Stablecoin regulation is a top priority for lawmakers, and three recent proposals reflect differing perspectives on how to achieve regulatory clarity while balancing safety and innovation.

By Jenny Cieplak, Arthur Long, Yvette D. Valdez, Stephen P. Wink, Pia Naib, Connor Jobes, and Deric Behar

In the wake of President Trump’s executive order on digital assets aiming to make the US the “crypto capital of the planet” (for more information, see this Latham blog post), the 119th Congress has convened with a keen interest in digital assets, particularly stablecoins. Senators from both parties and leaders of the House Financial Services Committee have outlined varying approaches to how Congress will address regulation in the crypto space.

To that end, three significant stablecoin initiatives have emerged in Congress:

1. Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act): Introduced on February 4, 2025, by Senate Banking Committee Chairman Tim Scott, and members Senator Bill Hagerty, Senator Cynthia Lummis, and Senator Kirsten Gillibrand.
2. Stablecoin Transparency and Accountability for a Better Ledger Economy Act of 2025 (STABLE Act): Introduced on February 6, 2025, by House Financial Services Committee Chairman French Hill and Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee Chairman Bryan Steil.
3. The Waters Stablecoin Act (Waters Act): Reintroduced February 10, 2025, by House Financial Services Committee member Maxine Waters.

Given narrow majorities in both chambers of Congress and a busy legislative agenda before the 2026 midterms, the texts of any of these bills will likely not reach the president’s desk without further debate and revision. As with any efforts to regulate innovative technologies, developing a legal regulatory scheme for stablecoins will be an iterative process. Despite some critical differences, the current slate of bills reflect a consensus in Washington regarding certain key aspects of stablecoin regulation that lawmakers are prioritizing.

In this post, we will highlight important areas of agreement — and divergence — among the three stablecoin bills. We do expect, however, that the GENIUS Act and STABLE Act, given Republican majorities in both Houses of Congress, will be the more influential of the three bills.

Payment Stablecoins

The three stablecoin bills focus on “payment stablecoins,” digital assets that are, or are designed to be, used as a means of payment or settlement. The bills also agree that the issuers of payment stablecoins will be obligated to represent that their stablecoins will maintain a stable value relative to the value of a fixed amount of monetary value, and to convert, redeem, or repurchase their stablecoins for a fixed amount of monetary value.

For the purposes of this post, references to stablecoins will reflect this legislative focus on payment stablecoins.

However, perhaps recognizing that the government’s understanding of this technology is still developing, all three bills would require that the US Treasury — in consultation with the Board of Governors of the Federal Reserve System (FRB), the Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC) — conduct a study of “endogenously collateralized stablecoins” (i.e., algorithmic stablecoins) and non-payment stablecoins, and deliver it to Congress within 365 days of enactment of the bills. The STABLE and Waters Acts would go even further by imposing a two-year moratorium on algorithmic stablecoins by making it unlawful to issue, create, or originate an algorithmic stablecoin not already in existence on the date the particular bill is enacted.

Federal Stablecoin Regulators

The three stablecoin bills agree that subsidiaries of insured depository institutions and credit unions that issue stablecoins must be subject to the regulatory oversight of their primary financial regulator. The bills differ on the oversight of licensed, nonbank stablecoin issuers, which currently fall outside the traditional federal bank regulatory regime.

Both the STABLE and GENIUS Acts empower the OCC or the National Credit Union Administration (NCUA) – the latter in the case of a credit union subsidiary – to oversee nonbank stablecoin issuers, while the Waters Act provides that the FRB would oversee nonbank stablecoin issuers.

This difference reflects contrasting perspectives on Capitol Hill regarding the FRB’s role in financial supervision. Republicans in Washington have criticized the independent oversight of the FRB, and having nonbank payment stablecoin issuers governed by the OCC would put the administration of these entities under increased control of the White House (the OCC being an independent bureau within the US Department of the Treasury, an executive agency).

The STABLE and GENIUS Acts, but more explicitly the GENIUS Act, also recognize a significant role for state-level regulatory regimes, whereas the Waters Act prioritizes the federal oversight role of the FRB.

The GENIUS Act, for example, allows stablecoin issuers with a total market capitalization of not more than $10 billion to opt for regulation under a state-level regulatory regime. These state-level regulatory regimes, however, must be “substantially similar” to the federal regulatory framework. State regulators would be required to submit to the Secretary of the Treasury an initial certification that their state-level regulatory regime meets their established criteria for substantial similarity within one year of the enactment of the GENIUS Act, and annually thereafter. If state regulators fail to submit proper certification, then a payment stablecoin issuer would be subject to the federal regulatory framework, regardless of the stablecoin issuer’s market capitalization.

