. Stablecoin issuers, banks, and other stablecoin participants will need to add tax compliance to their growing list of regulatory reporting requirements.
S&P Tax Solutions is proud to work with some of the largest financial institutions and digital asset players in shaping and delivering their regulatory and tax reporting compliance program.
The Tax Solutions at S&P Market Intelligence global tax ecosystem platform is a centralized solution to address all aspects of digital asset tax information compliance including due diligence and tax withholding, transactional information gathering, cost basis tracking and tax information reporting for financial and digital assets including, IRS Form 1099-DA, CRS, OECD CARF and DAC 8 regulations.
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