What does Preamble of GENIUS Act do?

This Act is formally titled Public Law 119-27, also known as the Guiding and Establishing National Innovation for U.S. Stablecoins Act. The Act aims to provide for the regulation of payment stablecoins. The Act includes provisions for other purposes, though these are not specified in this section.

What does > DEFINITIONS. of GENIUS Act do?

This section defines terms used throughout the Act. “Appropriate federal banking agency” has the meaning given in section 3 of the Federal Deposit Insurance Act. “Bank Secrecy Act” includes specific sections of the Federal Deposit Insurance Act, Public Law 91-508, and Title 31 of the United States Code. “Digital asset” is defined as any digital representation of value recorded on a cryptographically secured distributed ledger. “Digital asset service provider” includes entities engaging in activities like exchanging digital assets, transferring them, or acting as custodians, but excludes certain protocol developers and liquidity providers. “Distributed ledger” refers to technology where data is shared across a network and secured using cryptography. “Federal qualified payment stablecoin issuer” is defined based on approval by the Comptroller and may be a nonbank entity, an uninsured national bank, or a Federal branch. “Lawful order” is a final order issued under Federal law requiring actions related to payment stablecoins. “National currency” includes Federal Reserve notes, money in Federal Reserve Bank accounts, and money issued by foreign central banks.

What does > ISSUANCE AND TREATMENT OF PAYMENT of GENIUS Act do?

This section establishes limitations and prohibitions regarding the issuance and offering of payment stablecoins in the United States. It is unlawful for any person other than a 'permitted payment stablecoin issuer' to issue a payment stablecoin in the United States. Digital asset service providers are prohibited from offering or selling payment stablecoins unless issued by a permitted issuer, starting three years after the Act's enactment. Foreign payment stablecoin issuers must have the technological capability and willingness to comply with U.S. regulations to offer stablecoins in the U.S. The Secretary of the Treasury can issue regulations providing safe harbors from the issuance restrictions, limited in scope and applying to a de minimis volume of transactions. The Secretary of the Treasury may provide limited safe harbors in unusual and exigent circumstances, requiring justification submitted to congressional committees. Payment stablecoins not issued by permitted issuers will not be treated as cash or cash equivalents for accounting, margin, or settlement purposes. Certain transactions are exempt, including direct transfers between individuals and transactions involving personal custody of digital assets. The Act intends to have extraterritorial effect if conduct involves offering or selling payment stablecoins to a person located in the United States.

What does > REQUIREMENTS FOR ISSUING PAYMENT of GENIUS Act do?

This section establishes requirements for issuing payment stablecoins. Permitted payment stablecoin issuers must maintain identifiable reserves backing outstanding stablecoins on at least a 1 to 1 basis. Acceptable reserves include U.S. coins and currency, funds held in insured depository institutions, Treasury bills/notes/bonds with maturities of 93 days or less, and other approved assets. Issuers must publicly disclose their redemption policy, including clear procedures and fees, with limitations on discretionary redemptions. Issuers are required to publish the monthly composition of their reserves on their website. Reserves generally cannot be rehypothecated, except for specific purposes like satisfying margin obligations or creating liquidity for redemptions. A registered public accounting firm must examine monthly reports, and issuers must submit certifications of accuracy. Individuals convicted of certain felonies are prohibited from serving as officers or directors of payment stablecoin issuers. Federal savings associations holding qualifying reserves are exempt from certain requirements under the Home Owners’ Loan Act.

What does > APPROVAL OF SUBSIDIARIES OF of GENIUS Act do?

This section establishes a process for the approval of applications from insured depository institutions seeking to issue payment stablecoins through a subsidiary, and from nonbank entities seeking to issue payment stablecoins as Federal qualified payment stablecoin issuers. Primary Federal payment stablecoin regulators are required to receive, review, and consider these applications and establish a framework for licensing, regulation, examination, and supervision. Applications will be evaluated based on factors including the applicant's financial condition, the presence of individuals with felony convictions, the competence of officers and directors, and the redemption policy. Regulators must render a decision on substantially complete applications within 120 days, and denials must be accompanied by a written explanation and recommendations. Issuance of a payment stablecoin on an open, public, or decentralized network is not a valid ground for denial. Permitted payment stablecoin issuers must annually certify their implementation of anti-money laundering and economic sanctions compliance programs. The provisions of this section supersede and preempt State requirements for charter, license, or other authorization for approved Federal qualified payment stablecoin issuers.

What does > SUPERVISION AND ENFORCEMENT WITH of GENIUS Act do?

