LEGAL OUTLOOK - The GENIUS Act 2025: Stablecoin Shake-Up Heading for the UK

Olivia Eliadou
Nov 17, 2025
3 min read

Updated: Nov 27, 2025

What are stablecoins?

Stablecoins are a type of cryptocurrency designed to maintain a stable value, usually by being pegged to traditional assets such as the US dollar. They operate using blockchain technology, a secure, decentralised digital ledger that records transactions securely, and are part of a wider trend of tokenisation, where real-world assets are represented digitally.

Three Main Types

Fiat-backed: backed by actual reserves of currency.
Crypto-backed: backed by other cryptocurrencies.
Algorithmic: reliant on smart contracts but are higher risk.

The GENIUS Act

On 18 July 2025, the US enacted the Guiding and Establishing National Innovation for US Stablecoins Act, establishing the first federal framework for stablecoin regulation. It requires:

Full reserve backing: coins must be supported 1:1 by safe assets like cash or short-term US Treasuries.
Transparency: monthly public reserve disclosures and independent audits.
Licensing: only approved banks or financial institutions may issue.
Consumer protections: priority claims on reserves in insolvency and restrictions on misleading marketing.
AML/KYC compliance: issuers must follow anti-money-laundering rules and be able to freeze or seize tokens if required.
No interest or yield: issuers cannot pay returns on payment stablecoins.

Why This Matters

The Act brings legal certainty, potentially boosting consumer trust and accelerating institutional adoption. It also signals US intent to lead in digital asset regulation. However, critics argue that the high compliance thresholds may give large financial institutions an unfair advantage, cementing their market power, and make it harder for smaller innovative start-ups to compete.

Legal Outlook for the UK

The UK is advancing its own framework. Under the Financial Services and Markets Act 2023, HM Treasury’s April 2025 draft statutory instrument would bring fiat-backed stablecoins within scope, while FCA consultations on issuance, custody and resilience, alongside Bank of England oversight, reinforce this shift.

The GENIUS Act also raises the bar for cross-border compliance. UK issuers targeting US customers will need to satisfy American reserve, transparency, and licensing requirements. More broadly, foreign issuers face US Treasury comparability assessments, OCC registration, and US-held reserve mandates, without which distribution in the US will become unlawful after the Act’s transition period, an 18-month phase-in (or 120 days after final rules) that gives issuers time to comply.

Looking ahead, the UK is likely to accelerate alignment with US and EU rules such as MiCAR to attract innovation while safeguarding financial stability. This, coupled with global competitive pressure and the rapid tokenisation of payments, suggests that new UK guidance on reserves, redemption rights, and operational resilience is likely within the next 12-18 months.