Launching a Stablecoin? Here’s How The STABLE Act Impacts New & Existing Issuers

Key Takeaways

• The STABLE Act sets strict federal rules for stablecoin issuers, requiring 1:1 reserves, banking licenses, and monthly audits.
• The GENIUS Act takes a more flexible path, allowing state-regulated issuers and calling for a study on algorithmic coins instead of banning them.
• Stablecoin issuers must prepare to comply with formal regulation.
• Compliance is no longer optional as both acts progress through Congress, signaling a regulatory crackdown on non-compliant stablecoin issuers.

U.S. crypto legislation is forcing politics and innovation to find a common path and has triggered a wider debate over transparency, influence, and the direction of digital finance. 

The Trump family’s digital asset holdings and their backing of World Liberty Financial (WLFI)—which plans to launch its own stablecoin, USD1—raise questions about potential conflicts of interest.

As the STABLE Act in the House and the GENIUS Act in the Senate bring their own approaches to regulation, the debate over their specific features—and which direction should prevail—brings more specific elements to the table.

Additionally, while the STABLE Act and GENIUS Act are under discussion, the House Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence is also advancing the FIT21 Act, which aims to set more rules for digital assets. 

This article explores the STABLE Act, what it proposes, how stablecoins are reshaping U.S. finance, and how it compares to the GENIUS Act in shaping the future of digital asset regulation.

What Is The Stable Act

The STABLE Act stands for the “Stablecoin Tethering and Bank Licensing Enforcement Act.” It is a legislative proposal introduced in the U.S. House of Representatives in December 2020. It aims to provide a regulatory framework for stablecoins in the U.S.

What The Stable Act Proposes

In the original 2020 version of the STABLE Act, Rep. Stephen Lynch was one of the main advocates, alongside Rashida Tlaib and Jesús “Chuy” García. 

In its origins, the STABLE Act warned that Wall Street and Silicon Valley should not control the future of digital payments. To prevent that, it proposed the following:

• Only banks can issue stablecoins: Any group that wants to create a stablecoin must first become a licensed bank.
• Follow banking rules: Any company that offers stablecoin services must follow existing banking regulations.
• Notify regulators in advance: Stablecoin issuers must tell the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) , and other banking regulators six months before launching. They also must assess and report any risks to the financial system.
• Guarantee stablecoin safety: Issuers must either get FDIC insurance or hold reserves at the Federal Reserve. This ensures users can always exchange their stablecoins for U.S. dollars.

Why The Stable Act Matters in 2025

The STABLE Act aims to bring clear rules to an ecosystem growing fast but still lacking strong regulation. It aims to provide stronger oversight to stablecoins within the broader U.S. financial system, making sure they do not bypass banking laws or put consumers and the economy at risk.

• Regulatory clarity: The Act proposes consistent rules for issuing and operating stablecoins. It outlines who can issue them, how issuers must back them, and the specific rules for regulation.
• Consumer protection: It aims to protect users by requiring 1:1 reserves, monthly disclosures, and clear redemption procedures. These steps help ensure users can always redeem their stablecoins at face value.
• Financial stability: As stablecoins’ creation and adoption grow, they could impact the wider financial system. The Act aims to prevent this by enforcing capital, liquidity, and risk controls.
• Maintaining U.S. dollar dominance: A stable regulatory framework for dollar-backed stablecoins reinforces the dollar’s role in digital finance and helps preserve its position as the world’s reserve currency.
• Combating illicit finance: The Act aims to help prevent money laundering, fraud, and hidden transactions.

The STABLE Act generally aims to set the rules for transparency, safety, and regulatory approval.

2025 STABLE Act Explained: Key Regulations for Stablecoin Issuers And Consumer Protection

In its 2025 version, the STABLE Act specifies stablecoin regulations which include:

• Clear definition of a payment stablecoin: The Act defines payment stablecoins as digital assets used for payments that maintain a stable value relative to a national currency and are redeemable for a fixed amount of monetary value.
• Only approved issuers allowed: Only federally or state-approved entities—called “permitted payment stablecoin issuers”—can legally issue stablecoins in the U.S.
• Strict reserve backing: Issuers must back all stablecoins 1:1 with cash, Treasury bills, or highly liquid assets. Reserves cannot be reused or rehypothecated.
• Monthly public disclosures: Issuers must publish detailed monthly reports on reserve holdings. These must be audited by a registered public accounting firm and certified by the CEO and CFO.
• Ban on paying interest: Stablecoin issuers are not allowed to pay interest or yield to holders.
• Redemption and consumer protection: Issuers must provide clear redemption policies and timely access to the underlying fiat currency.
• Two-year moratorium on algorithmic stablecoins: The Act bans new stablecoins that are backed only by tokens from the same issuer for two years. This targets designs like TerraUSD, which collapsed in 2022.
• Federal and state dual oversight: The Act allows both federal and certified state regulators to oversee issuers, creating a framework for shared regulation.
• Strict penalties for violations: Entities that issue stablecoins without approval may face civil penalties up to $100,000 per day. There are also penalties for misleading users about insurance or backing.
• No misrepresentation of insurance: Issuers must clearly disclose that their stablecoins are not FDIC- or National Credit Union Association (NCUA) -insured or guaranteed by the U.S. government.
• Supervision of custodians: Entities providing custody services for stablecoins or their private keys must follow strict segregation, reporting, and transparency rules.
• Stablecoins are not securities: The Act amends multiple federal laws to clarify that payment stablecoins are not considered securities.
• Approval process and appeals: The Act outlines a detailed process for both approval and appeal, with timelines, transparency rules, and the right to a hearing.
• Global coordination and interoperability: The Treasury may recognize equivalent stablecoin regimes in other countries and work to ensure cross-border interoperability.

Comparing The STABLE Act And GENIUS Act: Two Paths To Stablecoin Regulation

The STABLE Act and the GENIUS Act present two distinct approaches to regulating stablecoins. Below are their main features:

The STABLE Act: More Precise

The STABLE Act takes a centralized approach with stricter rules. It requires all stablecoin issuers to be federally or state-approved entities. It mandates 1:1 backing of stablecoins with U.S. assets, prohibits interest payments to holders, and imposes a two-year moratorium on algorithmic stablecoins. 

It also enforces strong consumer protection rules, including monthly disclosures and independent audits of reserve holdings.

The GENIUS Act: More Flexible

In contrast, the GENIUS Act proposes a more flexible, tiered regulatory framework. It allows state-level regulation for issuers with assets under $10 billion, while larger issuers fall under federal oversight. It also mandates 1:1 backing, but with high-quality liquid assets like Treasury bills, and does not ban interest payments. 

Instead of blocking algorithmic stablecoins, it directs the Treasury to study them. Consumer protection focuses on redemption rights, transparency, and giving customers priority in insolvency cases.

​As of April 17, 2025, both the STABLE Act and the GENIUS Act have advanced through their respective committees in the U.S. Congress and are awaiting full chamber votes to establish clear rules for stablecoin compliance.

Launching A Stablecoin In The U.S.? Compliance Is No Longer Optional

Both the STABLE Act and the GENIUS Act have moved through their respective congressional committees. Whether one bill passes or both are merged into a unified law, the message from Washington is clear: stablecoin issuers must prepare to comply with formal regulation.

Operating outside these rising regulatory standards carries serious stablecoin legal risks.

• Enforcement actions: Regulators can impose fines, issue cease-and-desist orders, or pursue criminal charges for violations. Issuers can no longer skip licensing, ignore audits, or launch algorithmic stablecoins without full reserve backing.
• Reputational damage: Non-compliance erodes credibility and destroys public trust in the project.
•  Limited scalability: Building partnerships with banks and reaching broader markets is nearly impossible without a clear regulatory status. 
• Legal uncertainty: Staying in the gray zone increases exposure to lawsuits, disruptions, and regulatory crackdowns.

Given the current momentum in Congress and the current regulatory landscape, seeking expert guidance and staying informed is no longer optional. Stablecoin issuers must treat legal compliance as a core requirement.

Conclusion

The U.S. is no longer leaving stablecoin regulation to chance. As both the STABLE Act and the GENIUS Act move closer to becoming law, the direction is clear: dollar-backed tokens must meet firm standards or risk being shut out. 

Whether through centralized oversight or tiered flexibility, compliance is no longer a suggestion—it is likely to be a strict requirement.

Stablecoin issuers must stay informed, follow the rules, and seek expert guidance to avoid legal risk and build trust in a changing financial system.

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