The Trump government enacted the GENIUS ACT (Guiding and Establishing National Innovation for U.S. Stablecoins Act) on June 17th, 2025. The Act is intended to establish a regulatory framework to engage the use of cryptocurrency in the market and enhance the status of the United States in the digital currency landscape.
What is The GENIUS Act?
The GENIUS Act works as a regime of regulations for stablecoins and their issuers, while safeguarding consumers, i.e., stablecoin holders. It makes it compulsory for companies to issue these stablecoins valued at more than $10 billion to register with a federal agency. In contrast, those issues valued less than this are required to operate under state regulation. They are also required to disclose their stablecoin status at regular intervals for periodic audits.
What are Stablecoins?
Now, stablecoins are any coin whose value is pegged to some other stable asset, typically the US dollar or, in some instances, to gold or silver, without allowing the value to change wildly. There are primarily four types of prominent stablecoins:
- Fiat-Collateralized Stablecoins: Pegged to the US dollar.
- Crypto-Collateralized Stablecoins: Pegged to other coins.
- Commodity-Collateralized Stablecoins: Pegged to physical commodities such as gold, silver, and minerals.
- Algorithmic Stablecoins: Supported by technological algorithms on software that modify the supply of the stablecoin based on demand.
How this impacts accounting firms
The GENIUS Act will make a considerable difference in the way accounting firms crypto clients operate and will also prompt them to change the way they transact. As cryptocurrency and the financial side to it are still in nascent stages, there is still time for firms’ crypto clients to gear up and adjust to this drastic change, not merely in certain finance, tax or accounting areas but perhaps the ecosystem as well.
The following are some things that accounting firms need to watch out for:
Tax reporting and client guidance
Tax reporting and client guidance require explicit documentation of stablecoin transactions. Issuers should publish monthly reserve disclosures, and accountants are to monitor client transfers between fiat and stablecoins to identify whether they are sales, exchanges, or conversions for tax purposes. With the increasing popularity of stablecoins, the IRS will likely issue more guidance.
Accounting Treatment Classification
Classification of accounting treatment is essential. Many companies previously viewed stablecoins as intangible assets or inventory, but because of new reserve and redemption rules, some could now be considered cash equivalents. A detailed examination of legal convertibility will be required, and standard-setters will need to publish updates.
Audit considerations
Auditors will observe increased activity around attestations validating cash and Treasury balances, custody arrangements, and redemption controls. Insolvency procedures alter the game too: stablecoin holders now enjoy priority claims, which impacts creditor hierarchy reviews.
Controls, AML/KYC, and onboarding
Companies providing services such as bookkeeping or payroll in stablecoins will be required to comply with stricter requirements for AML/KYC procedures, such as vendor due diligence on issuers, safe custody of private keys, and transparent procedures for managing digital wallets.
What are the GENIUS Act Regulations?
1. Federal Oversight
The GENIUS Act creates a national standard for regulating issuers of stablecoins, primarily overseen by the Office of the Comptroller of the Currency (OCC), to establish a uniform national standard rather than a confusing morass of state laws.
2. Authorized Payment Stablecoin Issuers (PPSIs)
To operate legally, issuers must register as PPSIs, either as an insured depository (like a bank) or a Fed-approved non-bank financial institution. This aligns stablecoin issuers with traditional oversight.
3. Reserve Requirements and Disclosure
- 1:1 Backing: Stablecoins must be fully backed by reserves equal to the total value in circulation.
- Eligible Reserves: These reserves must be held in liquid, low-risk assets like U.S. dollars, Treasury bills, or other regulator-approved instruments.
- Public Disclosures: Issuers must publish extensive information regarding reserve composition and redemption policies.
- Monthly Audits: Reserve holdings should be audited monthly by registered public accounting firms to maintain transparency and compliance.
4. Consumer Protection
- Reserve Segregation: Reserves should be segregated from the issuer’s other assets to safeguard token holders.
- Priority in Bankruptcy: In the case of bankruptcy, stablecoin holders have priority when reserve assets are distributed.
- Bank Secrecy Act Compliance: Issuers are required to satisfy anti–money laundering (AML) and counter–terrorist financing (CFT) obligations.
- Clear Redemption Policies: Issuers should ensure transparent redemption mechanisms to pay holders promptly.
5. Preemption and State Regulation
Approved stablecoin issuers enjoy state-level exemption from licensing because of federal preemption. State consumer protection legislation addressing marketing, fee disclosure, and redemption behavior continues to apply, underpinning a dual compliance framework.
What can be expected in the future with the GENIUS Act?
The GENIUS Act will bring about a revolutionary but unforeseen era in the US economy, and many opportunities and challenges will arise. Accounting firms’ clients interested in transforming successfully must remain updated on the regulations and comply with them.
If you are interested in more information on how to navigate accounting standards compliance and tax treatment resulting from the new regulations, our experienced professionals can be contacted for a free trial.
