Summary
A comprehensive founder's guide to the GENIUS Act stablecoin framework published by Montague Law provides a plain-English walkthrough of the federal stablecoin licensing regime. The GENIUS Act, signed July 18, 2025, creates an exclusive licensing category called Permitted Payment Stablecoin Issuer (PPSI) — only a PPSI may legally issue a payment stablecoin in the United States once the Act is fully effective.
The guide covers three pathways to becoming a PPSI: federal qualified (OCC license, mandatory above $10B), state qualified (state regime with federal equivalency, must transition at $10B), and IDI-issued (banks/credit unions issuing directly). Reserve requirements mandate 100% backing in high-quality liquid assets (Treasuries, Fed balances, insured deposits, government MMFs) — explicitly excluding corporate bonds, commercial paper, equities, and crypto. The yield prohibition prevents PPSIs from paying interest to stablecoin holders, though tokenized deposits from insured institutions can pay yield.
Key Facts
- GENIUS Act signed: July 18, 2025; effective: January 18, 2027 (or 120 days after final rules)
- Three PPSI pathways: federal qualified (OCC), state qualified (state regime), IDI-issued (banks)
- $10B threshold: state qualified issuers must transition to federal regime above $10B
- Reserve requirement: 100% backing in permitted assets
- Permitted reserves: U.S. currency, Fed balances, insured deposits, short-dated Treasuries, overnight Treasury repos, government MMFs, tokenized versions
- Excluded reserves: corporate bonds, commercial paper, equities, gold, crypto, non-tokenized credit
- Rehypothecation: prohibited (reserves cannot be lent or repledged)
- Yield prohibition: PPSIs cannot pay interest to stablecoin holders
- Tokenized deposits: IDIs can issue yield-bearing digital tokens (FDIC-insured)
- Monthly attestation: registered public accounting firm examination required
- Foreign issuers: must pursue Treasury approval or restructure U.S. distribution
- Five proposed rules: OCC (March), FDIC (April), NCUA (April), Treasury (April), FinCEN/OFAC (April)
- Rulemaking deadline: July 18, 2026 (missed for final rules; proposed rules published)
Why It Matters
The GENIUS Act is the most consequential U.S. stablecoin legislation ever enacted, and this guide provides the clearest available roadmap for founders navigating the new regime. The reserve rules close the most lucrative income lever existing issuers have used (investing reserves in higher-yielding assets), while the yield prohibition creates a bright line between stablecoins and tokenized deposits. For founders, the key strategic decision is which licensing pathway to pursue — and the window for planning is narrowing as final rules approach.