This section outlines the supervision and enforcement of federal qualified payment stablecoin issuers and subsidiaries of insured depository institutions. Permitted payment stablecoin issuers with a consolidated total outstanding issuance of less than $10,000,000,000 are subject to supervision by the appropriate primary Federal payment stablecoin regulator. Issuers are required to submit reports on their financial condition, risk monitoring systems, and compliance with this Act and the Bank Secrecy Act upon request. The regulator will examine issuers to assess their operations, financial condition, and risks to the issuer and the financial system. Supervision and examination activities should utilize existing reports and avoid duplication to the fullest extent possible. The regulator can prohibit an issuer from issuing payment stablecoins if they willfully or recklessly violate this Act. The regulator may initiate cease-and-desist proceedings for violations of this Act. The regulator has the authority to remove institution-affiliated parties and impose civil money penalties for violations, with penalties potentially reaching $100,000 per day. This section does not apply to State qualified payment stablecoin issuers.

What does > STATE QUALIFIED PAYMENT STABLECOIN of GENIUS Act do?

This section establishes supervisory, examination, and enforcement authority for State payment stablecoin regulators over issuers within their State. State regulators may enter into agreements with the Board to allow the Board to participate in supervision and enforcement. State regulators and the Board are required to share information regarding State qualified payment stablecoin issuers. State regulators can issue orders and rules applicable to State qualified payment stablecoin issuers, similar to how Federal regulators handle non-State issuers. Under unusual and exigent circumstances, the Board or Comptroller may take enforcement actions and impose restrictions, including limitations on redemptions, after providing 48 hours' notice. The Board or Comptroller must establish rules defining the circumstances that warrant such actions. Affected parties can object to directives issued by the Board or Comptroller and request administrative review. If the Board or Comptroller does not respond within 10 days, the directive automatically lapses. The laws of a host State generally apply to out-of-state issuers to the same extent as they apply to federal issuers. If a host State law doesn't apply, the laws of the issuer's home state govern. This section does not preempt State consumer protection laws.

What does > ANTI-MONEY LAUNDERING PROTECTIONS. of GENIUS Act do?

This section establishes anti-money laundering protections for payment stablecoins issued by foreign issuers. A foreign payment stablecoin issuer may not publicly offer, sell, or trade its stablecoin in the United States unless it can comply with lawful orders. The Secretary of the Treasury has the authority to designate noncompliant foreign issuers and notify them in writing within 30 days. A determination of noncompliance is subject to judicial review. If an issuer doesn't comply within 30 days, the Secretary must publish the determination and prohibit digital asset service providers from facilitating secondary trading. This prohibition expires when the Secretary determines the issuer is no longer noncompliant, based on criteria specified through rulemaking. The Secretary may impose civil monetary penalties on digital asset service providers and foreign issuers for violations. The Secretary of the Treasury may offer waivers or licenses under certain circumstances, including when prohibiting secondary trading would adversely affect the U.S. financial system or the issuer is taking steps to remedy noncompliance. Waivers for national security or intelligence/law enforcement activities are also possible. The Secretary must report any waivers or licenses to Congress.

What does > ANTI-MONEY LAUNDERING INNOVATION. of GENIUS Act do?

This section directs the Secretary of the Treasury to solicit public comment on innovative methods regulated financial institutions use to detect illicit activity involving digital assets. Following the public comment period, the Secretary of the Treasury must conduct research on identified methods and the Financial Crimes Enforcement Network (FinCEN) will evaluate them against existing strategies. The research will consider factors such as improvements in detection, costs, privacy risks, operational challenges, cybersecurity risks, and effectiveness in mitigating illicit finance. The Secretary of the Treasury must also consider the source of illicit activity, gaps in existing methods, and the impact of regulatory frameworks. Within three years of enactment, FinCEN must issue guidance and rulemaking related to the implementation of innovative methods, standards for payment stablecoin issuers, and tailored risk management standards for decentralized finance. The Secretary of the Treasury is required to submit a report to Congress within 180 days of enactment, outlining legislative and regulatory proposals, research results, and recommendations regarding digital asset service providers. The section clarifies that existing authorities of the Secretary of the Treasury and regulators are not limited by this section.

What does > CUSTODY OF PAYMENT STABLECOIN of GENIUS Act do?

This section outlines requirements for individuals providing custodial or safekeeping services for payment stablecoin reserves, payment stablecoins used as collateral, or private keys. These individuals must be subject to supervision or regulation by a primary Federal payment stablecoin regulator or a State bank/credit union supervisor. The section mandates that custodians treat customer property as belonging to the customer and protect it from the custodian's creditors. Payment stablecoin reserves and customer assets must be separately accounted for and not commingled with the custodian's assets, with specific exceptions allowed for convenience and regulatory purposes. Customer claims against a custodian for payment stablecoins have priority over other claims, unless the customer consents otherwise. Custodians must submit information to the primary Federal payment stablecoin regulator regarding their business operations and processes to protect customer assets. This section does not apply to those solely providing hardware or software facilitating a customer's own custody of their assets.