The U.S. GENIUS Act officially enters into effect on April 1, 2026, as the U.S. Department of the Treasury and the OCC jointly launch a 30-day registration window for “Permitted Payment Stablecoin Issuers (PPSI),” marking the formal inclusion of stablecoins under federal regulation.
Article author, source: CoinFound
TAKEAWAY
- The regulatory compliance window has opened; the GENIUS Act enters implementation on April 1, 2026, with the U.S. Treasury and OCC jointly launching a 30-day registration window. Major issuers such as Circle and Paxos must submit applications for "Permitted Payment Stablecoin Issuer (PPSI)" status within this period, bringing compliant stablecoins onto a formal regulatory path.
- Reserve asset requirements create a structural moat; the law mandates that stablecoins be backed 1:1 by cash or short-term U.S. Treasuries, prohibiting any form of re-collateralization or lending, directly eliminating the "shadow banking" risks that previously plagued the market—but this also means hundreds of billions of dollars will be locked into low-liquidity assets.
- The dual federal and state regulatory framework creates opportunities for regulatory arbitrage; stablecoins with an issuance volume under $10 billion can opt to operate under state-level frameworks deemed "substantially equivalent." Both CSIS and the Brookings Institution have noted that this arrangement may trigger a regulatory race to the bottom, representing the most easily overlooked systemic vulnerability in the current framework.
- COINFOUND exclusive analysis: The market is generally pricing USDC and USDP based on the "compliance premium" narrative, but the key variable that will reshape the stablecoin landscape over the next 12 months is the reverse impact of reserve asset composition on the short-term Treasury market—when compliant stablecoins approach $500 billion in volume, their mandatory Treasury buying will materially suppress short-term yields and continuously erode yield sources for DeFi protocols.
Core argument
The first federal stablecoin law in the United States has entered the enforcement phase.
This is not just a regulatory event—it redefines what constitutes "legal tender USD" and who is qualified to issue it. This moment is critical because the 30-day registration window is the single point of trigger for the entire framework; once the window closes, issuers who have not completed their filings will face forced delisting pressure, and the on-chain USD landscape will undergo structural realignment over the next 90 days.
The core question this article seeks to answer is: Who truly gains a strategic advantage from the GENIUS Act, and where are the structural risks—undervalued by the mainstream narrative—hidden? The sole central thesis: Compliant stablecoins are not a regulatory victory, but the beginning of an interest rate war driven by Treasury reserve demand.
Event background
On July 18, 2025, the GENIUS Act (Guiding and Establishing National Innovation for Stablecoins Act) was officially signed into law by the President of the United States, becoming the first comprehensive federal legislation in U.S. history targeting payment stablecoins. The Act requires the OCC to complete corresponding rulemaking within one year of enactment, with a deadline of July 18, 2026.
On February 25, 2026, the OCC issued the first notice of proposed rulemaking (NPRM), proposing a draft comprehensive regulatory framework for payment stablecoins, with a public comment period open until May 1, 2026 (source: OCC, 2026-02).
On April 1, 2026, the U.S. Department of the Treasury officially launched the implementation phase, jointly with the OCC, opening a 30-day registration window for "Permitted Payment Stablecoin Issuers (PPSIs)." Major issuers such as Circle and Paxos must complete their eligibility filings during this period, while the Treasury simultaneously released a draft of配套 rules on state-level regulatory "substantial equivalence" standards, establishing a state-level regulatory pathway for smaller issuers under $1 billion in assets (Source: FinanceFeeds, 2026-04; PYMNTS, 2026-04).
Immediate reactions from various parties were sharply divided: Coinbase publicly stated that "regulatory rules are about to be finalized" and viewed this as a positive signal; Federal Reserve Board Governor Michael Barr issued a statement on the same day warning that the bill does not eliminate risks related to reserve quality or redemption pressure; and New York’s attorney general pointed out structural gaps in the bill’s anti-money laundering (AML) compliance requirements.
