Breaking Down Stablecoin Regulations Under the GENIUS Act and MiCA

Introduction

More and more companies have started to explore the world of nonbank financial services and payment stablecoins over the last several years, and even more are considering entering the game. Now, after seeing how the EU has taken crypto seriously by implementing Markets in Crypto Assets Regulation (MiCA) the U.S. has followed suit with the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.

These moves toward a more regulated environment signal a new era for stablecoins—and hopefully, an environment where stablecoins and similar digital assets can really flourish. That’s great news if you’re an NBFI dealing in stablecoins: Not only will you have the benefit of working with a stable global currency, fewer transaction fees (compared to wire transfers), and access to customers without bank accounts, but you’ll also have more protections and legal clarity.

With that said, keeping in line with new regulations is crucial for NBFIs that want to survive and thrive in this new era. So, how exactly will these new regulations affect you?

A Quick Overview of the GENIUS Act and MiCA

Both GENIUS and MiCA are regulatory frameworks for stablecoin crypto asset issuers, with GENIUS focusing solely on payment stablecoins. Both require issuers to maintain full liquid reserves, undergo regular audits, and operate under strict regulatory oversight. Infringements of the rules of these regulations are punishable by fines, penalties, and/or by revoking licenses.

MiCA was approved by the EU in 2023, but did not take effect until March of 2025. However, the European Banking Authority (EBA) recently put out a "no action" statement, delaying the regulations until March of 2026. MiCA covers crypto-asset issuers (not including securities) and crypto-asset service providers (CASPs) throughout the EU.

The GENIUS Act was just passed in July of 2025, first by the U.S. Senate on June 17th and then by the House on July 1st. It will take effect either 18 months after passing or 120 days after final regulations are issued, depending on which occurs first. If this ends up being 18 months after passing, the effective date would be January 18, 2027, while the earliest effective date would be in late 2026. The GENIUS Act only regulates the issuance of payment stablecoins in the U.S. The issuance of a payment stablecoins in the U.S. or in any U.S. territory is only permitted by approved payment stablecoin issuers.

These new regulations are having an impact on how many NBFIs do business and how they keep records of their activities—something that tools like Formance can help with. Below, we’ll outline the key guidelines for compliance, so that you can get a better handle on what you’ll need to keep track of.

What the GENIUS Act Means for NBFIs

Under the GENIUS Act, NBFIs can be approved as “permitted payment stablecoin issuers.” Companies with a market cap of less than $10 billion can apply for a state license, but are still subject to federal rules. If a company has a market cap of over $10 billion, they’ll need a federal license.

To keep that license, NBFIs must follow certain guidelines:

• Any payment stablecoins issued to customers must be pegged to the U.S. dollar (USD) and backed 1:1 by high-quality, liquid assets denominated in USD, such as cash, treasury bills, notes, or bonds. Rehypothecation (a fancy word for banks/brokers using their clients assets for other purposes while they hold onto them) is not allowed.

This typically requires special contractual arrangements with deposit institutions regarding how they set up their 'safeguarding' or 'itemized' accounts—meaning you can deposit with them, but the banks refrain from rehypothecating deposits.

• Issuers have to comply with the financial institution requirements under the Bank Secrecy Act, which means implementing an anti-money laundering (AML) program, a know your customer (KYC) program, and an economic sanctions compliance program. Any time a customer acquires, redeems, or interacts with a payment stablecoin, there must be automated identity and risk checks.
• Issuers must audit and report on their reserves monthly. These disclosures must show the composition of reserve asset holdings. An independent public accountant is required to check each monthly report before the next report is submitted.
• Large issuers–those with $50 billion in consolidated total outstanding issuance—also have to file annual financial disclosures and publish audited financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) on their websites and submit these to their primary federal payment stablecoin regulators.
• Issuers are required to have the technological ability to seize, freeze, or prevent the transfer of stablecoins when necessary by law.
• Issuers are not allowed to pay any interest to customers or make the issuance or redemption of payment stablecoins contingent on a customer’s purchase.

The penalties for unauthorized stablecoin issuance—issuing payment stablecoins without being either a permitted issuer or a registered foreign issuer—are pretty harsh: up to $1 million in fines and 5 years of prison.

What the MiCA Means for NBFIs

Meanwhile in the EU, MiCA requires NBFIs issuing or trading in “crypto-assets” to register as an Electronic Money Institution (EMI) or a Crypto-Asset Issuer (CI). To comply with financial standards, an EMI license is necessary for issuing and trading crypto-assets publicly.

MiCA defines a crypto-asset as a digital representation of value that can be transferred and stored digitally and that is not already regulated. This is a broad and at the moment potentially ambiguous definition that covers not just stablecoins, but a wide range of cryptocurrencies and digital currencies.

CIs will need to acquire a Crypto-Asset Service Providers (CASP) license. Prior to the implementation of MiCA, crypto-asset issuers had to have a Virtual Asset Service Providers (VASP) license. VASP license holders were required to switch to CASP licenses at the beginning of 2025 as MiCA took effect, although there may be exceptions after the EBA’s “no action” letter.

The guidelines for NBFIs under MiCA include:

• Issuers conducting public offerings of a crypto-assets within the EU have to submit a whitepaper before launch, providing a disclosure about the issuer’s identity, the function and purpose of the token, investor rights, and outlining any potential risks.
• Crypto-assets must be backed 1:1 by liquid assets and securely held by a third-party external custodian. The trusted custodian ensures these assets aren’t used for anything else.
• Audits must be conducted quarterly. During these audits, issuers must provide proof of their reserves for crypto-assets and confirm compliance of the custody service.
• CASP licenses also have capital requirements that range from EUR 50,000 to EUR 150,000 depending on the type of the crypto-asset services provided.
• Similar to GENIUS, issuers are not allowed to rehypothecate their reserves.
• Like GENIUS, issuers must be upfront and transparent on "redemption" policies.
• Also like GENIUS, issuers must implement AML/KYC programs, with transaction monitoring protocols, customer checks and verification processes, and obligations for reporting suspicious activities and disclosing transaction information to authorities when necessary. There are additional verification processes that must be carried out for individuals from high risk countries.
• MiCA does not explicitly require the technological ability to seize, freeze, or prevent the transfer stablecoins.
• Penalties for non-compliance vary across member states, but can be up to €5 million.

Keeping Up with Regulations with Comprehensive Bookkeeping

Payment stablecoins (in the U.S.) and crypto-assets (in the EU) are now regulated, which helps to provide stability and certainty in the market. These changes enable all parties to trust in using these new digital means of payment and that’s a good thing. Notably, complying with either MiCA or GENIUS requires NBFIs to track the 1:1 liquid asset requirements with a ledger.

NBFIs issuing crypto-assets or payment stablecoins now need a private, centralized, account-based ledger like Formance Ledger to account for and track the liquid assets backing the digital asset according to these new regulations. This process might sound intimidating, but Formance can make it simple.

With Formance Ledger, you can focus your efforts on your product and on your business while resting assured that everything you need for your next audit is automatically tracked and easy to access—and that digital payments are becoming safer, more reliable, and normalized around the world.