The GENIUS Act, signed into law on July 18, 2025, established the first federal framework for payment stablecoins in the United States. Less than a year after enactment, federal and state regulators are moving to narrow its scope, according to a CryptoSlate report.

The legislation created a federal licensing route through the OCC for issuers above $10 billion in circulation, with state-chartered options for smaller issuers. It mandated 1:1 reserve backing in cash and short-dated Treasuries, required monthly attestations from qualified auditors, and prohibited yield payments to holders. The statute drew a line between regulated payment stablecoins and other digital assets.

Since enactment, regulators have pursued interpretations and guidance that, according to CryptoSlate's reporting, could constrain key parts of the framework. Areas under reported scrutiny include the composition of permissible reserves, the treatment of foreign issuers operating in U.S. markets, and the division of authority between federal and state supervisors.

What does the narrowing effort mean operationally?

Tighter definitions around permissible payment stablecoins would impose additional compliance work on issuers and expand bank discretion over custody arrangements. State regulators, who lost exclusive chartering authority over compliant issuers meeting federal thresholds, have publicly raised concerns about coordination mechanisms and the boundaries of federal-only charters.

The OCC has indicated forthcoming guidance on bank custody of stablecoin reserves. Treasury and the FDIC continue coordination on implementation timelines. The SEC has separately signaled interest in the boundary between payment stablecoins and yield-bearing products, a question the statute addresses by prohibiting pass-through yields while leaving open certain ancillary structures.

Industry counsel expect the most consequential guidance to come from the OCC and Treasury, which hold primary rulemaking authority. Several large issuers have reportedly engaged with regulators on reserve composition questions, particularly around the treatment of repurchase agreements and overnight reverse repos within the permissible reserve basket.

What is at stake for the industry?

Stablecoin issuance has become one of the most profitable segments of the crypto economy, with monthly settlement volumes regularly exceeding those of major card networks. The GENIUS Act was designed to bring that activity inside a regulated perimeter while preserving the dollar-denominated settlement utility that has drawn institutional adoption.

If regulators narrow what qualifies as a permissible payment stablecoin, issuers may need to restructure reserves, alter distribution arrangements, or seek alternative licensing pathways. Banks that have built custody and reserve-management infrastructure for stablecoin issuers would see their client base affected by any rule changes altering permissible reserve compositions.

The legislative history offers limited comfort to either side. The statute directs federal agencies to coordinate with state supervisors and to issue implementing rules within specified timeframes, but leaves substantial discretion on interpretive questions.

CryptoSlate's reporting indicates the narrowing effort is most advanced at the OCC, where guidance on bank custody is expected in the coming months. Treasury has signaled it will coordinate with the FDIC and state regulators, and the SEC has continued to assert jurisdiction over adjacent products.

The combined effect of these rulemakings will determine whether the GENIUS Act functions as a broad federal framework for dollar stablecoins or as a narrower regime limited to specific issuer structures and reserve compositions. The next milestone will arrive as implementing agencies release proposed rules and as any legal challenges work through the courts, determining how much of the law's original scope survives intact.