Banks Are Issuing Stablecoins Now: How the GENIUS Act Unleashed Institutional Issuance

For a decade, stablecoin issuance belonged to crypto-native companies. Tether launched USDT from the British Virgin Islands. Circle built USDC with venture capital and fintech partnerships. Banks watched from the sidelines, constrained by regulatory ambiguity and institutional caution. That changed on July 18, 2025, when President Trump signed the GENIUS Act into law, creating the first comprehensive U.S. federal framework for permitted payment stablecoins. Now, traditional banks are issuing stablecoins of their own, and the competitive landscape that Tether and Circle built is facing its most serious challenge yet.

Within six months of the law's passage, SoFi Bank launched the first stablecoin issued by a nationally chartered, FDIC-insured bank. By September 2026, a consortium of 21 global financial institutions, including Goldman Sachs, Bank of America, Citi, and UBS, announced plans for a joint stablecoin venture. The question is no longer whether banks will enter the stablecoin market. It is how fast they will reshape it.

What the GENIUS Act Actually Says

The Guiding and Establishing National Innovation for U.S. Stablecoins Act (Public Law 119-27) passed the Senate 68-30 on June 17, 2025, cleared the House 308-122 on July 17, and was signed the following day. Its effective date is the earlier of 18 months after enactment (January 18, 2027) or 120 days after final regulations are issued. For a detailed breakdown of the law's provisions, see our GENIUS Act explainer.

The law restricts payment stablecoin issuance to three categories of entities:

1. Subsidiaries of insured depository institutions regulated by a federal banking agency
2. Nonbank institutions supervised by the OCC as "federal qualified payment stablecoin issuers"
3. State-chartered entities operating under state frameworks certified as "substantially similar" to the federal framework

Non-financial firms are generally prohibited from issuing stablecoins. This provision effectively blocks big tech companies from launching their own dollar tokens while opening the door for every bank in the country.

Why this matters: Before the GENIUS Act, banks had no clear legal authority to issue stablecoins. The OCC had released interpretive letters permitting certain crypto activities, but no statute addressed stablecoin issuance directly. The GENIUS Act provides the legal certainty banks require before committing capital and reputation to a new product line.

Reserve Requirements: Stricter Than Existing Issuers

Section 4 of the GENIUS Act mandates 1:1 backing: issuers must maintain reserves equal to or exceeding the face value of all outstanding stablecoins. The law specifies exactly which assets qualify as reserves:

• U.S. currency and deposits at insured depository institutions
• Treasury bills, notes, or bonds with remaining maturity of 93 days or less
• Repurchase agreements collateralized by Treasuries with maturity of 93 days or less
• Money market funds invested solely in the other listed asset classes
• Any of the above in tokenized form, plus other liquid government-issued assets approved by the primary regulator

Reserves must not be pledged or rehypothecated, with narrow exceptions for overnight repos. This is notably stricter than historical Tether practices. For years, USDT's reserves included commercial paper, secured loans, and other assets that would not qualify under the GENIUS Act framework. Stablecoin reserves under this regime look more like a Treasury money market fund than a diversified portfolio.

Reporting and Accountability

The transparency requirements go well beyond what any stablecoin issuer currently provides voluntarily:

• Monthly public disclosure of reserve composition
• Monthly examination of reserves by a PCAOB-registered independent accounting firm
• CEO and CFO must personally certify accuracy of reserve disclosures
• Annual attestation by an independent accounting firm on internal controls
• Issuers with more than $50 billion in outstanding stablecoins must publish annual audited financial statements

Personal certification by the CEO and CFO mirrors the Sarbanes-Oxley regime for public companies. This creates individual liability for misrepresentation, a mechanism entirely absent from existing stablecoin governance.

Consumer Protections

Holders must be able to redeem stablecoins at par value. Fees must be disclosed in advance, and changes to redemption terms require seven days' notice. In bankruptcy or insolvency, stablecoin reserves are excluded from the issuer's estate, and holders receive a super-priority claim. This bankruptcy protection is a first for digital assets and directly addresses the lesson of the redemption risk exposed by the collapse of algorithmic stablecoins and crypto lending platforms.

The $10 Billion Threshold: State vs Federal Oversight

The GENIUS Act creates a two-tiered regulatory system based on the size of a stablecoin's outstanding supply. State-licensed issuers with $10 billion or less in circulating stablecoins may operate under state frameworks, but only if those frameworks are certified as "substantially similar" to federal standards by the Stablecoin Certification Review Committee (SCRC).

Issuers that cross the $10 billion threshold must notify the OCC within five business days, complete a capital analysis within 270 days, and transition to federal oversight within 360 days or obtain a waiver. If they fail to comply, they must cease issuance. This creates a clear growth path: start under state regulation, scale to federal oversight.

The Treasury published a separate notice of proposed rulemaking on April 3, 2026, outlining the broad-based principles for determining whether a state regime qualifies as substantially similar. States may be more conservative than federal standards but not more permissive.

The OCC's Role in Bank Stablecoin Issuance

The Office of the Comptroller of the Currency has been laying groundwork for bank stablecoin participation since 2020 through a series of interpretive letters. Understanding this regulatory history explains why banks were ready to move quickly once the GENIUS Act passed.