In addition, under the GENIUS Act, if a payment stablecoin issuer is regulated at the state level and reaches a market capitalization of more than $10 billion, it must transition to regulation under the federal regulatory framework (if a depository institution, under the FRB; if not a depository institution, then under the OCC) within 360 days. In the alternative, it must cease issuing new stablecoins until its market capitalization falls below the $10 billion threshold.

Stablecoin Issuance

Each bill acknowledges that stablecoin issuers must be registered with a regulatory authority to engage in the issuance of stablecoins within the US, and unlicensed issuance of stablecoins will be unlawful. All of the bills provide details as to the application and evaluation process for federal approval of a permitted stablecoin issuer. The Waters Act goes further and explicitly provides criminal penalties of up to 5 years imprisonment and $1 million in fines for illicit stablecoin issuance.

Custody, Safekeeping, and Limitations on Stablecoin Activities

Each bill curtails the activities of stablecoin issuers, limiting their business to issuing and redeeming stablecoins, managing reserves, and providing custodial and safekeeping services of stablecoins or private keys. Each bill also includes language requiring segregation of assets backing stablecoins and general prohibitions on comingling of assets.

The STABLE and GENIUS Acts provide that custodial and safekeeping services may only be performed by entities subject to regulatory oversight by federal or state banking regulators. These acts also state that federal regulators may not require depository institutions to include assets held in custody, including stablecoins, as liabilities on financial statements or balance sheets, or hold additional regulatory capital against assets in custody or safekeeping, except as necessary to mitigate operational risks.

These provisions are likely reactions to the recently rescinded SEC Staff Accounting Bulletin 121, which required publicly traded entities to include digital assets held in custody on their balance sheets with a corresponding safeguarding liability. That requirement made it extraordinarily difficult for banks that were part of publicly traded groups to custody stablecoins and other cryptocurrencies due to regulatory capital rules. The GENIUS Act also expressly prohibits regulators from issuing any new regulations similar to SAB 121.

The GENIUS Act would also expressly not apply to persons engaged in providing software to facilitate a customer’s self-custody of payment stablecoins.

Reserves

Each bill requires stablecoin issuers to maintain reserves backing outstanding stablecoins on at least a one-to-one basis, and provide that reserves can consist of fiat currency, federal reserve notes, funds held at certain insured or regulated depository institutions, short-term Treasuries and Treasury-backed repurchase agreements. The GENIUS Act also includes money market funds as a suitable reserve asset.

Notably, none of the bills permit stablecoins backed by other cryptocurrencies, which have become common in DeFi markets. Protocols issuing these tokens would need to market the tokens as something other than stablecoins, which would likely mean taking measures to keep US residents from accessing them or risk their characterization as securities issued by an investment fund. Regulators may determine that it will be up to intermediaries such as exchanges to refrain from listing stablecoins that do not meet the regulatory requirements, although such stablecoins could possibly still enter US markets through DeFi protocols.

Each bill also provides that federal payment stablecoin regulators must issue capital and liquidity risk requirements. The GENIUS Act includes interest rate risk management standards and the Waters Act includes general risk management requirements.

The most divergent language as it pertains to reserves comes from the Waters Act, subjecting reserves held at insured depository institutions to limitations established by the Federal Deposit Insurance Corporation (FDIC) and the NCUA to address the safety and soundness risks of the institutions. The STABLE and GENIUS Acts, on the other hand, limit any risk requirements to “not exceed[ing] what is sufficient to ensure the permitted payment stablecoin issuer’s ongoing operations.” These differences reflect the ongoing debate regarding crypto entities’ ability to access the traditional financial system, and whether traditional financial institutions should have access to riskier cryptoassets or be permitted to include them on their balance sheets.

Security and Commodity Status of Stablecoins

The STABLE Act explicitly states that stablecoins are not securities, and would amend all relevant federal regulations to note that the term security does not include a payment stablecoin issued by a permitted payment stablecoin issuer.

The GENIUS Act explicitly states that stablecoins are not securities or commodities, and would amend all relevant federal regulations to note that the term security does not include a payment stablecoin issued by a permitted payment stablecoin issuer. It is silent, however, on the commodity classification issue.

The Waters Act is silent as to the security status of stablecoins.

Deposit Insurance

The Waters Act explicitly states that in the case of resolution or liquidation of a payment stablecoin issuer, stablecoins are not subject to deposit insurance. The STABLE and GENIUS Acts do not address this topic.

