Authors
Partner, Corporate, Calgary
Associate, Disputes, Toronto
Summer Student, Calgary
On 17 June, the U.S. Senate took a historic step for the digital asset industry by approving the Guiding and Establishing National Innovation in U.S. Stablecoins (GENIUS) Act. Passed in a decisive 68-30 vote, the GENIUS Act marks the U.S.’s first comprehensive federal regulatory framework for stablecoins. Although the bill must still clear the House of Representatives and be signed into law by President Donald Trump, its passage signals a significant shift in the regulatory landscape for digital currencies in the United States.
The GENIUS Act is designed to bring clarity, legitimacy, and oversight to the stablecoin sector — a segment of the crypto market that has often been grouped with more volatile assets like bitcoin. By establishing clear standards for the issuance and management of stablecoins, the GENIUS Act aims to reduce regulatory uncertainty and encourage broader adoption of these digital payment tools by both banks and fintechs.
Key provisions of the GENIUS Act
The GENIUS Act establishes a robust regulatory regime for stablecoins issuers with the following core requirements:
- Licensing and oversight: Only entities that are expressly permitted — either as subsidiaries of insured depository institutions, federally qualified nonbank issuers, or state-qualified issuers — may issue payment stablecoins in the U.S. The GENIUS Act sets out detailed procedures for obtaining the necessary approvals, with federal and state regulators sharing supervisory responsibilities depending on the issuer’s structure and size.
- Reserve requirements: Issuers must maintain reserves backing all outstanding stablecoins on at least a 1:1 basis. Permitted reserve assets include U.S. coins and currency, demand deposits at insured institutions, short-term U.S. Treasury securities, and certain money market funds. The GENIUS Act strictly prohibits the pledging or reuse of these reserves, except in limited circumstances to meet redemption requests.
- Transparency and disclosure: Issuers are required to publicly disclose their redemption policies and establish procedures for the timely redemption of stablecoins. Each month, issuers must publish the composition of their reserves, including the total number of outstanding stablecoins and the breakdown of reserve assets, on their website, which must be certified by the issuer’s CEO and CFO and verified by a registered public accounting firm. Knowingly submitting false certifications carries criminal penalties.
- Ongoing supervision: The GENIUS Act empowers federal and state regulators to issue rules, conduct examinations, and enforce compliance. For issuers with a market capitalisation below $10 billion, the GENIUS Act provides that a state-level regulatory regime may apply, provided it is substantially similar to the federal framework. Once an issuer exceeds this threshold, it must transition to federal oversight.
- Customer protection: The GENIUS Act introduces robust customer protection measures, including requirements for the segregation of customer assets, restrictions on commingling, and procedures for safeguarding client funds in the event of insolvency. In bankruptcy proceedings, claims by stablecoin holders are given priority over other creditors.
- Scope of activities: Permitted stablecoin issuers are generally limited to issuing and redeeming stablecoins, managing related reserves, and providing custodial services. Any expansion into other activities requires explicit regulatory approval.
- Clarification of legal status: Notably, the GENIUS Act would amend existing U.S. securities laws to clarify that payment stablecoins issued in compliance with the Act are not considered securities or commodities, reducing legal ambiguity for issuers and users.
The Canadian position
While the U.S. moves towards a bespoke regulatory framework for stablecoins, Canada has taken a markedly different stance. The Canadian Securities Administrators (CSA) has maintained that stablecoins — or “value-referenced crypto assets” — may constitute securities and/or derivatives under Canadian law.
In October 2023, the CSA issued CSA Staff Notice 21-333 Crypto Asset Trading Platforms: Terms and Conditions for Trading Value-Referenced Crypto Assets with Clients, setting out guidance for crypto asset trading platforms and stablecoin issuers, requiring any new stablecoin issuer seeking to operate in Canada to file a prospectus and adhere to a disclosure-based regime, including detailed requirements for reserve backing, redemption rights, and ongoing public reporting.
Although the CSA has twice delayed the implementation of this regime in response to industry concerns that Canada’s approach may be out of step with global developments, the regime came into force last year and the deadline for compliance was December 31, 2024.
On December 3, 2024, Circle Internet Financial, LLC — issuer of the USDC stablecoin and one of the world’s largest US-dollar backed stablecoin by market capitalization — became the first to file an undertaking with the CSA. Notably, Circle prefaced its filing by stating that it does not consider USDC to be a security or derivative in the U.S., EU, or other jurisdictions, but rather a virtual currency, e-money, payment instrument, or commodity.
Looking ahead
The passage of the GENIUS Act in the U.S. Senate represents an important moment for the regulation of stablecoins, offering a clear path forward for issuers, financial institutions, and users. By contrast, the regulatory future for stablecoins remains in flux in Canada. As the U.S. framework moves into the House of Representatives for approval, it remains to be seen whether Canadian regulators will adjust their stance or continue to chart their own course. For market participants on both sides of the border, the coming months will be critical in shaping the next phase of stablecoin innovation and adoption.
