GENIUS ACT - Insured Depository Institutions

The law goes into effect on the earlier of January 18, 2027, or the date that is 120 days after the date on which the primary Federal payment stablecoin regulators issue any final regulations implementing the Act.

Insured depository institutions are not permitted to issue payment stablecoins under the new law but may seek to issue payment stablecoins through a subsidiary. Applications will be received and reviewed by the IDI’s primary Federal regulator. The Act tasks the Federal regulators with establishing a process and framework for licensing, regulation, examination, and supervision of such entities, and demands the Federal regulators issue rules to carry out this process and framework by July 18, 2026.

While the specific process is yet to be determined, the Act does provide insight into how such applications will be evaluated, including timing, factors to be considered, and grounds for denial.

Upon receipt of a “substantially complete” application, the Federal regulator will have 120 days to render a decision. 

(1) The ability of the applicant (or, in the case of an applicant that is an insured depository institution, the subsidiary of the applicant), based on financial condition and resources, to meet the requirements set forth under [12 USC § 5903, Requirements for issuing payment stablecoins].

(2) Whether an individual who has been convicted of a felony offense involving insider trading, embezzlement, cybercrime, money laundering, financing of terrorism, or financial fraud is serving as an officer or director of the applicant.

(3) The competence, experience, and integrity of the officers, directors, and principal shareholders of the applicant, its subsidiaries, and parent company, including—

     (A) the record of those officers, directors, and principal shareholders of compliance with laws and regulations; and

     (B) the ability of those officers, directors, and principal shareholders to fulfill any commitments to, and any conditions imposed by, their primary Federal payment stablecoin regulator in connection with the application at issue and any prior applications.

(4) Whether the redemption policy of the applicant meets the standards under [12 USC § 5903(a)(1)(B)].

(5) Any other factors established by the primary Federal payment stablecoin regulator that are necessary to ensure the safety and soundness of the permitted payment stablecoin issuer.

Such an application may only be denied upon a determination that the activities of the applicant would be unsafe or unsound based on the factors identified above. Within thirty days of denying an application, the Federal regulator must provide written notice with specificity and an explanation of all material shortcomings and actionable recommendations. Such a denial may be appealed by the applicant within thirty days of receiving the written notice.

The Act expressly preempts state requirements for a charter, license, or other authorization to do business with respect to a subsidiary of an IDI that is an approved permitted payment stablecoin issuer. Nevertheless, such a subsidiary of a state-chartered IDI will remain subject to the ongoing supervision by the IDI’s state regulator.