So, when the regulatory framework is officially established, is the stablecoin market truly ready to accommodate a scale expansion of $500 billion?
In-depth analysis
1. Structural driver — Why this is happening now
Stablecoins are no longer peripheral tools in the cryptocurrency market. By the end of 2025, the global total circulating supply of stablecoins surpassed $200 billion, with USDT and USDC together accounting for approximately 88% of market share, and daily settlement volumes once exceeding Visa’s daily transaction volume (Source: State Street Global Advisors, 2026-Q1). This scale has reached a threshold sufficient to trigger systemic attention from traditional financial regulators.
The implementation of the GENIUS Act represents a proactive move by the U.S. government under the convergence of three pressures: first, the MiCA framework came into full effect across the EU at the end of 2024, leading to USDT's delisting from multiple European exchanges due to non-compliance with reserve disclosure requirements, thereby undermining the global dominance of dollar-denominated stablecoins; second, the Federal Reserve continues to monitor the potential disruption stablecoins may cause to monetary policy transmission, particularly short-term interest rate volatility triggered by large-scale redemptions; third, there is political consensus within Congress on a "digital dollarization" pathway—using compliant stablecoins to replace CBDCs, thereby achieving digital transformation of the payment system without compromising the Federal Reserve’s independence.
The core regulatory mechanism is the reserve asset requirement: each compliant stablecoin must be backed 1:1 by cash or short-term U.S. Treasury securities, and issuers are explicitly prohibited from rehypothecating or lending out reserve assets (source: OCC NPRM, 2026-02). This requirement directly transforms stablecoin reserves into mandatory demand for short-term Treasuries.
Although this mechanism is widely interpreted by the market as a positive signal of de-risking, its underlying interest rate effects have been almost fully priced in. If the market capitalization of compliant stablecoins reaches $500 billion this year, the demand for U.S. Treasury purchases on the reserve side alone would be roughly equivalent to the annual net issuance of a medium-sized economy, exerting a measurable and sustained downward pressure on U.S. Treasury yields maturing in 3 to 12 months. This is not theoretical speculation, but an inevitable outcome of reserve structure mechanics.
This leads to the central question of the next section: Who will truly benefit, and who will truly be pressured, in this market restructuring driven by regulatory mandates?
2. Ripple effects—What will this lead to?
Short-term signal (within 3 months):
The registration window (April 1 to April 30, 2026) is the first critical milestone. Whether the PPSI filing is completed within this window directly determines whether issuers can continue operating legally in the U.S. market. Circle (issuer of USDC) and Paxos (issuers of USDP and PYUSD), with their strong compliance foundations, are expected to pass the initial review smoothly. Tether, the issuer of USDT, is registered in El Salvador, and it remains unclear whether it falls under the registration obligation—this ambiguity represents the largest source of market uncertainty in the short term.
For exchanges, stablecoins without PPSI qualification will face increased regulatory scrutiny for listing, and some smaller stablecoins may be voluntarily delisted by major centralized exchanges within 30 to 60 days, with liquidity rapidly consolidating around compliant assets.
Medium-term structural impact (6 to 18 months):
DeFi protocols will face structural pressure from yield compression. Currently, the stablecoin deposit rates on DeFi lending protocols (such as Aave and Compound) largely depend on stablecoin issuers redistributing a portion of the yield from their reserve assets back into the protocol ecosystem. Once the GENIUS framework forcibly cuts off the path of yield redistribution from reserve assets, the base yield of DeFi stablecoin pools will lose its "external subsidy" and revert toward the risk-free rate (i.e., short-term Treasury yields).
Regarding regulatory expectations, the EU’s MiCA and the UK’s FCA are closely monitoring the implementation of the GENIUS framework; if the U.S. framework is successfully implemented, it will accelerate the convergence of regulatory standards for stablecoins among major global economies, and the narrative of "global stablecoin regulatory coordination" will enter mainstream discourse in the second half of 2026.
