GENIUS and CLARITY ACT: US Financial Institutions entering the digital space

It opens doors for traditional financial institutions (FIs) to enter the digital asset space with fewer regulatory hurdles. Banks can now more easily offer crypto services and provide banking to crypto businesses if they maintain proper risk management practices.

Stablecoins — once mainly restricted to the cryptocurrency world — are entering the corporate and policy mainstream, potentially reshaping how money moves in the United States (US) and around the world. Major traditional financial institutions like Bank of America, Citigroup and JPMorgan Chase prepare to launch stablecoins to compete in the evolving financial landscape. Their exploration could signal an irreversible integration of blockchain technology into mainstream finance. Nevertheless there are still a number of challenges that could limit its uptake.

In this blog we will explore what these regulatory activities involve, the growing acceptance by large US financial institutions, the various use cases and the main challenges financial institutions are confronted with.

Present state stablecoin market

The use of stablecoins has exploded in recent years, notably among crypto traders moving funds between tokens, such as Bitcoin and Ether. These tokens are already deeply embedded in decentralized finance (DeFi), international remittances, and institutional liquidity operations.

Stablecoins have grown into a multibillion-dollar sector used by traders, businesses, and cross-border payment providers. A McKinsey study estimates about $250 billion in stablecoins have been issued so far, but are mainly used to settle cryptocurrency trades. In 2024, stablecoin transactions totalled more than $28 trillion, surpassing the combined volume of Mastercard and Visa, according to Deutsche Bank. Much of that activity is concentrated on centralized exchanges, which account for 41% of stablecoin volume and 24% of transaction count.

Until now, stablecoins operated in a largely unregulated environment, prompting concerns about consumer protection, systemic risk, and monetary policy implications.

Regulating stablecoins in the US

But that has changed since the launch of the GENIUS Act and the upcoming CLARITY Act.

President Trump signs the GENIUS Act

The GENIUS Act, which was signed into law on July 18, 2025, by President Donald Trump, establishes the country’s first federal framework for stablecoins. The legislation introduces a framework for banks and other corporations to issue stablecoins as the crypto industry matures into the broader financial landscape.

With his signature of the GENIUS Act, it delivered important regulatory clarity for the stablecoin industry. One of the key provisions of the Act is the establishment of a comprehensive  federal regulatory framework for stablecoins issuance. The GENIUS Act lays the foundation for how payment stablecoins can be issued, managed, and regulated in the US. The bill includes guidelines for consumer protections, reserve requirements for issuers, and anti-money laundering guidance. Under the new law, stablecoin issuers are required to maintain 100% reserve backing or US treasury bills, undergo regular audits, and register with the relevant regulatory authorities. The law prohibits algorithmic stablecoins that are not backed by tangible assets, addressing recent high-profile collapses that have shaken confidence in the space.

Enforcement will begin either 120 days after final rules are published or by January 2027.

 

US Congress debating the CLARITY Act

In addition to the GENIUS Act, the US Congress is debating the Digital Asset Market CLARITY Act, known simply as the CLARITY Act, which passed the House last week with broad bipartisan support.

While the CLARITY Act briefly defines stablecoins, the legislation is complementary to the GENIUS Act. If approved by the Senate and enacted, the CLARITY Act will provide a regulatory mandate that works alongside the GENIUS Act. Together, they will provide an overarching regulatory framework for crypto assets in the US.

The US regulators have rolled out final rules guiding banks on handling crypto. The Act provides a regulatory structure for non-stablecoin crypto assets and clarifies the oversight roles of the Commodity Futures Trading Commission (CFTC) and SEC, regarding regulating digital assets, delineate which tokens qualify as securities or commodities, and create a unified registration regime for crypto exchanges.

The Clarity Act addresses key operational requirements for banks handling crypto custody services, particularly the importance of managing cryptographic keys and evaluate risks, while integrating digital assets into their operations, in a way that aligns with current legal and regulatory obligations. It also covers areas such as anti-money laundering compliance, audit readiness, risk management, and technical competency.

US banking regulators: removed previous hurdles

US banking regulators including the Federal Deposit Insurance Corporation (FDIC), Federal Reserve, and Office of the Comptroller of the Currency (OCC), have signalled more bank-friendly crypto policies, diminishing heavy oversight requirements and stringent liquidity management mandates. Each regulator has made specific changes that remove previous hurdles for engaging with digital assets.

