GENIUS Act expands fintech powers, raises concerns for banks

For decades, the playbook was simple: if you wanted to move money at scale in America, you needed a bank charter. The GENIUS Act, signed into law by President Donald Trump on July 18, 2025, just rewrote that playbook. Nonbank fintech firms can now issue payment stablecoins under federal supervision, and the traditional banking industry is watching its competitive moat get a little shallower.

The legislation passed with bipartisan support that would make most bills jealous. The Senate approved it 68-30 on June 17, 2025, followed by the House voting 308-122 on July 17.

What the law actually does

The GENIUS Act creates the first comprehensive federal framework for payment stablecoins in the US. Only approved entities, specifically subsidiaries of insured depository institutions and nonbanks supervised by the OCC, can issue these tokens.

Issuers must maintain a 1:1 reserve ratio backed by liquid assets like US dollars or short-term Treasuries. The law also mandates monthly public disclosures of those reserves, strict compliance with anti-money laundering and sanctions regulations, and prohibits issuers from paying any interest or yield on the tokens themselves.

If an issuer goes belly up, token holders get priority claims in insolvency proceedings.

Fintechs move in, banks push back

The OCC wasted no time putting the framework into practice. In December 2025, the agency granted conditional national trust bank charters to Circle, Paxos, and three additional nonbank firms. That same month, the FDIC approved proposed rulemaking that would allow banks to issue stablecoins through subsidiaries.

Traditional banks hold FDIC insurance and can lend out customer deposits, two structural advantages that have defined American banking for nearly a century. Stablecoin issuers under the GENIUS Act cannot lend against reserves and cannot pay interest, but they also do not need the full apparatus of a bank charter to operate.

Banks are now lobbying regulators to shape the implementation details in their favor, with concern centered on deposit flight: if consumers and businesses start parking funds in stablecoins instead of bank accounts, the traditional deposit base that fuels lending could erode.

The regulatory road ahead

On April 8, 2026, the Treasury proposed anti-money laundering and countering the financing of terrorism requirements for permitted stablecoin issuers. Capital standards and illicit finance rules are still being refined, with discussions expected to continue through 2026.

For investors watching this space, the key variables are the pace of new charter approvals, whether banks successfully lobby for restrictions that slow fintech competitors, and how quickly the Treasury finalizes its AML rules. Circle and Paxos already have their conditional charters.

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