GENIUS Act Signed Into Law, Ushering in First Federal Digital Assets Framework

On Friday, July 18, 2025, President Trump officially signed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act of 2025 into law. The stablecoin framework is the first tailored regulatory structure for digital assets in U.S. history and provides clear rules for stablecoin issuers. 

The GENIUS Act sets requirements for reserve backing, transparency, consumer protection, and compliance with anti-money laundering laws, while also creating pathways for federal and state stablecoin issuers. In addition, GENIUS mandates Treasury-led and marketwide studies, which will help inform sound policy going forward.

GENIUS is significant for DeFi because it recognizes decentralized blockchain networks as infrastructure in a dollar-backed global financial system, protects peer-to-peer transactions in stablecoins, and explicitly treats DeFi differently than centralized intermediaries, securing affirmative language for the future of DeFi infrastructure. 

DEF is proud of the role we have played advocating for DeFi during the legislative process. We ensured that key definitions were clear and appropriately tailored, and that the law did not encroach on self-custody or users’ ability to self-direct transactions on blockchain networks. DEF applauds the staff in both chambers on this bipartisan achievement and remains committed to supporting lawmakers and regulators as they continue to navigate the evolving digital asset landscape.

Dive into our latest blog below to learn how the newly enacted GENIUS Act tackles stablecoin regulation and oversight, and what it means for the evolving regulatory landscape ahead for DeFi in the United States.

The GENIUS Act Summary 

The GENIUS Act—bipartisan legislation led by Senator Bill Hagerty (R-TN) and co-sponsored by Senate Banking Committee (SBC) Chairman Tim Scott (R-SC), along with Senators Kirsten Gillibrand (D-NY), Cynthia Lummis (R-WY), and Angela Alsobrooks (D-MD)—establishes a regulatory framework for “payment stablecoins” in the United States.

After overcoming a series of Senate procedural milestones, the Senate officially passed the legislation with a resounding bipartisan supermajority of 68 Senators on Tuesday, June 17. The GENIUS Act then passed the House on July 17 with an overwhelming bipartisan supermajority vote of 308-122, and was signed into law by President Trump on July 18, 2025.

STABLECOINS UNDER THE GENIUS ACT

The GENIUS Act establishes regulatory guardrails and oversight for the issuance and trading of stablecoins in the U.S. Payment stablecoins, the specific assets regulated by GENIUS, are blockchain-based digital assets designed to offer price stability by being pegged to the dollar and by being backed by reserves of currency or short-term treasury instruments. Examples of payment stablecoins include Circle’s USD Coin (USDC), Tether (USDT), and Paxos (USGD). 

Under Section 2 of GENIUS, the term “payment stablecoin” means a digital asset that “is designed to be used as a means of payment or settlement” and whose issuer “is obligated to convert, redeem, or repurchase for a fixed amount of monetary value, not including a digital asset denominated in a fixed amount of monetary value;” and “represents [it] will maintain or creates the reasonable expectation that it will maintain a stable value relative to the value of a fixed amount of monetary value.” Monetary value is defined as a “national currency or deposit” that is “denominated in a national currency” (as defined under Section 3 of the Federal Deposit Insurance Act). This definition excludes decentralized stablecoins from regulatory obligations designed for centralized intermediaries, which is a positive outcome for the DeFi ecosystem. 

Inside the GENIUS Act: Key Provisions 

The GENIUS Act regulates payment stablecoin issuers and focuses on ensuring compliance through trusted financial intermediaries. The GENIUS Act marks the first time federal law explicitly recognizes the distinction between centralized intermediaries and decentralized systems. By treating blockchains and blockchain protocols as foundational infrastructure, it secures appropriate treatment for decentralized systems. This unprecedented legal distinction lays the groundwork for a regulatory future that respects decentralization.

For a more in-depth explainer of the bill's key provisions, please refer to the first blog on GENIUS from Team DEF linked here.

Definition of Digital Asset Service Provider (DASP)

“(7) DIGITAL ASSET SERVICE PROVIDER.—The term ‘‘digital asset service provider’’— 

(A) means a person that, for compensation or profit, engages in the business in the United States (including on behalf of customers or users in the United States) of—

(i) exchanging digital assets for monetary value;

(ii) exchanging digital assets for other digital assets; 

(iii) transferring digital assets to a third party;

(iv) acting as a digital asset custodian; or

(v) participating in financial services

relating to digital asset issuance; and

(B) does not include—

 (i) a distributed ledger protocol;

(ii) developing, operating, or engaging in the business of developing distributed ledger protocols or self-custodial software interfaces;

(iii) an immutable and self-custodial software interface;

(iv) developing, operating, or engaging in the business of validating transactions or operating a distributed ledger; or

(v) participating in a liquidity pool or other similar mechanism for the provisioning of liquidity for peer-to-peer transactions.”

