GENIUS Act Explained: What the US Stablecoin Law Means for Merchants

The GENIUS Act is the first federal law in the United States written specifically for stablecoins. It was signed on July 18, 2025, and on October 21, 2026 the Office of the Comptroller of the Currency (OCC) published the final rule that puts much of it into practice. Both the law and that rule take effect on January 18, 2027. If your business accepts USDC or USDT, this is the law that will decide which coins can be offered to Americans and how they must be backed. For a quick refresher on the two biggest coins, see our comparison of USDC vs USDT.

This guide explains what the GENIUS Act requires, who it applies to, what happens to offshore stablecoins, and what merchants should actually do before 2027. It is a plain-language summary, not legal advice.

What the GENIUS Act Is

GENIUS stands for Guiding and Establishing National Innovation for U.S. Stablecoins. The law creates a licensing and supervision regime for “payment stablecoins”, which it defines as digital assets designed to be used for payments or settlement and redeemable at a fixed value, usually one US dollar.

Before the law, US stablecoin issuers operated under a patchwork of state money-transmitter licenses and trust charters, and the largest coin in the world, USDT, is issued by a company based outside the US. There were no federal rules on what reserves must look like or how often they must be disclosed. The GENIUS Act fills that gap. In practice, it:

• limits who may issue a payment stablecoin to US persons
• requires one-to-one backing with high-quality, liquid reserves
• requires monthly public disclosure of those reserves
• bans issuers from paying interest to holders
• gives holders priority over other creditors if an issuer fails
• states that payment stablecoins are not securities or commodities

The Senate passed the bill 68-30 in June 2025, the House followed 308-122 on July 17, and the President signed it the next day. That bipartisan margin is one reason the rulemaking has moved faster than the separate market-structure bill, which we cover in our CLARITY Act explainer.

Key Dates: From Signing to January 18, 2027

Based on the OCC’s October 2026 release and reporting on the Treasury and FinCEN proposals.

The statute said it would take effect on the earlier of two dates: 18 months after signing, or 120 days after regulators finalize their rules. Eighteen months came first, so the start date is January 18, 2027.

Not every rule will be ready by then. The OCC’s October rule covers the issuers it supervises. Proposals from the Treasury, the Federal Reserve and the FDIC were still in comment periods in October 2026, and the OCC has not yet said when it will begin accepting applications from would-be issuers.

Who Can Issue a Payment Stablecoin

The law creates a new category: the permitted payment stablecoin issuer. There are three routes to becoming one.

1. A subsidiary of an insured bank or credit union, supervised by that institution’s federal regulator.
2. A federal qualified nonbank issuer, a company approved and supervised directly by the OCC.
3. A state qualified issuer, licensed under a state regime that federal regulators judge to be substantially similar. This route is only open to issuers with $10 billion or less in stablecoins outstanding. Larger issuers move under federal supervision.

Anyone else who issues a payment stablecoin in the United States without approval breaks the law. Big tech and retail companies face extra hurdles: a public company whose main business is not financial needs a unanimous sign-off from a special review committee before it can issue its own coin.

Reserve, Disclosure and Redemption Rules

The heart of the law is the reserve requirement. Every coin in circulation must be backed one-to-one by a short list of safe, liquid assets:

Reserves cannot be lent out, pledged or reused, except in narrow cases needed to meet redemptions. Issuers must publish the composition of their reserves every month, and senior executives must certify that the reports are accurate. Issuers with more than $50 billion in circulation must also produce annual audited financial statements.

Redemption has to be timely and at par. If you hold a coin from a permitted issuer, you are entitled to swap it for a dollar under the issuer’s published redemption policy, and in an insolvency stablecoin holders are paid from the reserves ahead of other creditors.

Why this matters to merchants: the risk you take when you hold a stablecoin overnight is mainly the risk that it is not really worth a dollar. The GENIUS Act is designed to shrink that risk for regulated coins.

The OCC’s final rule turns these principles into detailed requirements on how reserves are custodied, how much capital and liquidity an issuer must hold, and how it manages operational risk. Anti-money-laundering and sanctions obligations are being handled in a separate Treasury rule.

No Interest for Holders and the Rewards Question

Permitted issuers may not pay interest or yield to people who hold their coins. The aim is to keep payment stablecoins from competing directly with bank deposits.

The harder question is what happens when someone other than the issuer pays rewards, for example an exchange offering a bonus to customers who hold a stablecoin there. The OCC’s proposal had included a presumption that some of these third-party arrangements were unlawful. The final rule dropped that presumption, so the agency will judge such arrangements case by case. Banks continue to lobby to close the gap, and the issue is one of the main sticking points in the CLARITY Act negotiations in the Senate.

For a merchant, this is mostly background. You accept stablecoins to get paid, not to earn yield on them.

What Happens to USDT and Other Offshore Stablecoins

This is the question merchants ask most. Tether, which issues USDT, is not a US company, and USDT is not issued by a permitted payment stablecoin issuer.