The agencies emphasized their intent to promote innovation and keep expectations current with market changes — recognizing the growing role of blockchain as core financial infrastructure.

 

Federal Deposit Insurance Corporation (FDIC)

FDIC issued new guidance affirming that FDIC-supervised institutions supervised by the FDIC,  can engage in permissible crypto-related activities without seeking prior FDIC approval, if they properly manage risks and comply with regulations. The FDIC’s draft regulations would compel issuers to demonstrate “dollar-for-dollar” backing of reserves and undergo quarterly third-party audits

Federal Reserve (The Fed)

The Fed signalled a shift from values-based supervision to risk-based supervision grounded in financial stability and consumer protection. The Federal Reserve Board  would no longer include “reputational risk” in its formal bank examinations and supervision programs. The Fed will now oversee banks’ crypto activities through regular supervisory processes.

Office of the Comptroller of the Currency(OCC)

The US Office of the Comptroller of the Currency(OCC) issued rules to outline several risk management and compliance requirements. Under the new U.S. framework, the Treasury Department will have to issue a rule on foreign stablecoin regulatory regimes and their compatibility with the new US framework. The OCC paved the way for lenders to engage in some crypto activities, such as custody, some stablecoin activities and participation in distributed ledger networks, provided they are conducted safely and legally. .

SEC and CFTC

The Clarity Act also proposes further guardrails and designates the roles of the SEC and CFTC in overseeing different classes of digital assets. The draft aims to clarify how tokens are classified, whether as securities or commodities, and calls on the SEC to “tailor existing requirements to digital asset activity.” The SEC scrapped earlier accounting guidance that made it expensive for banks to deal in crypto.

SEC Launches Project Crypto: Streamline Digital Asset Oversight

On July 31, SEC Chairman Paul Atkins unveiled Project Crypto, aimed at modernizing securities regulation in alignment with on-chain infrastructure and digital finance model, to allow for crypto-based trading. The initiative proposes new clarity on when digital assets qualify as securities, supports regulatory frameworks for staking and DeFi services under a unified licensing regime, and seeks to integrate tokenized securities and crypto-native firms into the traditional capital markets.

State-Level Crypto Reforms: Focus on ATM Licensing and Fraud Protection

Big banks seek more clarity around anti-money laundering rules and supervision before diving deeper into crypto. They are also asking for consistent guidelines across banking and market regulators before launching new businesses in digital assets, whose values are volatile.

At least 40 US states have introduced legislation in the 2025 session targeting crypto access and consumer protections at the local level. Among them, Nebraska enacted regulations requiring ATM operators to acquire state licensure, cap transactions at $2,000 per day for new clients, and refund customers for fraudulent activity. The rules also mandate transparent warnings about crypto-related risks.

These actions reflect growing bipartisan consensus at the state level that digital asset infrastructure needs clearer oversight – especially around in-person access and money laundering vulnerabilities.

US financial institutions: reevaluating their strategies

As the US takes a historic step toward regulating digital assets, the shift presents a strategic decision for banks. The GENIUS ACT opens up the door for major US financial institutions considering entry into the digital space in a structured and compliant manner. By removing prior notice and approval requirements, regulators have reduced friction for banks wanting to offer crypto services. This enables faster market entry and greater competitiveness

The GENIUS Act’s requirements could create a significant opportunity for banks in the US to compete on trust and compliance, areas where traditional institutions already have an edge. Banks now have clearer latitude to engage in a range of crypto activities that were previously subject to regulatory uncertainty, including custody services, payments, and distributed ledger applications.

Major banks are reevaluating their strategies for staying relevant in an increasingly crypto-driven economy. Crypto in 2025 is about infrastructure, compliance and risk management. Banks will also need to reassess their internal capabilities. They must decide whether to compete with existing stablecoin providers, such as Circle and Tether, or integrate existing stablecoins into their financial services.

US banks exploring crypto-related services

Triggered by the GENIUS ACT and further regulatory clearance, the largest US banks are shifting their focus and are beginning to take action, stating their plans to be involved in stablecoin efforts. All of the big banks that plan to play are still ironing out the details, exploring how to integrate crypto products into their offerings.