While the GENIUS Act is limited to establishing a regulatory framework for centralized payment stablecoin issuance, some provisions of the bill regulate secondary trading of stablecoins on centralized venues. Particularly critical in GENIUS is the definition of “digital asset service provider” (DASP), which defines which intermediated venues are regulated by the bill. DASPs include centralized exchanges and trading venues, and are prohibited from facilitating the offer, sale, or secondary trading of payment stablecoins issued by foreign entities that have been designated as noncompliant by the Treasury Department. 

Importantly, the definition of DASP is limited to centralized actors who custody and control user assets. This includes those who engage in the business of exchanging, transferring, custodying, or issuing digital assets on behalf of customers or users in the U.S. The definition notably omits decentralized distributed ledger protocols and self-custodial software interfaces, safeguarding DeFi from regulations designed for centralized financial intermediaries. As DEF has emphasized, decentralized protocols and developers of such protocols should not be treated like centralized intermediaries. GENIUS recognizes secondary stablecoin transactions as peer-to-peer activity, and marks the first time this recognition is formally codified into U.S. federal law.

Sections 3 and 8 of the GENIUS Act prohibit DASPs from offering or selling payment stablecoins in the U.S. unless those stablecoins are issued by a permitted issuer. For foreign issuers, they must demonstrate technological capacity to comply with “lawful orders” (e.g., freeze, seize, or burn directives related to AML or sanctions compliance), or risk being designated noncompliant by the Treasury. Section 18 provides an exemption for foreign issuers overseen by a regulator with a comparable framework, while Section 9 mandates that legislative recommendations clarify how the DASP definition applies to DeFi.

Overall, the GENIUS definition of DASP is a victory for decentralization, specifically respecting the differences between DeFi and centralized intermediaries. As we move forward, it is imperative that we ensure that DeFi is protected as agencies issue rules mandated by GENIUS, discussed below.  

After the Signature: What GENIUS Means for DeFi Going Forward

The Act will take effect on the first of: 18 months after it is enacted or 120 days after the date the primary federal payment stablecoin regulators issue final regulations to implement the Act. 

GENIUS also provides a 3-year safe harbor, allowing DASPs to continue offering or selling payment stablecoins to U.S. persons even if those stablecoins are not yet classified as “permitted payment stablecoins.”

Importantly, the GENIUS Act provides for both rulemakings and studies carried out by the federal government that will shape the digital assets ecosystem in the coming months and years. DEF will closely follow these proceedings to ensure that DeFi is properly protected.

Below, we outline the future rulemakings and studies and their effective dates, detailing how they will impact digital assets and the government's oversight role.

Rulemakings

The GENIUS Act explicitly empowers regulators to issue rulemakings to implement its framework for payment stablecoins. Notably, the Treasury Department and FinCEN are required to issue accompanying reports and studies by January 14, 2026, and July 18, 2028, respectively. Most instances mandate the promulgation of regulations by July 18, 2026, a year after the GENIUS Act's enactment. Here's what happens now:

• Section 13 of the GENIUS Act directs each primary federal payment stablecoin regulator, the Secretary of the Treasury, and each State payment stablecoin regulator to, within a year from the date of enactment of the Act, promulgate regulations through appropriate notice and comment rulemaking to “carry out this Act.” Section 13 further states that federal payment stablecoin regulators, the Secretary of the Treasury, and State payment stablecoin regulators should coordinate, as appropriate.

• The Secretary of the Treasury is tasked with issuing regulations on safe harbor provisions (Section 3), issuer definitions (Section 3), anti-money laundering (AML) and sanctions compliance (Section 4), state regime equivalency (Section 4), and foreign issuer standards (Section 18). These regulations will also mandate the Secretary to define key terms, including DASPs (Section 3). 

• Primary federal payment stablecoin regulators must establish rules on capital and liquidity requirements (Section 4), issuer application processes (Section 5), interoperability (Section 12), and the treatment of regulated entities. (Section 16) Regulators are also authorized to address the commingling of funds and clarify the scope of permissible stablecoin activities (Section 10 and Section 4).