Three points are clear:

• Foreign issuers can qualify only through a comparability route. The Treasury must find that the issuer’s home regime is comparable to the US rules, and the issuer must register and meet conditions such as holding enough reserves in US institutions to serve US customers.
• There is a transition period. Three years after the law was signed, on July 18, 2028, it becomes unlawful for digital asset service providers, such as exchanges and custodians, to offer or sell payment stablecoins that are not from a permitted or approved foreign issuer to people in the United States.
• Tether has launched a separate US coin. On January 27, 2026, Tether introduced USAT, a stablecoin issued by Anchorage Digital Bank, a federally chartered bank, with Cantor Fitzgerald as reserve custodian. USAT is a separate token with its own reserves. USDT continues to operate globally, and as of October 2026 there was no public confirmation of its status under the GENIUS framework.

The restriction applies to service providers that offer coins to US persons. It does not make holding or receiving USDT a crime for an individual or a merchant. But it will shape where US customers can buy, sell and convert USDT after mid-2028, which is why merchants with many US buyers should watch it closely. If you serve international customers, USDT will likely remain the dominant settlement coin in many regions. Our guide to accepting USDT payments covers the networks and costs.

How the Major Stablecoins Line Up

The law does not name specific coins, but merchants naturally want to know where the stablecoins they see most often stand. This is the picture as of October 2026, based on public information from the issuers.

Two practical points follow. First, coins from US issuers will be the easiest to buy, sell and convert in the United States after the transition. Second, many international customers still prefer USDT, especially in Asia, Latin America and Eastern Europe, so dropping it entirely could cost you sales. Most merchants will accept both and decide where to convert based on where they operate.

Common Myths About the GENIUS Act

A few misunderstandings come up again and again.

• “Stablecoins are now guaranteed by the government.” They are not. Reserves must be held in safe assets and reported monthly, but stablecoins are not insured deposits, and issuers may not claim they are.
• “Merchants need a license to take stablecoins.” Accepting stablecoins as payment for your own goods and services is not regulated by the GENIUS Act.
• “USDT becomes illegal in January 2027.” Nothing changes for holders on that date. The restriction on US service providers offering unapproved stablecoins starts in July 2028.
• “The law covers all crypto.” It covers payment stablecoins only. Bitcoin, Ether and other tokens fall under the separate market-structure debate.

What the Law Means for Merchants Who Accept Stablecoins

The GENIUS Act regulates the companies that issue stablecoins and the firms that sell or hold them for customers. It does not regulate businesses that accept stablecoins as payment for goods and services. You do not need a license to take a USDC payment for an order.

What changes for you is the quality and legal status of what you receive.

The law also requires issuers to be able to freeze, seize or burn coins when legally ordered to do so. Major issuers already do this to comply with sanctions and court orders. It is a reminder that “non-custodial” describes how a payment reaches you, not whether a stablecoin issuer can act on a specific address. Keeping your business wallets clean, and never accepting payments that originate from sanctioned sources, matters more after the law than before.

The law includes language preserving people’s ability to hold stablecoins in self-custody wallets for lawful purposes. That is important for direct-to-wallet payment flows, where your customer pays from their own wallet and the funds land in yours without a third party holding them.

Taxes do not change. A stablecoin payment is still income at its dollar value when you receive it, and the GENIUS Act says nothing about tax reporting.

A Practical Checklist for 2027

You do not need to change how you take payments on January 18, 2027. These steps will help you get ready.

1. List the stablecoins and networks you accept. Know which issuer stands behind each coin and where it is regulated.
2. Offer at least one US-regulated coin. For US customers, USDC is the most widely used coin from a US issuer. Our guide to accepting USDC payments shows how to set it up.
3. Keep USDT if your buyers use it, but watch the July 2028 deadline for US-facing exchanges and decide in advance where you would convert it.
4. Choose low-cost networks. As of October 22, 2026, a USDC or USDT transfer cost about $0.03 on Ethereum, about $0.002 on BNB Smart Chain and well under one cent on Solana. A USDT transfer on Tron cost about $2.13, or roughly $4.31 to an address that has never held the token.
5. Convert through regulated venues. When you cash out, use exchanges and off-ramps that will meet the new federal standards.
6. Keep records of every payment. Store the transaction hash, coin, network, amount and dollar value at receipt for your accountant.
7. Screen for sanctions risk. Avoid accepting funds you have reason to believe come from sanctioned parties, since issuers can freeze affected coins.

Bcon Global supports this approach by design: payments in USDC, USDT and other coins go straight from your customer’s wallet to yours, with no account holding your funds in between and a flat 1% fee.

The GENIUS Act turns stablecoins from a lightly regulated product into a supervised one. For merchants, that is good news: from January 2027, the dollar coins issued under the law will come with clear reserve rules, monthly disclosure and a statutory claim on reserves.

The practical work is modest. Know which coins you accept, keep at least one US-regulated option for American buyers, use low-cost networks, and keep good records. If your payments already arrive directly in your own wallet, you are well placed for the new rules.