More than half of the 25 largest banks in the US are now either considering or actively rolling out crypto-related products, reevaluating their own stablecoin strategies to capitalize on the promise of instant payments and settlement that stablecoins offer. These banking giants are increasingly positioning in digital asset custody and trading services via tokenization, while some are exploring next-gen financial services. This trend signals that digital assets are steadily integrating into mainstream wealth management and capital markets.

Some examples

JP Morgan Chase

JPMorgan Chase already launched several crypto-related projects. In June, it initiated a pilot for a tokenized deposit token issued on Coinbase, aiming to enable instant dollar transfers. The bank also revealed plans to test stablecoin services alongside the tokenized deposit pilot. JPMorgan Chase mentioned on 15 July 2025 that the bank was set to engage in both its deposit coin and other stablecoin efforts. JPMorgan’s venture could leverage its JPM Coin, a closed-loop corporate stablecoin used internally since 2019. The bank is also developing a new product that would offer loans backed by clients’ cryptocurrency holdings, including Bitcoin and Ethereum. The product could launch as early as next year.

Bank of America

Bank of America is actively working on launching a stablecoin in collaboration with others, though no timeline has been announced. The bank emphasized collaboration with peers and fintechs, comparing stablecoin development to the rollout of payment platforms.

Citi

Citigroup is actively considering issuing their own stablecoin. The bank is exploring the issuance of a Citi stablecoin to facilitate faster and more secure digital payments. The bank is developing services to allow clients to send stablecoins between accounts or to convert them to dollars to make instant payments. Citi has explored Solana for next-gen financial services and tokenization pilots, and reportedly is also exploring custody services for digital assets that back crypto-related investment products.

Morgan Stanley

Morgan Stanley is closely monitoring stablecoin developments. The bank is considering allowing its 15,000 brokers to recommend spot Bitcoin ETFs to clients, while working on suitability guardrails and allocation limits. The bank also announced plans to enable customers to trade both Bitcoin and Ethereum, aiming to provide a unified platform where all holdings can be viewed and managed.

BNY Mellon

Bank of New York (BNY)  Mellon offers custody services for digital assets. BNY Mellon frequently appears in filings and product developments, including roles as administrator and cash custodian in ETF documents. The bank has also recently served as custodian for reserves linked to Ripple’s RLUSD

Other banks

PNC is partnering with Coinbase so that wealth and asset management clients can trade crypto directly through their PNC accounts instead of a separate platform. State Street announced plans to launch stablecoins and tokenize deposits to improve settlement efficiency, with subsequent initiatives expected to tokenize bonds and money market shares.

Bank Issued Stablecoins

Single Stable coins in payments

Banks and Wall Street payment giants like JPMorgan and Visa are roll out/launching their own crypto tokens. Bank-issued stablecoins could bridge traditional and digital finance. They could stabilize the cryptocurrency market by introducing institutional credibility. Unlike decentralized stablecoins, these would be backed by regulated institutions with access to Federal Reserve liquidity

Visa’s CEO told CNBC the payment processor is modernizing its infrastructure with the help of stablecoins. JPMorgan took a slightly different approach to the crypto token boom on Wall Street. The financial giant launched a token backed by commercial bank deposits rather than U.S. dollars.

The JPMD token would allow for round-the-clock settlement for institutional clients looking for faster, cheaper transactions while staying connected to the traditional banking system.

Stablecoin consortium: Issuing joint stablecoins

Some of the biggest US banks are also exploring issuing whether to team up to issue a joint stablecoin. One bank consortium possibility that has been discussed would be a model that lets other banks use the stablecoin. The conversations have so far involved companies co-owned by JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and some other large commercial banks. The bank consortium discussions are in early, conceptual stages and could change. Some regional and community banks have also considered whether to pursue a separate stablecoin consortium.

Banks: compliant digital assets strategy

For banks, entering the crypto space without a clear strategy could prove costly. US banks who aim to enter the crypto sector should develop a structured and scalable approach to crypto adoption that meet the newly regulatory environment requirements. Success will thereby depend on a number of essential issues that should be met including evaluating strategic opportunities exploring services like custody, payments, tokenization, and blockchain infrastructure

Banks should also develop comprehensive risk management and compliance frameworks tailored to the unique characteristics of digital assets, including transaction monitoring, customer due diligence, and AML compliance.

Another step could be considering partnerships with trusted crypto service providers. As banks gear up to implement these new rules, there is a strong chance we will see an increase in partnerships with tech firms experienced in crypto management. Experts estimate around 60% of banks may opt for third-party custodians to ensure compliance and security.

