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06 Jun, 2025

What You Need To Know About Incoming Stablecoin Legislation

The adoption by the U.S. Congress of stablecoin legislation is likely to become a reality in the coming weeks following action by the Trump administration to establish U.S. leadership in digital assets as a priority. The U.S. House of Representatives and the U.S. Senate continue to advance federal stablecoin legislation in two similar bills: the STABLE Act (or the Stablecoin Transparency and Accountability for a Better Ledger Economy Act of 2025, in the House) and the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025, in the Senate). These bills, which emerged on the basis of bipartisan support for federal regulation of the issuance of stablecoins, would serve to establish a novel federal regulatory framework for this particular form of digital asset. Although the two bills aim to achieve similar objectives, they differ in certain key details.This Advisory (1) summarizes what the bills would do if adopted as proposed; (2) highlights differences between the two bills; (3) discusses important outstanding legislative and policy considerations; (4) places the bills in perspective by explaining the political dynamics that gave rise to this legislative initiative and continue to shape the path to enactment; and (5) discusses the opportunities that a federal stablecoin law might provide for banking and other financial institutions.This Advisory is part of a series by Arnold & Porter covering the evolution of the digital asset landscape in the U.S. It is the second in a pair of Advisories covering stablecoins. The first Advisory provided an Introduction to Stablecoins, explaining use cases, current approaches and structures, and associated risks.How are stablecoins currently regulated?With no comprehensive federal regulatory framework, issuers and intermediaries of stablecoins are not currently subject to uniform regulatory requirements. Instead, they are regulated under state laws and regulations — principally state money transmitter laws that vary by jurisdiction and generally apply to various forms of payment services providers. Some states, including New York, California, and Arkansas, regulate one or more aspects of stablecoin issuance and custody under state-level digital asset regulatory frameworks. Meanwhile, the status of payment stablecoins under federal securities laws has been a moving target over the past few years and the federal bank regulators have only recently begun to liberalize their standards for approving activities involving stablecoins and other digital assets.What do the STABLE and GENIUS Acts cover?Broadly, the STABLE and GENIUS Acts create a regime for the issuance and regulation of payment stablecoins. They would allow payment stablecoins to be issued by subsidiaries of insured depository institutions, other entities approved by the Office of the Comptroller of the Currency (OCC), and entities authorized to issue stablecoins under qualifying state regimes (“permitted payment stablecoin issuers”). The acts would set forth standards for reserving practices, supervision and enforcement, Bank Secrecy Act (BSA)/Anti-money Laundering (AML), and insolvency, while striking a balance between federal and state authorities over stablecoins. By bringing regulatory clarity to the asset class, the legislation is expected to stimulate the growth of the industry.How do the two bills define payment stablecoin?The Senate’s GENIUS Act defines a payment stablecoin as follows:The term payment stablecoin means(A) A digital asset —(i) That is or is designed to be used as a means of payment or settlement; and (ii) the issuer of which —(I) Is obligated to convert, redeem, or repurchase for a fixed amount of monetary value(II) 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(B) That is not —(i) A national currency(ii) A security issued by an investment company registered under section 8(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-8(a))The definition of payment stablecoin in the House’s STABLE Act is similar to the Senate’s definition but differs in certain respects. The House’s bill clarifies that a payment stablecoin must be denominated in a national currency; does not include a “deposit” as defined in the Federal Deposit Insurance Act or an “account” as defined in the Federal Credit Union Act; and could not be a security issued by a person that would be an investment company under the Investment Company Act of 1940 but for paragraphs (1) and (7) of section 3(c) of that Act. Finally, the House bill would further limit instances where stablecoins could operate as securities issued by investment companies.Both bills clarify that tokenized deposits are not covered by the legislation, leaving space for banks to continue issuing that kind of digital asset without being subject to the regulatory requirements of these acts (most notably, the STABLE Act’s prohibition on paying interest to individuals holding stablecoins, discussed in further detail below).What are the reserve requirements for stablecoins?The bills have similar, but not identical, requirements for stablecoin reserves. Under both bills, a “permitted payment stablecoin issuer” would be required to maintain reserves backing all outstanding payment stablecoins on at least a one-to-one basis. Under both bills, such reserves must be held in safe assets, such as U.S. currency; bank deposits; deposits held at a Federal Reserve bank; Treasury securities with a maturity of 93 days or less; certain repurchase agreements backed by Treasuries; or money market funds that are invested in safe assets such as Treasuries or repos on Treasuries.Also under both bills, stablecoin issuers would be required to publish monthly reports on their websites disclosing the total number of outstanding payment stablecoins issued by the issuer, and the amount and composition of the reserves underlying the issued stablecoins. In addition, in the subsequent month, these reports would be required to be examined by an independent public accounting firm, and the issuer’s CEO and CFO would be required to attest to their accuracy in submissions to their relevant federal or state regulator.Notably, both bills are silent on whether stablecoin issuers would be permitted to access Federal Reserve master accounts. This silence is likely to leave these judgments to the discretion of the Federal Reserve, a subject that has been a matter of some controversy over the past several years.Who may issue a stablecoin?Stablecoin issuance would be restricted to (1) subsidiaries of insured depository institutions approved under applicable federal or state regulatory regimes to issue stablecoins, (2) nonbank entities approved by the OCC, or (3) issuers approved by a state regulatory agency (more details below). Permitted payment stablecoin issuers would have their businesses restricted solely to the issuance, redemption, management, and safekeeping of stablecoins, along with other functions that directly support the work of issuing and redeeming stablecoins or are otherwise permitted by the primary federal payment stablecoin regulator. The ability of nonbanks to issue stablecoins is notable; payment stablecoins bear a lot of similarities to banking products, and there is a historically strong barrier in U.S. law between banking and commerce.What federal agencies would regulate payment stablecoin issuers?In general, stablecoin issuers that are subsidiaries of depository institutions would be regulated by the respective federal prudential regulators of the parent depository institution. Accordingly, for national banks, the primary federal regulator would be the OCC; for insured state-chartered banks that are members of the Federal Reserve system, the primary federal regulator would be the Federal Reserve; and for insured state-chartered banks that are not members of the Federal Reserve system, the primary federal regulator would be the Federal Deposit Insurance Corporation (FDIC). Subsidiaries of credit unions would be regulated by the National Credit Union Administration (NCUA).In addition, nonbank entities would be able to apply to the OCC for permission to issue stablecoins as a “federal qualified nonbank payment stablecoin issuer” and, for these entities, the OCC would be the primary federal regulator.Federal stablecoin regulators would be required to promulgate a regulatory regime governing stablecoin issuance, including capital, liquidity risk, interest rate, operational risk, and other risk management standards tailored to the business of issuing stablecoins. Under the STABLE Act, these standards would apply to all permitted payment stablecoin issuers, and the federal authorities are required to consult with state authorities in developing the standards; under the GENIUS Act, the federal standards apply to federally permissioned issuers, while state standards apply to state-permissioned issuers.Toward a unified regulatory future for stablecoinsAs Congress edges closer to passing historic federal stablecoin legislation, the STABLE and GENIUS Acts represent a significant step toward establishing a unified regulatory regime for payment stablecoins in the U.S. While key differences remain between the two bills, both aim to balance innovation and oversight by clarifying the roles of federal and state regulators, setting reserve and transparency requirements, and defining who can issue stablecoins. If enacted, this legislation could catalyze the growth of the digital asset ecosystem by enhancing legal certainty, bolstering consumer confidence, and providing traditional financial institutions with a clearer path to engage with stablecoin technologies.