Key Interpretive Letters

In 2020 and 2021, the OCC issued a sequence of letters that incrementally expanded what national banks could do with crypto assets. IL 1170 (July 2020) permitted crypto-asset custody services. IL 1172 (September 2020) allowed banks to hold dollar deposits backing stablecoins. IL 1174 (January 2021) said banks could participate in distributed ledger networks and engage in certain stablecoin payment activities.

However, IL 1179 (November 2021) imposed a supervisory non-objection (SNO) requirement, effectively creating a permission gate that chilled bank participation. The current OCC reversed course with IL 1183 on March 7, 2025, rescinding the SNO requirement and confirming that crypto custody, stablecoin activities, and DLT participation are permissible for national banks without prior approval.

IL 1186, issued November 18, 2025, went further: national banks may purchase and sell GENIUS Act payment stablecoins as principal to facilitate payment activities. On February 25, 2026, the OCC published a Notice of Proposed Rulemaking to implement the GENIUS Act, creating a new Part 15 of Title 12 of the Code of Federal Regulations covering licensing, reserves, prudential standards, custody, capital, reporting, supervisory fees, and enforcement.

In December 2025, the OCC conditionally granted national trust bank charters to Circle, Paxos, and several other nonbank firms, signaling that both incumbent crypto issuers and new entrants would be able to operate under the federal framework.

Early Movers: Which Banks Are Issuing Stablecoins

SoFi: First National Bank Stablecoin

On December 18, 2025, SoFi Bank launched SoFiUSD, the first stablecoin issued by a U.S. nationally chartered, FDIC-insured bank on a public, permissionless blockchain. SoFiUSD is deployed on Ethereum, backed 1:1 by cash held at the Federal Reserve in SoFi Bank's own master account. This reserve structure is arguably superior to even short-term Treasury backing: cash at the Fed carries zero credit risk and zero duration risk.

SoFi initially positioned SoFiUSD for enterprise settlements before extending access to its 14.7 million retail members. The bank also positioned itself as stablecoin infrastructure for other banks, fintechs, and enterprise platforms, recognizing that many institutions would prefer to integrate an existing bank-issued stablecoin rather than build their own.

ZLUSD: The Zelle Consortium Stablecoin

On June 11, 2026, Early Warning Services announced ZLUSD, a USD-backed fiat-backed stablecoin designed for international consumer payments within the Zelle network. Early Warning Services is jointly owned by seven of the largest U.S. banks: Bank of America, Capital One, JPMorgan Chase, PNC Bank, Truist, U.S. Bank, and Wells Fargo.

The first planned corridor is U.S. to India remittances, expected before the end of 2026. The specific issuance mechanics, custody arrangements, and on-chain details have not yet been disclosed, but the involvement of seven systemically important banks signals that stablecoin-based cross-border payments are moving from crypto-native experiments to mainstream banking infrastructure.

The 21-Bank Global Consortium

On September 1, 2026, a consortium of 21 global financial institutions announced plans to form a company and issue a joint USD stablecoin. The members span three continents:

• North America: Bank of America, Capital One, Citi, Fidelity Investments, Goldman Sachs, PNC Financial Services, Scotiabank, TD Bank Group, Wells Fargo, WisdomTree
• Europe: Banco Santander, BBVA, Commerzbank, Credit Agricole, Deutsche Bank, Lloyds Banking Group, Rabobank, UBS
• Asia/Middle East/Africa: MUFG Bank, Sirius International Holding, Standard Bank

Company formation is planned for H2 2026, with the USD stablecoin launch targeted for H1 2027, aligning with the GENIUS Act's January 18, 2027 effective date. The consortium also plans to add stablecoins denominated in other G7 currencies, starting with the euro.

Scale matters: The combined assets of the 21 consortium members dwarf the entire existing stablecoin market. If even a fraction of their customer base adopts a bank-issued stablecoin, the competitive dynamics between USDT and USDC could shift dramatically.

Other Banks in Motion

Bank of America CEO Brian Moynihan stated in February 2025 that BofA would enter the stablecoin business once federal law allowed it. JPMorgan, which already operates Kinexys Digital Payments (formerly JPM Coin) as a tokenized deposit for institutional clients, was reported by the Wall Street Journal in August 2026 to be holding early internal conversations about issuing a true payment stablecoin under the GENIUS Act framework.

Bank Stablecoins vs Tether and Circle

As of early September 2026, the stablecoin market totals approximately $302 billion. Tether (USDT) holds roughly $183 billion (about 59% market share) and Circle (USDC) holds roughly $74 billion (about 24%). Together, they control over 83% of the market. How do bank-issued stablecoins stack up against these incumbents?

The reserve quality advantage is significant. SoFiUSD holds cash directly at the Federal Reserve, which carries zero credit risk and zero duration risk. Even USDC's reserves, while high quality, involve Treasury securities and deposits at commercial banks that carry some counterparty exposure. Tether's historically opaque reserve composition, which once included commercial paper and secured loans, would not qualify under the GENIUS Act framework.

