WASHINGTON, D.C. — A permitted payment stablecoin issuer is defined as a person formed in the United States that is a subsidiary of an insured depository institution approved by its primary Federal payment stablecoin regulator, a Federal qualified payment stablecoin issuer approved by the Office of the Comptroller of the Currency, or a State-qualified payment stablecoin issuer approved by its State payment stablecoin regulator. The GENIUS Act defines a payment stablecoin as a digital asset that is, or is designed to be, used as a means of payment or settlement, and the issuer of which is obligated to convert, redeem, or repurchase for a fixed amount of monetary value and represents or creates the reasonable expectation that it will maintain a stable value relative to a fixed amount of monetary value.

Board-supervised payment stablecoin issuers must fully back their stablecoins with permissible reserve assets such as short-term Treasury bills and high-quality liquid assets. Officers and directors must certify they have not been convicted of specific felony offenses including insider trading or money laundering. Control is defined as owning, controlling, or having power to vote 25 percent or more of any class of voting securities.

The Board must notify applicants within 30 days if an application is not substantially complete. The Board must render a decision on a substantially complete application within 120 days of the submission date. If the Board fails to decide within 120 days, the application is deemed approved. Comments on the proposed rule must be received by the Board on or before 60 days after the date of publication in the Federal Register.

Why It Matters

The GENIUS Act was enacted on July 18, 2025, and establishes a regulatory framework for issuers of payment stablecoins. The law will become effective on January 18, 2027, or 120 days after the date on which the primary Federal payment stablecoin regulators issue any final implementing regulations, if earlier. This timeline places pressure on regulators to finalize rules before the statutory deadline.

The Securities Act of 1933 is referenced in the GENIUS Act as a defining statute for what constitutes a security. No bond, note, evidence of indebtedness, or investment contract issued by a permitted payment stablecoin issuer shall qualify as a security solely by virtue of meeting the conditions described in the GENIUS Act. This clarification distinguishes stablecoins from traditional securities under federal law.

Timeline

The Board of Governors of the Federal Reserve System proposed rules establishing application procedures for insured State member banks seeking approval for a subsidiary to issue payment stablecoins under the GENIUS Act. The proposed rule implements statutory requirements mandating prior Board approval for subsidiaries of insured State member banks to become permitted payment stablecoin issuers. The proposed rule would be issued as subpart D to Regulation UU in 12 CFR part 247.

What's New

The GENIUS Act was enacted on July 18, 2025. Under the GENIUS Act, the Federal Reserve System is responsible for establishing a regulatory framework for permitted payment stablecoin issuers (PPSIs), including subsidiaries of insured state member banks seeking approval to issue payment stablecoins. The Federal Reserve Board has previously issued rules related to stablecoins, including a notice of proposed rulemaking in September 2026 that outlines the application procedures for insured State member banks seeking approval for a subsidiary to issue payment stablecoins under the GENIUS Act.

Under the GENIUS Act, the Federal Reserve is required to establish a regulatory framework for permitted payment stablecoin issuers (PPSIs), which includes both subsidiaries of insured State member banks and state-qualified PPSIs with $10 billion or more in assets. The Federal Reserve Board has previously issued regulations related to the prohibition on tying in section 4(a)(8) of the GENIUS Act, which applies to all permitted payment stablecoin issuers. The GENIUS Act was enacted on July 18, 2025, and it establishes a regulatory framework for issuers of payment stablecoins, defining them as digital assets used as a means of payment or settlement, with issuers obligated to maintain a stable value relative to a fixed amount of monetary value. The GENIUS Act was enacted on July 18, 2025, and will become effective on January 18, 2027, or 120 days after the date on which the primary Federal payment stablecoin regulators issue any final implementing regulations, if earlier.

How Sources Differ

Sources present different details regarding the primary Federal payment stablecoin regulators and the effective date of the GENIUS Act.

There are differences in how sources describe permitted payment stablecoin issuers and the scope of the regulatory framework. One source states that under the GENIUS Act, only a permitted payment stablecoin issuer may issue payment stablecoins in the United States, subject to certain exceptions. Another source indicates that the Federal Reserve is required to establish a regulatory framework for permitted payment stablecoin issuers (PPSIs), which includes both subsidiaries of insured State member banks and state-qualified PPSIs with $10 billion or more in assets.

Sources also differ on the details regarding insured state member banks and the proposed rule. Another source focuses on the Board of Governors of the Federal Reserve System proposing rules establishing application procedures for insured State member banks seeking approval for a subsidiary to issue payment stablecoins under the GENIUS Act.

Regarding the proposed rule and comment period, one source states the Federal Reserve Board has proposed a 60-day comment period following the issuance of the proposed rule, during which stakeholders can provide feedback on the framework for insured State member banks seeking approval for a subsidiary to issue payment stablecoins. Another source specifies that comments on the proposed rule must be received by the Board on or before 60 days after the date of publication in the Federal Register.