Stablecoin rules late, statutory clock on time: the GENIUS Act’s awkward first year

The week

The GENIUS Act, the first comprehensive federal framework for payment stablecoins, was signed into law on July 18, 2025. Until then, stablecoins had grown in the United States for years without a dedicated federal rulebook. A stablecoin is a digital token designed to be worth exactly one dollar, every day, backed by real dollars or safe, dollar-like assets held in reserve. It lives on a blockchain, a shared digital ledger that many computers keep in sync, which lets the token move between parties at any hour without passing through a bank’s normal payment systems.

The law came with two clocks. The first gave the federal regulators one year to write the detailed implementing regulations, the rules that turn a statute’s broad commands into specific requirements. The second set when the law itself takes effect: on the earlier of January 18, 2027, or 120 days after the primary regulators issue final rules. That second clock acts as a backstop. Whether or not the rules are finished, the law arrives by January 18, 2027.

By the first anniversary on July 18, 2026, the first clock had run out without final rules. The regulators had published proposals, drafts put out for public comment, but nothing final. The FDIC had proposed application procedures for bank subsidiaries on December 16, 2025. The OCC, which supervises national banks, proposed its rule for issuers under its supervision on February 25, 2026, with comments closing May 1. In April, the Treasury Department’s FinCEN and OFAC, the arms responsible for anti-money laundering and sanctions, proposed rules for issuers in their areas, and the FDIC issued a prudential proposal, covering safety-and-soundness requirements, the same week.

So in the week of July 20, banks and credit unions were in an awkward spot. The statutory date was six months away. The final rule text was not. Boards were asking what their institution should do about stablecoins, and management teams had to answer without knowing exactly what the rules would say. This piece is about how to make that decision anyway, and why waiting was not really an option.

Much of the banking conversation about stablecoins has been framed as a single question: should we issue one? For most institutions that is the wrong question. The law creates or implies several distinct roles, and each carries different obligations, technology and risk. The missed rulemaking deadline made the choice harder, because the detail for each role was still sitting in proposals. It did not make the choice optional, because the statute’s backstop date was fixed and customers were already bringing stablecoin activity to their banks.

A missed rulemaking deadline is less unusual than it sounds. Writing detailed rules for a new kind of financial product takes time, involves several agencies, and requires reading and weighing public comments. What makes this case awkward is the backstop. Many laws simply wait for their rules. This one does not: if the rules are late, the statute takes effect on its fixed date anyway, and institutions must be ready for whatever the final text turns out to say.

The decision separates into three roles that do not overlap, issuer, reserve custodian and payments partner, and one constraint that applies to all three, which is funding. First, what a stablecoin actually is and how it moves. How the final rules will treat a particular bank’s charter and activities is a question for its lawyers.

What a payment stablecoin is, and how it works

Start with something familiar: a casino chip. You hand over dollars, you receive chips, and as long as the casino is sound you can hand the chips back and get your dollars. The chip is useful inside the casino because it moves quickly from hand to hand. A payment stablecoin works on a similar promise. An issuer takes in dollars, creates (or “mints”) tokens worth one dollar each, and promises to redeem them for dollars on demand. The dollars it took in are held as reserves.

The difference is where the chips circulate. Stablecoins live on a blockchain, a shared ledger maintained by many computers, where each token sits at a wallet address, a long string of characters that works like an account number. Moving a stablecoin means updating that ledger, which can happen in minutes, at any hour, across borders, without going through the traditional bank payment systems. That speed and reach are the attraction for businesses that pay suppliers abroad or settle trades around the clock.

The risk has always been the promise. If the reserves are not really there, or are invested in assets that cannot be sold quickly, holders may not get a dollar back when they ask. The GENIUS Act is largely an answer to that risk. It sets out who may issue, what reserves must look like, how they must be reported, and what anti-money laundering and sanctions duties apply. Two more terms will recur. To freeze a coin is to block it from moving; to burn it is to destroy it, removing it from circulation. Both matter when a court or law enforcement agency lawfully orders an issuer to act.

Role one: issuer

The law allows three kinds of issuer. Subsidiaries of insured depository institutions, meaning banks and similar institutions whose deposits carry federal insurance, may issue with approval from their primary federal regulator. Federally qualified nonbank issuers are supervised by the OCC. Below a size threshold, state-qualified issuers may operate under a state regime that meets federal standards.

Whatever the route, the core obligations are the same. Issuers must back outstanding coins at least one to one with a defined list of high-quality liquid assets, meaning safe assets that can be turned into cash quickly. They must publish monthly reserve reports examined by a registered public accounting firm, redeem at par (a dollar for a dollar, no haircut), and meet anti-money laundering and sanctions obligations. They may not pay interest or yield to holders. That last point matters: a stablecoin is meant to be a way to pay, not a savings product.