For a deeper analysis of how USDT and USDC compete on metrics beyond reserves, see our coverage of stablecoin competitive dynamics.

Card Networks and Infrastructure Players

Banks are not the only traditional financial institutions moving into stablecoins. The card networks are building infrastructure that could accelerate bank stablecoin adoption:

• Visa launched a global Stablecoins Advisory Practice in December 2025, with over 20 client engagements and $3.5 billion in annual stablecoin settlement volume
• Mastercard acquired stablecoin payments company BVNK in March 2026 for up to $1.8 billion, its largest digital-asset deal
• In June 2026, Visa, Mastercard, Coinbase, Stripe, and over 140 businesses launched the "Open Standard" consortium to issue Open USD, a new USD-pegged stablecoin
• Stripe closed its $1.1 billion acquisition of stablecoin infrastructure firm Bridge in February 2025

These moves suggest that the traditional payment rails are preparing to route stablecoin transactions alongside card payments. For banks issuing their own stablecoins, integration with Visa and Mastercard's settlement networks could provide distribution that crypto-native issuers lack.

Potential Market Share Shifts

The stablecoin market has been a near-duopoly. USDT and USDC together hold 83% of the roughly $302 billion market. But the entry of regulated banks changes the competitive calculus in several ways.

Distribution Advantage

Banks have something crypto-native issuers do not: existing customer relationships. SoFi alone has 14.7 million members. The seven banks behind ZLUSD collectively serve hundreds of millions of accounts. The 21-bank consortium spans three continents and dozens of countries. Minting a bank stablecoin could be as simple as converting a checking account balance, a user experience fundamentally different from the exchange-mediated flow required to acquire USDT or USDC.

Yield Sharing and Deposit Competition

One dimension where bank-issued stablecoins may differentiate is yield. Under the GENIUS Act, the question of whether stablecoin issuers can share reserve yield with holders remains subject to regulatory interpretation. The CLARITY Act introduced additional provisions around this topic. Banks, which already pay interest on deposits, could potentially structure stablecoin products as tokenized deposits that carry deposit insurance and yield, a combination that neither USDT nor USDC currently offers.

Segmented Markets

Realistically, different stablecoins will serve different markets. USDT will likely retain dominance in offshore trading and emerging market dollarization. USDC may continue to lead in DeFi and developer ecosystems. Bank-issued stablecoins are best positioned for correspondent banking, cross-border remittances, payroll, trade finance, and enterprise treasury operations: use cases where regulatory certainty and institutional trust matter more than permissionless access.

Bank-Issued Stablecoins on Bitcoin Infrastructure

Most bank stablecoin discussions assume Ethereum or private ledgers as the settlement layer. But the combination of bank-issued stablecoins with Bitcoin Layer 2 infrastructure opens a different possibility: regulated dollar payments with instant finality, self-custody, and no smart contract risk.

Spark, a Bitcoin Layer 2 built on statechains, already supports native token issuance through the BTKN standard. Stablecoins like USDB are live on Spark today. Bank-issued stablecoins deployed on this infrastructure would inherit several properties that differentiate it from EVM-based settlement:

• Transfers settle instantly without on-chain transactions or block confirmation delays
• Users maintain self-custody through a two-of-two multisig model with threshold-signed operator keys
• Unilateral exit to Bitcoin L1 is always available, even if operators go offline
• No exposure to smart contract vulnerabilities, reentrancy attacks, or EVM-specific exploit vectors
• Native interoperability with Lightning for payments to any Lightning wallet

For banks evaluating which rails to issue stablecoins on, Bitcoin infrastructure offers a trust-minimized alternative to permissioned blockchains and a more battle-tested security model than newer smart contract platforms. Wallets like General Bread already demonstrate how Spark-powered stablecoin payments work in practice: instant transfers, self-custodial storage, and seamless Lightning compatibility.

What Comes Next

The GENIUS Act becomes fully effective no later than January 18, 2027. The OCC's Notice of Proposed Rulemaking closed its comment period on May 1, 2026, and final rules are expected in late 2026. Several milestones will shape how the bank stablecoin landscape develops:

• The SCRC must certify state regulatory frameworks, determining which states can host sub-$10B issuers
• The 21-bank consortium must form its company and obtain regulatory approvals before its H1 2027 launch target
• Early Warning Services must finalize ZLUSD's issuance mechanics and launch the U.S.-India remittance corridor
• Circle and Paxos must navigate the transition from state money transmitter licenses to their new OCC national trust bank charters
• The question of yield sharing on stablecoin reserves remains open and could determine whether bank stablecoins compete with bank deposits

For developers building on stablecoin infrastructure, the implications are concrete: more issuers mean more tokens to support, but also more demand for cross-issuer settlement, multi-stablecoin wallets, and chain-agnostic payment routing. The Spark SDK provides the tools to build on Bitcoin-native stablecoin rails today, while the regulatory framework crystallizes around bank issuance. For further analysis on the evolving stablecoin regulatory landscape, see our global regulation tracker.

This article is for educational purposes only. It does not constitute financial or investment advice. Bitcoin and Layer 2 protocols involve technical and financial risk. Always do your own research and understand the tradeoffs before using any protocol.