United States Crypto Regulation Framework: How the GENIUS Act Shapes Crypto in 2026

Before July 2025, if you asked a crypto company in the U.S. what rules they had to follow, the answer was usually: It’s complicated. No clear federal law. No consistent state rules. Just a bunch of enforcement actions from the SEC, scattered guidance, and a lot of guesswork. That changed with the GENIUS Act - the first real federal framework for crypto in the U.S. Signed into law on July 18, 2025, it didn’t regulate Bitcoin or Ethereum. It focused on one thing: payment stablecoins. And that single focus changed everything.

What the GENIUS Act Actually Does

The GENIUS Act doesn’t try to control all cryptocurrencies. It targets payment stablecoins - digital coins pegged to the U.S. dollar, like USDC or USDT - because they’re used for everyday transactions, not speculation. The law says any company issuing more than $10 billion in stablecoins must register with federal regulators. Smaller issuers? They answer to state authorities. This isn’t just federal vs. state. It’s a split system: big players get federal oversight, small ones get state supervision. Both must follow the same core rules.

Here’s what every issuer must do:

• Back every stablecoin 100% with cash or short-term U.S. Treasuries
• Release a public report every month showing exactly what’s in their reserves
• Register with FinCEN as a financial institution under the Bank Secrecy Act
• Build systems to freeze assets and share data with regulators on demand
• Follow strict anti-money laundering checks - same as banks

And here’s the big one: no interest. Stablecoin issuers can’t pay you yield. Not a penny. That’s intentional. The goal was to stop stablecoins from becoming bank-like savings accounts - a move that worried traditional banks and the Federal Reserve. But it also created a loophole: third-party platforms like exchanges or DeFi apps can still offer interest on stablecoins. That’s where most of the yield is going now - and regulators are already looking at it.

Who’s Affected - And How

The biggest winners so far are the big players. Circle, the company behind USDC, said adoption jumped 37% after the law passed. Why? Institutional investors finally had clear rules. Fidelity reported a 214% spike in digital asset custody clients. JPMorgan launched its Onyx platform. Banks that once avoided crypto are now building custody systems that meet NIST SP 800-130 standards - a technical bar that’s expensive and complex.

Smaller issuers? Not so much. Deloitte estimates compliance costs between $2 million and $5 million a year. That’s a huge burden for startups. Coinbase’s CEO called the monthly reserve disclosures a heavy operational load. Tether’s CEO called the reserve rules “excessively restrictive.” And the truth is, many small issuers can’t afford this. Some may exit the market. Others may try to operate under the radar - which is exactly what regulators want to avoid.

The SEC didn’t stop at stablecoins. In Spring 2025, they announced six new rulemaking initiatives targeting:

• Digital asset offerings
• Trading on alternative systems
• Dealer definitions
• Books and records for crypto
• Custody rules
• Transfer agent rules for blockchain

These aren’t vague ideas. They’re specific, detailed rules that will reshape how exchanges, brokers, and custodians operate. The rescission of SEC Staff Accounting Bulletin 121 in January 2025 was a quiet revolution - it allowed banks to hold crypto on their balance sheets without treating it as a risky asset. That’s why JPMorgan and State Street are now in the game.

How It Compares to the Rest of the World

The U.S. didn’t copy Europe’s MiCA law. MiCA regulates everything - Bitcoin, NFTs, stablecoins, DeFi protocols. The U.S. picked one target: payment stablecoins. That’s a strategic choice. It’s less ambitious, but more focused. The EU allows interest-bearing stablecoins. The U.S. bans them for issuers. Singapore’s Payment Services Act lets stablecoins operate under a broader payment license. Japan has a full virtual currency framework. China? Ban. The U.S. is somewhere in the middle: not a ban, not a free-for-all, but a tightly controlled sandbox for one part of the market.

But here’s the catch: the rest of the crypto market - Bitcoin, Solana, Dogecoin, DeFi apps - still operates in a gray zone. The SEC still decides case by case whether a token is a security. That means if you’re building a DeFi protocol or launching a new token, you’re still guessing. Critics say this creates regulatory arbitrage: projects might avoid calling themselves stablecoins just to dodge the rules. The Brookings Institution warned this could lead to “regulatory arbitrage,” where innovation moves to unregulated corners of the market.

The Unintended Consequences

The ban on interest payments was meant to protect the banking system. But it’s backfiring. Instead of keeping money in regulated banks, people are moving it to DeFi platforms like Aave or Compound, where yields are high - and unregulated. MIT’s Neha Narula told Congress this could increase systemic risk, not reduce it. The Treasury’s Office of Financial Research confirmed this in November 2025, warning that “yield-seeking activity is migrating to unregulated protocols.”

Another problem? The dual system. State regulators have power over small issuers. But what happens when a state like Texas has looser rules than New York? Or when a stablecoin issuer moves from California to Wyoming to avoid stricter rules? Georgetown Law’s Hilary Allen says this creates “unnecessary complexity” and “inconsistent enforcement.”

Then there’s the “rewards” loophole. Exchanges like Coinbase or Kraken can still give users crypto rewards for holding stablecoins. The law doesn’t ban that. But banks and regulators are worried. If users get 5% yield from an exchange, why keep money in a bank that pays 0.5%? The House Financial Services Committee is already holding hearings on this. Representative French Hill introduced the Stablecoin Innovation Preservation Act in October 2025 to create a legal path for interest-bearing stablecoins - but it’s still early.

Market Impact and Real Numbers

The numbers tell a clear story. U.S.-issued stablecoins now make up 68% of the global market - up from 52% in 2024. USDC sits at $32.7 billion in market cap. Total crypto transaction volume hit $3.2 trillion in 2025, a 47% jump from the year before. Traditional finance now controls 37% of stablecoin issuance - up from 19% in 2024. That’s a massive shift. Banks, asset managers, and insurance companies are now players in crypto.

But the U.S. isn’t leading in regulatory clarity anymore. Singapore and Switzerland rank higher in the 2025 Global Blockchain Benchmarking Study. The EU’s MiCA has already attracted 23 crypto firms that were considering the U.S. market. The U.S. won’t win by being the most open. It’s trying to win by being the most secure.

What’s Next in 2026

The GENIUS Act is just the beginning. The SEC’s Crypto Task Force will release guidance on security token offerings by Q1 2026. The CFTC plans to propose rules for crypto derivatives by December 2025. The Presidential Working Group on Digital Asset Markets will deliver its first full assessment on March 1, 2026. That report will decide whether the framework is working - or if it needs a major overhaul.

Two big questions loom:

1. Will Congress fix the interest payment loophole?
2. Will the SEC finally define what makes a token a security - or keep playing it case by case?

If the answer to both is yes, the U.S. could become the global standard for crypto regulation. If not, the gaps will widen - and the market will keep moving to places where the rules are clearer.

Who’s Winning and Who’s Losing

Winners: Large stablecoin issuers like Circle, institutional investors, traditional banks, and custodians with deep pockets. They get clarity, legal cover, and access to a regulated market.

Losers: Small crypto startups, DeFi protocols that rely on yield, and users who want to earn interest without jumping through compliance hoops. They face higher costs, fewer options, and more uncertainty.

The framework isn’t perfect. It’s not even close to comprehensive. But it’s the first real step toward a functional system. For the first time, crypto companies in the U.S. have a rulebook. And that’s a big deal.