How ICBA has worked to shape the GENIUS Act and what’s next for community banks

Following President Donald Trump’s signing of a new law on stablecoins—the GENIUS Act—on July 18, it is essential that the nation’s community bankers understand what it means for our industry, how ICBA has helped shape stablecoin policy, and the path forward as we face the challenges and opportunities this new law presents.

About Payment Stablecoins and the GENIUS Act

Given the complexity of this debate, let’s start with the basics. Payment stablecoins are largely unregulated digital assets that are intended to be pegged to a fixed reference asset, such as a national currency, to maintain a stable value. Under the law, they are designed to be used as a means of payment or settlement and must be backed on a 1-1 basis with reserves such as treasuries, U.S. currency, and funds held as demand deposits at insured depository institutions, among others.

With the total amount of stablecoins in circulation exceeding $250 billion, policymakers have sought to establish a federal regulatory framework to ensure stablecoin issuers have the reserve assets they claim to possess and are subject to anti-money laundering compliance.

In an effort to mitigate the risks posed by stablecoins, lawmakers passed the GENIUS Act, which establishes a regulatory framework for this largely unregulated market. This new law—a top priority of the Trump administration and congressional leadership—provides for stablecoin issuance by a subsidiary of an insured depository institution, federal qualified nonbank issuers, and state nonbank qualified issuers. The law also specifies allowable issuer activities and bars issuers from paying interest to stablecoin holders, requires issuers to maintain reserves on at least one-to-one basis, and more.

The law takes effect the earlier of 18 months after enactment or 120 days after the date on which primary federal payment stablecoin regulators issue final regulations implementing the act. However, community bankers will likely not see the full effect of the law until the regulatory process is complete.

Why the Stablecoin Debate Matters to Community Banks

While bipartisan passage and signing of the GENIUS Act is generating much media attention, the debate over stablecoin policy is not new. ICBA has directly engaged with policymakers on developing a regulatory framework for stablecoins since the conversation began several years ago, with the process culminating under the new Trump administration and 119th Congress.

Throughout the debate over the GENIUS Act, ICBA worked closely with lawmakers to ensure the bill addressed key community bank concerns and included high-priority changes to previous versions. Our focus was on ensuring any bill providing regulatory clarity for the digital assets sector includes needed guardrails against community bank disintermediation.

ICBA’s work with lawmakers has resulted in positive changes to the GENIUS Act, including strengthening language restricting Federal Reserve master account access, expanding the bill’s prohibition on yield and interest-bearing stablecoins, limiting nonfinancial companies' ability to issue stablecoins, tightening permissible activities of issuers, and ensuring issuers cannot claim stablecoins are FDIC insured.

Meanwhile, Congress continues to debate the CLARITY Act (H.R. 3633), a separate “market structure” bill that would determine which crypto assets and intermediaries are regulated by the Commodity Futures Trading Commission or Securities and Exchange Commission. Following House passage of that bill, it now heads to the Senate.

Ongoing Advocacy as the Debate Continues

While ICBA appreciated the steps lawmakers took throughout the legislative process to address concerns we’ve raised, the debate is not over just because the GENIUS Act has been signed into law. ICBA will continue to be heavily engaged in stablecoin discussions because, as community bankers know well, the process of regulatory agencies implementing the policies laid out in legislation is just as important as the underlying legislation.

In addition to the policy debate and our ongoing efforts to ensure our industry continues to be heard, ICBA is working on educational resources for community banks on the digital assets ecosystem, including a summary of the law, while we study the potential opportunities the GENIUS Act and recent regulatory actions present for community banks in the digital assets space. As always, ICBA’s three pillars of advocacy, education, and innovation will guide us.

Make no mistake, ICBA has worked closely with policymakers throughout the stablecoin debate, and continuously through four different Congresses, and we will continue to be engaged on all fronts in the weeks, months, and years ahead. Through it all, we will continue standing up on behalf of community banks while we keep you up to speed on the latest developments on this fast-moving and deeply important topic.