For a bank, issuance is a new line of business with its own capital, liquidity, operational and technology requirements. Those include the technical ability to freeze or burn coins when lawfully ordered, which means building and controlling software on a blockchain, something few banks do today. Issuance makes sense for institutions with a specific use case, such as settlement among their own corporate clients, and the scale to run a new regulated activity.

The pending rules matter most here, since capital floors, reserve composition and redemption timing will shape the economics. A bank can still do the work that does not depend on them: define the use case, size the market, and decide whether to build alone or join a shared arrangement with other institutions. The shared route spreads cost but raises its own governance questions, such as who controls the reserves, who decides on freezes, and what happens if one member wants out.

Role two: reserve custodian

Every issuer needs institutions to hold its reserves and, often, custodians for the reserve assets and for the coins themselves. A custodian is an institution that safekeeps assets on behalf of someone else, the way a bank holds securities for a pension fund. Banks are natural candidates. This role sits closer to existing business: deposits, treasury management and custody. It still needs new capabilities. The bank must understand the reserve requirements its issuer client must meet, support the client’s monthly disclosures, and handle large, fast redemptions.

Concentration is the main risk. Reserves for a large issuer can be substantial relative to a mid-sized bank’s balance sheet, and they can leave quickly when the issuer’s own customers redeem in a stress event. Consider a regional bank that wins the reserve deposits of a growing issuer. In ordinary months, the balance is steady and welcome. Then rumors spread about the issuer, holders rush to redeem, and the issuer must pull its reserves from the bank within days to pay them. A bank holding reserve deposits needs liquidity planning that assumes that behavior, not the behavior of ordinary operating deposits that drift slowly.

Custody of the digital assets themselves adds harder questions. Holding a token means controlling the cryptographic keys, the secret codes that authorize moving it, and keeping them safe from theft and loss. It also means keeping each client’s assets separate and clear about who owns what if something goes wrong. Existing custody operations may not cover any of that. Banks considering this role should test whether their technology and operations can support it, or whether a partner is needed.

Role three: payments partner

The broadest role is the one many banks will meet through customers before they choose it. Banks may accept stablecoin payments for business customers, convert to and from dollars, or provide accounts and services to issuers and platforms. The law also limits, after a transition period, which stablecoins digital asset service providers may offer to US persons, which affects platform partners.

This role is mostly integration and compliance work, and it has its own vocabulary. It includes screening wallet addresses against sanctions lists, much as banks screen names today. It includes monitoring on-chain activity, meaning watching what happens on the blockchain itself, where a token’s history can be traced. It includes handling travel rule information, the requirement that identifying details about the sender and recipient accompany certain transfers. It includes reconciling blockchain records with the bank’s ledger, so the two always agree. And it includes due diligence on clients whose business involves stablecoins.

Little of it depends on the final text of the issuer rules. A bank can build it now and reuse it in any of the three roles. The practical starting point is an inventory of where stablecoin flows already touch the bank, such as business clients receiving them through payment processors or exchanges, so that monitoring is aimed at real activity rather than hypothetical activity. A commercial bank might discover, for instance, that several import-export clients already convert stablecoin receipts into dollars through a third party and deposit the proceeds, which is activity the bank should understand whether or not it ever touches a token.

The constraint across all three: funding

Whatever role a bank chooses, payment stablecoins compete with deposits for the same balances. Deposits are a bank’s cheapest and most stable source of money to lend. Reserves held at other institutions or in Treasury bills are money that is not on deposit at the bank. Every dollar a business customer moves into a stablecoin is, at least for a while, a dollar the bank cannot lend.

The ban on issuers paying yield limits direct competition with interest-bearing accounts. Whether affiliates or platforms may offer rewards on stablecoin balances has remained contested, and bank trade groups have pressed Congress and regulators on it. If rewards are allowed through that side door, stablecoins look more like a competing place to park money. The size of the funding effect depends on adoption, which no one can forecast with confidence.

Treasury and asset-liability teams, the people who manage a bank’s balance between what it owes and what it owns, can still model scenarios. They can estimate which deposit segments, such as operating balances of payment-heavy business clients, are most likely to move, and what replacing that funding would cost. That analysis belongs next to any business case for the three roles, because a role that earns fees while draining low-cost deposits may not pay.

Three banks, three different answers

The same law produces different decisions. Consider three hypothetical institutions, each looking at the GENIUS Act in the summer of 2026.

