Regulatory Clarity is Taking Shape

The first week of February, 2025, has seen significant steps toward regulatory clarity for digital assets, particularly stablecoins. One such move is the introduction of the GENIUS Act, which aims to establish a federal framework while reinforcing select state-led regulatory models. The Act represents a fundamental shift in how stablecoin issuance is governed across the U.S., setting a federal framework while still recognizing state-led regulatory models with similar standards–most notably New York’s regime for Trust companies.

The framework in the GENIUS Act aligns closely with existing NYDFS standards, likely allowing New York-regulated issuers to continue operating with minimal disruption. As long as NYDFS certifies annually that its regulations remain substantially similar to federal requirements, and federal regulators agree, New York trust companies can maintain state-level supervision. For those exceeding $10 billion in market capitalization, the Act provides a transition pathway to federal oversight.

In addition to providing clarity, the GENIUS Act also may reshape the competitive landscape. The winners will be those who have already built within compliant, regulated environments. Others will face a stark choice: adapt or exit the market. Businesses selecting a stablecoin now may benefit from the continuity that comes with picking a stablecoin issued by a regulated entity.

The Competitive Shift in Stablecoin Issuance

The GENIUS Act does not merely introduce regulations—it fundamentally alters who can issue stablecoins in the U.S. By limiting issuance to federally qualified issuers or entities operating under certified state programs, it creates an environment where existing regulatory compliance is no longer just an advantage but a necessity. This shift will have profound implications for companies that issue or rely on stablecoins.

New York’s DFS framework has long been regarded as the most stringent and comprehensive in the U.S., with regulatory standards that already align closely with the requirements in the GENIUS Act. For NYDFS-regulated trust companies, this means business continuity with minimal disruption, while other issuers must now evaluate how—or if—they can comply with the new requirements.

Issuers fall into three distinct categories:

• NYDFS-regulated issuers under $10 billion in market capitalization likely can continue operating under state supervision, assuming annual certification.
• Issuers exceeding $10 billion will need to transition to federal oversight within 360 days.
• Issuers who aren’t already subject to a robust regulatory framework like New York’s will either have to seek federal approval and meet high standards—or potentially exit the market.

A business seeking to use stablecoin for settlement or loyalty programs may want to keep this possible future state in mind when selecting a stablecoin and stablecoin issuer. Regulated players may offer continuity in operations with less risk of disruption if the GENIUS Act passes.

How Market Participants Are Affected

For companies that have historically relied on state money transmitter licenses for stablecoin issuance, the GENIUS Act introduces major hurdles. These entities can no longer issue stablecoins unless they obtain a Federal Qualified Nonbank Payment Stablecoin Issuer status, operate under a certified state framework, or confine their activities to transmission services only. There is no transitional exemption, meaning that many existing stablecoin issuers will need to undertake significant regulatory transitions—or halt issuance altogether.

For New York DFS-regulated trust companies, the path forward is more clear. Their regulatory model already appears to meet the Act’s requirements, meaning minimal changes to their operational framework. As long as NYDFS maintains a substantially similar regulatory authority, New York Trust company issuers likely can continue issuing stablecoins without awaiting federal approval. If an issuer exceeds the $10 billion threshold, they will have a 360-day transition period to federal oversight.

Why NYDFS-Regulated Issuers Have the Advantage

The GENIUS Act has reshaped the competitive landscape for stablecoin issuers, but not all issuers are navigating the transition equally. NYDFS-regulated trust companies are in a uniquely advantageous position, benefiting from a regulatory framework that is already closely aligned with federal requirements. This may put them ahead of competitors that would have to build compliance with higher standards.

NYDFS standards resemble the requirements in the GENIUS Act. The GENIUS Act requires stablecoins be backed 1:1, emphasizes redemption, and outlines strict requirements on managing the reserve that backs the stablecoins. So does New York. Stablecoin issuers who are not already subject to these robust requirements face uncertainty, as their ability to maintain operations depends on their state obtaining Treasury certification or meeting the federal standards and getting federal approval to continue operations. For those who have to obtain approval and submit to federal oversight, the process would be costly and complex.

From an enterprise perspective, stability is key. Businesses using stablecoins for payments, settlements, and treasury operations will naturally prefer issuers with proven regulatory frameworks and minimal compliance risk. With fewer operational disruptions and clear alignment with federal policy, NYDFS trust companies are positioned as the most reliable choice for enterprises integrating stablecoins into their financial infrastructure.

The Road Ahead

With federal oversight becoming the dominant regulatory mechanism, the GENIUS Act will accelerate market consolidation among stablecoin issuers. Here are some predictions:

• Smaller issuers unable to meet compliance mandates will likely exit the market or seek acquisition by federally qualified entities.
• New York’s DFS framework will continue to be the preferred state regulatory model because the GENIUS Act aligns so well with New York’s existing requirements.
• Business adoption of stablecoin will accelerate as they gain confidence that stablecoins are regulated to maintain their USD backing.

For businesses using stablecoin infrastructure, the GENIUS Act offers clear guidance on which regulatory pathways will remain viable. Enterprises seeking stability should prioritize partnerships with NYDFS-regulated issuers or those already positioned for federal compliance.

Regulatory Alignment is the Foundation for Growth

The GENIUS Act represents the most comprehensive regulatory shift in the U.S. stablecoin market to date. Because its requirements so closely resemble the framework of New York, the Act is good news for well-regulated, well-capitalized issuers. This creates a strong foundation for institutional adoption and long-term stability.

For issuers already aligned with NYDFS or federal frameworks, this transition is a competitive advantage. Those outside these pathways must act quickly to comply or face market exclusion.

Ultimately, the GENIUS Act sends a clear message: regulatory alignment is no longer optional—it is the foundation for sustainable growth in the stablecoin market.