On 28 October 2025, K2 Integrity, Circle, and Anchorage Digital sponsored a webinar with experts Caroline Hill, senior director of global policy and regulatory strategy at Circle; Kevin Wysocki, head of policy for Anchorage Digital; Lesley Chavkin, global head of public policy for Ribbit Capital; and moderator Elizabeth Severinovskaya, managing director and head of K2 Integrity’s Crypto and Digital Assets Solutions practice. The panel discussed the implications of the GENIUS Act, including its impact on issuers’ regulatory strategies, financial crimes compliance (FCC) related controls, international coordination, and future opportunities for stablecoin adoption. The dialogue revealed a strong consensus: regulatory clarity is unlocking a new era of financial innovation—one grounded in trust, financial inclusion, and greater interoperability and reciprocity.
The GENIUS Act: Establishing a Federal Framework
The passage of the GENIUS Act (the Act) marks a defining moment in the evolution of the U.S. digital asset landscape. By establishing the first federal framework for stablecoins, the Act provides long-awaited regulatory clarity that integrates digital assets into the mainstream financial system. It lays out consistent expectations for compliance, consumer protection, and innovation, setting the stage for the next phase of growth in the digital economy.
Previously, most issuers were licensed on the state level, resulting in regulatory fragmentation. The Act creates a dual-path regulatory structure for stablecoin issuers, allowing oversight at both the federal and state levels. This bifurcated approach gives issuers flexibility based on their size and market presence while ensuring uniform standards for safety and soundness. For many institutions, this has catalyzed engagement with stablecoin markets and spurred partnerships between traditional financial entities and digital asset innovators.
Under the Act, stablecoin issuers can either:
- Obtain authorization as Permitted Payment Stablecoin Issuers (PPSIs) under the Office of the Comptroller of the Currency (OCC) (for those issuers that exceed a $10 billion market cap), or
- Operate under state-level licensing (for smaller issuers below the $10 billion market cap).
The Act’s emphasis on full reserve backing—primarily in short-term U.S. Treasuries—reinforces both consumer protection and the role of stablecoins as a secure, payment-oriented financial instrument.
International Interoperability and Global Standards
Beyond the United States, the European Union’s Markets in Crypto Assets (MiCA) regulation has set a parallel precedent for stablecoin oversight. While MiCA requires issuers to have an EU presence, the GENIUS Act introduces the concept of foreign reciprocity, allowing the U.S. Treasury to recognize equivalent foreign regulatory regimes. This mechanism promotes global interoperability and encourages other jurisdictions to strengthen their anti-money laundering and counter-terrorist financing (AML/CFT) regimes to gain access to the U.S. market.
Such reciprocity avoids regulatory fragmentation and establishes shared benchmarks for safety and compliance. However, it also introduces a new layer of complexity, as countries with weaker AML/CFT controls may need technical assistance to align with U.S. standards. Over time, this approach could elevate global financial transparency and reinforce the international role of the U.S. dollar—and help the United States maintain U.S. dollar dominance.
The Compliance Imperative
One of the most significant advancements under the GENIUS Act is the clarification of FCC obligations for stablecoin issuers. Domestic issuers are explicitly subject to the Bank Secrecy Act (BSA), including its requirements around customer due diligence, transaction monitoring, and suspicious activity reporting.
The Act also codifies issuer responsibilities in the enforcement of lawful orders, such as freezing, seizing, or remotely “burning” assets in compliance with sanctions or law enforcement directives. This introduces novel compliance capabilities that exceed those in traditional finance—enabling real-time asset control directly on blockchain networks.
The rulemaking process is expected to clarify how far these obligations extend, particularly regarding secondary market transactions, where stablecoins change hands beyond the direct relationship between issuer and customer. Extending BSA obligations too deeply into secondary markets could risk operational complexity and innovation barriers, so regulators will need to balance effectiveness with feasibility.
Remaining Gaps and Rulemaking Priorities
While the Genius Act establishes a strong foundation, several questions remain open for rulemaking:
- Secondary Market Oversight: Determining how issuers and intermediaries should manage compliance obligations beyond direct customer relationships.
- Scope of Reciprocity: Defining what qualifies as a “comparable jurisdiction” under Treasury’s foreign reciprocity provisions.
- Technical Infrastructure: Developing rapid, coordinated mechanisms for reporting and responding to suspicious blockchain activity across agencies.
- Safe Harbors: Considering protections for institutions that take proactive measures to freeze or report illicit transactions.
A particularly debated feature of the Act is its prohibition on stablecoin issuers paying interest or yield on tokens to holders. The rationale is to ensure that stablecoins remain focused on transactional use rather than functioning as deposit substitutes. This restriction has raised questions about competitive balance, as some exchanges and platforms can still offer reward or cashback programs linked to stablecoin holdings.
The upcoming comment period and subsequent rulemaking process will play a critical role in addressing these questions and refining the practical implementation of the Act.
Request for Comment Related to Detection of Illicit Activity Involving Digital Assets
Notably, as part of the GENIUS Act rollout, in August 2025 Treasury issued a Request for Comment on “Innovative Methods to Detect Illicit Activity Involving Digital Assets.” By the time commenting closed on 17 October, Treasury had received 250 responses from exchanges, stablecoin issuers, banks, blockchain analytics providers, and civil-liberties advocates alike.
Across that diverse set of voices, a few clear themes emerged:
- Modernization and Safe Harbors: A call for clearer pathways for innovation where firms can test new tools without facing regulatory uncertainty.
- AI and Advanced Analytics: Strong support for using AI and machine learning capabilities for improved detection and false positive reduction, while balancing the need for transparency and model explainability.
- Standardization and Interoperability: Proposals for shared APIs and data schemas so institutions can better collaborate and exchange risk signals.
- Privacy and Civil Liberties: Recognition that new detection methods must preserve individual rights and avoid overcollection of personal data.
- Collaboration: Agreement of the importance of collaboration across both public and private sectors through pilots, sandboxes, and formal information-sharing mechanisms.
Use Cases
Stablecoins have been described as crypto’s “killer app,” offering speed, transparency, cross-border funds movement, 24/7/365 real-time settlement, and low transaction costs unmatched by traditional payment systems. Several high-impact use cases are gaining traction:
- Business-to-Business (B2B) Payments: Enterprises are increasingly using stablecoins for money movement and treasury management.
- Consumer Transactions: Retailers stand to benefit from faster, cheaper settlement, potentially reducing the 2%–3% in card processing fees and expanding access to 24/7 payments.
- Payroll Innovation: Instant, low-cost settlement can enable daily wage payments, reducing reliance on payday loans and check-cashing services.
- Financial Inclusion: In both developed and emerging markets, stablecoins provide a hedge against local currency volatility and broaden access to digital financial services.
Together, these innovations move the global economy closer to financial inclusion and economic resilience.
Conclusion
The GENIUS Act ushers in a pivotal transformation in how digital assets integrate with the broader financial ecosystem. Its combination of regulatory clarity, compliance rigor, and innovation pathways signals a maturing marketplace—one that promises to reshape cross-border payments, modernize money movement, and expand access to trusted financial services.
Stablecoins are poised to play a central role in this evolution, bridging the gap between traditional finance and decentralized technology. With the right balance of regulation and innovation, they represent not just a new asset class, but a foundational infrastructure for the future of global finance. As rulemaking continues, success will depend on thoughtful calibration—encouraging innovation while maintaining robust consumer protections and financial integrity.