Therefore, compliant stablecoins are not a regulatory victory, but the beginning of an interest rate war driven by Treasury bill reserve requirements. The true legacy of the GENIUS Act will not be Circle’s market capitalization growth, but the strong coupling between stablecoin volume growth and short-term Treasury yields—a new macro variable not yet incorporated into any mainstream interest rate model.
[COINFOUND Perspective]
COINFOUND is an in-depth research platform for the crypto market, designed for institutional investors and high-net-worth users, with a core value proposition of "Contrarian, Data-Driven, Actionable Insights."
The mainstream view is that "the GENIUS Act is a positive regulatory signal for stablecoins, and Circle and licensed issuers are benefiting from a compliance premium." But we believe the real question is: when hundreds of billions of dollars in stablecoin reserves are forcibly locked into short-term Treasury purchases, who bears the liquidity cost on the asset side, and how will this rewrite the yield structure of DeFi protocols?
The logic stems from the reserve mechanism itself: the GENIUS framework prohibits the re-pledging of reserve assets, meaning the issuer's revenue sources are restricted to an extremely narrow range of government bond coupons, and the "reserve yield subsidy" previously relied upon by the protocol ecosystem will disappear systematically. A historical precedent can be seen in Circle’s USDC depegging following the 2023 Silicon Valley Bank incident—back then, it was precisely the liquidity mismatch in reserve assets that triggered a brief crisis of confidence; the existence of a regulatory framework does not automatically resolve the underlying liquidity stratification of assets.
If this assessment holds, the next most critical signals to monitor are: whether the stablecoin deposit rates of major DeFi protocols such as Aave and Compound begin a systematic decline starting in Q3 2026, and whether Tether leverages regulatory gray areas to achieve a strategic "re-registration" to circumvent PPSI obligations.
Risk Disclaimer
The greatest uncertainty in this assessment is the regulatory classification of Tether (USDT)—if the OCC ultimately rules that Tether must be brought under the PPSI framework or be forcibly delisted, the short-term liquidity landscape of the stablecoin market will undergo significant restructuring, exceeding the baseline expectations of this analysis.
This analytical framework relies on publicly available regulatory documents from early April 2026 and is limited by data lag and the rapid evolution of regulatory variables. Market feedback during the public comment period (ending May 1, 2026) may substantially modify the final rules.
Readers should pay special attention to a counter-signal: if the Federal Reserve restarts its rate-cutting cycle in the second half of 2026, a rapid decline in short-term Treasury yields will directly undermine the commercial viability of compliant stablecoin reserve models, triggering market exit pressure on issuers. This article is for informational and analytical purposes only and does not constitute investment advice.
References
[1] OCC.《GENIUS Act Regulations: Notice of Proposed Rulemaking》. OCC Official Bulletin 2026-3. 2026-02-25.https://www.occ.treas.gov/news-issuances/bulletins/2026/bulletin-2026-3.html
[2] FinanceFeeds. "US Treasury Commences Official Rollout of GENIUS Act Stablecoin Framework." FinanceFeeds. 2026-04-01.https://financefeeds.com/us-treasury-commences-official-rollout-of-genius-act-stablecoin-framework/
[3] PYMNTS. "Treasury Opens a State Path for Smaller Stablecoin Issuers." PYMNTS.com. 2026-04.https://www.pymnts.com/news/regulation/2026/treasury-proposes-its-first-regulation-to-implement-genius-act/
[4] Brookings Institution. "Stablecoins: Issues for regulators as they implement GENIUS Act." Brookings. 2026.https://www.brookings.edu/articles/stablecoins-issues-for-regulators-as-they-implement-genius-act/
[5] CSIS. Unstable Coins: Stablecoin Regulation, Market Structure Legislation, and U.S. Security Risks. CSIS Analysis. 2026.https://www.csis.org/analysis/unstable-coins-stablecoin-regulation-market-structure-legislation-and-us-security-risks