A large commercial bank has thousands of corporate clients who pay one another every day, many of them across borders. Its treasury services team believes a bank-issued stablecoin could let those clients settle with one another around the clock, without waiting for traditional payment systems to open. It has the scale to run a new regulated activity and the engineers to build on a blockchain. For this bank, the issuer role is worth serious study. It cannot finalize the economics until the capital and reserve rules are settled, but it can define the use case, talk to clients about demand, and decide whether to go alone or join other banks in a shared arrangement.

A mid-sized regional bank has a strong treasury management business and a custody operation for institutional clients. It has no appetite to issue a coin. But it has been approached by an issuer looking for a home for its reserves. The fee income is attractive. The question is concentration: the bank must decide how large a single issuer’s deposits could become relative to its balance sheet, and whether its liquidity plan could absorb those deposits leaving within days. It also has to decide whether to hold the digital tokens themselves, which would mean building key management it does not have today, or limit itself to holding cash and Treasury bills on the issuer’s behalf.

A community bank has no plans to issue or hold reserves. Yet when its compliance team runs an inventory, it finds that a handful of business customers already receive stablecoin payments through processors and convert them to dollars before depositing. For this bank, the payments partner role is already a fact rather than a choice. Its priority is to understand that activity, screen it properly and decide what services, if any, it wants to offer.

All three banks share two things. Each needs some of the same compliance and reconciliation capabilities. And each needs to know what stablecoins could do to its deposits, because that cost shows up whichever path it takes.

Four board responsibilities that stablecoins touch

Stablecoins can look like a niche topic for a crypto team. For a bank, they touch several things a board is responsible for. They touch funding, because balances that move into stablecoins are balances that leave deposits. They touch compliance, because sanctions and anti-money laundering obligations apply to activity the bank may already be facilitating without fully seeing it. They touch strategy, because competitors and non-bank firms may use the new framework to offer payment services that once required a bank. And they touch reputation, because a bank that holds an issuer’s reserves will be associated with that issuer if something goes wrong.

A board does not need to understand blockchains in technical depth to govern this well. It needs a clear statement of which role the institution has chosen and why, a view of the funding exposure, and confidence that the compliance work is under way regardless of how the rule text lands.

A decision the board can revisit

A good stablecoin decision at this stage has a few marks. It names the role, or roles, the institution intends to take, and that includes a deliberate decision to take none for now. It explains the reasons in writing, so the board can revisit them when final rules land. It separates work that depends on final rules from work that does not, and starts the second category immediately. And it puts the funding analysis beside the revenue case.

The ways it goes wrong are mirror images. One is treating “should we issue?” as the whole decision, and concluding that because the answer is no, there is nothing to do. A second is waiting for final rules before building anything, which leaves no time to build before the statutory date. A third is pursuing a role for its fee income without modeling the deposits it could draw away. A fourth is underestimating the operational novelty, such as key management, on-chain monitoring and reconciliation, because the activity looks like ordinary deposits or ordinary payments from a distance.

What the plan has to settle before January

1. Which of the three roles, issuer, reserve custodian or payments partner, are we considering, and have we written down why, including a decision to stay out for now?
2. Where does stablecoin activity already touch our customers and our accounts today, even indirectly?
3. If we held an issuer’s reserves, how fast could those balances leave, and does our liquidity plan assume it?
4. Which of our deposits are most likely to move into stablecoins, and what would it cost to replace that funding?
5. What parts of our plan depend on the final rule text, and what can we build now?

With hindsight

The implementing rules stayed largely at the proposal stage. The Federal Reserve published its own proposal only on September 29, with comments due November 30. On August 19, Comptroller of the Currency Jonathan Gould said the OCC would have its final rule out by November. Treasury published a further proposal on stablecoin issuance, offer and sale on August 18, with comments due October 19.

Put those dates side by side and the picture is plain. Even on the most hopeful reading, institutions will have only a short window between final rules and the January 18, 2027 statutory date. That makes the work that does not depend on final text more valuable, not less. Screening wallet addresses, monitoring on-chain activity, reconciling blockchain records with the bank’s ledger and mapping where stablecoin flows already reach customers can all proceed without waiting.

The debate over rewards on stablecoin balances has continued alongside broader digital asset legislation. For banks, that remains the question with the largest bearing on deposits, and therefore on funding costs. Asset-liability teams that have already modeled which deposit segments could move are in a better position to respond, whichever way it is settled.

What followed is a case study in deciding under uncertainty. Regulators running late does not stop a statute from taking effect, and customers do not wait for rulebooks. A decision on role, even a decision to stay a payments partner for now, lets an institution start on screening and reconciliation while the text settles. An institution that has decided nothing will find itself making several decisions at once, in a hurry, in the weeks before the date arrives.

The practical step for a board is to ask for a short, dated update each time a final rule is published, showing what changed in the institution’s plan as a result. Organizations should rely on final rules and agency guidance when published, rather than proposals, and confirm dates with counsel.