• Additional federal agencies, including the Federal Reserve, OCC, SCRC, and FinCEN, are empowered to issue rules on anti-tying practices (Section 4), non-financial issuer restrictions (Section 4), enforcement authority (Section 6), and AML innovation (Section 9). The AML innovation section includes legislative recommendations to clarify the scope of the term “digital asset service provider” and its application to decentralized finance (Section 9). State regulators are similarly authorized to issue rules aligned with federal standards for capital, liquidity, and issuer qualifications, ensuring a coordinated regulatory approach across jurisdictions. (Section 4).

Studies and Reports 

The GENIUS Act also mandates a comprehensive set of studies and reports to inform its regulatory framework, particularly on national security, AML, DeFi, non-payment stablecoins, and bankruptcy risks. The Act also directs the Federal banking agencies to submit to the Senate Banking Committee and House Financial Services Committee “a report that confirms and describes the regulations promulgated to carry out this Act” within 180 days after enactment of the Act (Section 13).

• The Secretary of the Treasury must report on national security coordination with stablecoin issuers, issue briefings on any waivers granted, and deliver a comprehensive report within 180 days on anti-money laundering innovation under Section 9 of GENIUS. Section 9 states that beginning 30 days after the GENIUS Act is enacted, the Secretary of the Treasury will open a 60-day public comment period to gather input on innovative methods financial institutions use or could use to detect illicit activity involving digital assets. After the comment period, the Treasury will conduct research on these methods. 

• Also under Section 9, FinCEN will evaluate each approach based on its effectiveness, cost, privacy risks, cybersecurity concerns, operational challenges, and ability to detect illicit finance. Within three years, FinCEN must issue public guidance and regulations based on this research. These rules will cover how financial institutions and stablecoin issuers should detect and report illicit activity, monitor blockchain transactions and privacy-enhancing tools like mixers and tumblers, and manage risks when interacting with decentralized finance (DeFi) protocols.

• Additionally, Section 9 mandates that within 180 days of enactment, the Treasury must submit a report to Congress. This report will include legislative and regulatory proposals, research findings, support efforts for financial institutions, analysis of privacy tools that may facilitate illicit activity, and recommendations on how to define and regulate DASPs, especially in relation to DeFi.

• The Secretary must also report to Congress within 7 days after issuing any waiver or license of the facts and circumstances justifying the waiver determination, and providing a briefing on the report (Section 8).

• The Secretary must analyze and report on non-payment stablecoins (Section 14), covering their risks, use cases, reserve structures, and governance within one year. The report on non-payment stablecoins is due to the scope of payment stablecoins being limited to only impacting centralized tokens relative to monetary value, such as centralized stablecoins backed by treasury instruments or the U.S. dollar. Federal regulators are required to report annually on issuer applications, stablecoin activity trends, and financial stability risks (Section 15). Regulators are also tasked with studying the implications of bankruptcy for stablecoin issuers and reporting the rulemaking within three years (Section 11).

DEF’s Perspective

The GENIUS Act offers strong protections for consumers and sets rules for centralized intermediaries and payment stablecoin issuers, while also fairly scoping out decentralized protocols, noncustodial software providers, and self-custodial web interfaces. Stablecoins are a critical component of DeFi and the future of peer-to-peer payments and transactions. 

As DEF Board Member Jake Chervinsky stated on X: “The GENIUS Act isn't directly about DeFi — it regulates centralized stablecoins with full reserves off-chain. But it is very good for DeFi — the more dollars and people there are onchain, the more need there will be for onchain finance of all kinds. Payments are just a gateway.”

We are also encouraged by the growing recognition of DeFi's unique nature on Capitol Hill. As reported by Blockworks, key GENIUS and Digital Asset Markets Clarity Act amendments reflect a serious shift in how policymakers distinguish between custodial and noncustodial actors — a signal that Congress is beginning to understand the difference between centralized financial services and permissionless protocols.

This is a win for DeFi. Through education and advocacy, DEF helped secure critical protections in GENIUS for DeFi technology, preventing rules meant for centralized intermediaries from being misapplied to decentralized, noncustodial technology. 

Moving forward, we will focus on additional proposed legislation related to digital asset market structure and on the agencies: Over the coming months, regulators will begin crafting rules to implement the GENIUS Act — and it’s essential that the DeFi community remains engaged to ensure that these rules reflect the realities of DeFi technology and protect innovation.