Banks should also monitor for forthcoming agency guidance on more complex issues like cryptocurrency lending and holding digital assets beyond stablecoins on balance sheets. To guarantee a successful approach banks should also consider a phased strategy.

Banks still face Challenges: balancing act

Now that a growing number of large US financial companies are preparing to offer crypto based products or launch their own dollar-backed stablecoin, experts warn the path forward could be anything but simple.

Despite the GENIUS Act’s passage and upcoming additional regulation, banks still face many challenges as not all questions have been answered. While this regulatory guidance is an important step, the real test will come when banks actively manage digital assets. Can they deliver security and trust in the handling of crypto?

 

Main challenges

The flip side of the equation is the competitive landscape. Fintech firms and crypto-native companies like Coinbase, Circle, Fireblocks and Anchorage Digital have moved fast, partnering with global exchanges, wallet providers, and payment processors. They have built robust infrastructure, compliant pathways and brand loyalty among digital-first users and are already seizing market share..

An important challenge is therefor timing. The longer banks wait to launch products, the greater the risk that network effects lock in other providers. In this context, banks that hesitate risk being relegated to providing infrastructure but ceding customer relationships. The alternative is to lean into innovation, embrace partnerships and compete in trust, usability and security.

But also legal ambiguity remains. Not all legislators in the US agree on whether Fed reserves should back stablecoins or if they should avoid them entirely. Federal Reserve policy bars banks from directly holding crypto as deposits. Meanwhile, infrastructure challenges loom, as US banks interlink blockchain technologies like Ethereum or new platforms like Hyperledger. While easing restrictions, regulators are still emphasizing the importance of proper risk management. Banks must ensure that all crypto activities comply with existing laws and regulations such as the Bank Secrecy Act, AML/CFT etc. But also that operational soundness is maintained, while adequate risk management controls are implemented

Banks also face uncertainty on how digital assets will be taxed, how custody services will be regulated, and how their stablecoins will interact with future central bank digital currencies (CBDCs) that may emerge from the Federal Reserve or other monetary authorities. But also the question whether banks can hold crypto assets on their balance sheets. If and how banks can engage in crypto lending activities

For consumers, the outcome could mean faster, cheaper cross-border payments, but also new privacy concerns. Stablecoins require user identification, potentially altering how digital identities interact with finance. The necessity for banks to adapt to new compliance measures raises questions about their readiness.

And not all players stand to gain. Remittance companies, smaller banks, and payment networks face likely disruption. Smaller banks could face rising digital infrastructure costs and reduced access to low-cost deposits. Meanwhile, interchange fees charged by Visa and Mastercard, typically 2% to 3%, may face pressure as merchants and consumers turn to direct stablecoin payments.

International context: navigate Basel Committee standards

Thanks to this new regulatory environment US banks now have greater flexibility to engage with crypto markets, provided they maintain sound risk and compliance practices. However while US regulations are easing, banks with an international presence may still face some constraints from forthcoming global standards. They would have to comply with current regulations, including money laundering and currency controls in some countries for international transfers, such as the EU MICA regulation

Next to that institutions with a global presence must still navigate Basel Committee standards. The Basel Committee on Banking Supervision (BCBS) has expressed continuing concerns about heightened risks associated with permissionless blockchains. As part of this, Basel standards on the prudential treatment of banks’ crypto-asset exposures — which BCBS members have agreed to implement by January 1, 2026 — will impose substantial capital requirements on internationally active banks holding assets on permissionless blockchains on their balance sheets.

Forward Looking: a platform for growth

The GENIUS Act and other legislative acts are seen as a milestone in digital asset policy in the United States, creating a new opportunity for traditional banks to compete in the crypto market. This regulatory shift represents a transformative moment in the US banking landscape. After years of caution and restrictions, regulators are now giving banks more freedom to explore cryptocurrency opportunities with the expectation of responsible innovation.

A growing number of large banks in the US are now exploring how to integrate crypto products into their offerings. Banks can move forward with more confidence: strategically, securely, and compliantly. The entry of banks into the market is an indication that they increasingly believe in the long-term role of cryptocurrencies in the financial system.

Whether these efforts will be sufficient remains to be seen. However the message from lawmakers is clear. The digital dollar era has begun, and financial institutions that move first may gain a significant advantage.