Prohibition on Rehypothecation

Each bill prohibits stablecoin issuers from rehypothecating (also known as repledging or reusing) clients’ collateral held in reserves, except for creating liquidity to meet reasonable redemption expectations. The bills also allow, for the purposes of creating liquidity, reserves in the form of Treasury bills to be pledged as collateral for short-term repurchase agreements that can either be cleared by an approved central clearing counterparty or by prior approval with the appropriate stablecoin regulator.

Redemption

The STABLE and GENIUS Acts have a more flexible redemption policy focused on disclosure, requiring stablecoin issuers to report their redemption policies publicly and establishing procedures to ensure timely redemption of outstanding stablecoins. The Waters Act requires that redemption requests be met within one day, and provides that issuers’ processes to ensure redemption must meet the standards of their primary regulator.

Mandatory Disclosures

Each bill requires stablecoin issuers to provide public monthly reporting as to the composition of their reserve portfolios. The STABLE and GENIUS Acts specify that stablecoin issuers must regularly provide the total number of outstanding stablecoins and the amount of the issuer’s reserves, and require third-party accounting of reserves to be submitted to regulators. The Waters Act requires attestation as to the accuracy of the issuer’s public reporting to its regulators.

Additional transparency measures include periodic two-year reviews of issuers’ reserve assets (Waters Act), and requirements to submit reports and respond to examinations upon request of regulator inquiries.

Bank Secrecy Act Obligations

Each bill provides that stablecoin issuers will be considered financial institutions for the purposes of the Bank Secrecy Act, with agreement between the bills as to the authority of federal regulators to issue appropriate operational, compliance, and information technology risk management standards, including anti-money laundering, countering the financing of terrorism, and sanctions compliance.

Supervision and Enforcement

Each bill provides regulatory, civil, and criminal penalties for noncompliance. Each bill provides that the primary federal payment stablecoin regulator may prohibit an issuer from issuing payment stablecoins, initiate cease-and-desist proceedings, remove an affiliated party from their participation in the issuer, or issue civil monetary penalties. All three bills also allow for the primary federal stablecoin regulator to remove and ban from the stablecoin industry anyone in violation of the respective bill.

The STABLE and GENIUS Acts allow for the primary federal payment stablecoin regulators to issue regulations and orders as necessary to ensure the safety and soundness of stablecoin issuers. The Waters Act provides the appropriate federal payment stablecoin regulator with the specific authority, responsibility, and enforcement ability to ensure the safety and soundness of a payment stablecoin issuer that the FDIC has over an insured depository institution and an institution-affiliated party.

Insolvency, Conservatorship, and Receivership

Each bill provides that stablecoin holders will have priority over all other claims against a stablecoin issuer in insolvency proceedings. But the Waters Act also provides federal payment stablecoin regulators with the authority to appoint a receiver or liquidating agent, while prohibiting federal regulators from acting as conservators.

International Considerations

Another notable distinction in these legislative approaches relates to the extraterritoriality of the US stablecoin regulations. The STABLE and GENIUS Acts direct the FRB and the Treasury to implement reciprocal and bilateral agreements between the US and jurisdictions abroad to facilitate international transactions and interoperability with US dollar-denominated stablecoins issued overseas. The Waters Act, however, explicitly prohibits the offer or sale of stablecoins issued by foreign-based issuers unless they first subscribe to the US regulatory regime.

The variance here reflects an openness to stablecoin issuers that have largely had to operate outside of an uncertain US regulatory environment on the one hand, versus a focus that emphasizes compliance with the domestic regulatory authorities on the other.

Extent of Regulation

The STABLE and GENIUS Acts would impose less intrusive regulation than the Waters Act. The Waters Act would require federal approval of stablecoin issuer mergers and acquisitions, with expedited processes in instances of emergencies or issuer failure; prohibit a non-financial commercial company from controlling the registered payment stablecoin issuer or licensed nonbank entity (based on the Bank Holding Company Act’s framework for determining control); and prohibit individuals convicted of insider trading, embezzlement, cybercrime, money laundering, terrorist financing, or felony fraud from serving in or exercising significant control of a stablecoin issuer. The STABLE and GENIUS Acts do not contain such provisions, opting for a lighter regulatory touch that will encourage stablecoin issuers while recognizing that stronger oversight than is currently the case is necessary in this space.

Conclusion

These legislative efforts are a good beginning, reflecting a long-held view that stablecoin issuers will benefit from more regulatory certainty, as opposed to an enforcement-centered posture that marked the last administration’s approach to digital assets generally. Language referencing regulatory “tailoring” and safe harbors are included in each of these bills, indicating congressional understanding that digital asset and blockchain technology is still developing, and therefore the regulatory approach must be nimble to foster innovation and American dominance in the stablecoin space.