ISO Compliance Insights & Best Practices
CART
ISO Compliance Insights & Best Practices
GENIUS Act reserve requirements are the part of the statute an issuer can least afford to read from a summary. Section 4(a)(1)(A) says reserves must back outstanding payment stablecoins on at least a 1 to 1 basis and then lists, in eight clauses, the only assets that count. Section 4(a)(2) says those reserves may not be pledged, rehypothecated or reused, with three narrow exceptions. Section 4(a)(1)(C) and 4(a)(3) say the composition is published monthly, examined by a registered public accounting firm, and certified by the chief executive and chief financial officer under criminal penalty for a knowing falsehood.
This guide works through the GENIUS Act reserve requirements clause by clause, as they read in the enrolled text of Public Law 119-27, which takes effect on 18 January 2027. Where a proposed rule from the OCC or the FDIC adds a number, it says so and says that the number is proposed, because none of the implementing rules was final when this was written.
The core of the GENIUS Act reserve requirements is one sentence with a list attached. A permitted payment stablecoin issuer shall maintain identifiable reserves backing its outstanding payment stablecoins on at least a 1 to 1 basis, with reserves comprising the assets in clauses (i) to (viii). Three words in that sentence do most of the work.
Identifiable means the reserve assets can be traced to the stablecoin liability and distinguished from every other asset of the issuer, its parent and its custodian, at any time. A reserve that sits inside the issuer’s general treasury is not identifiable. At least means 1.0 is a floor, not a target; a coverage ratio that dips to 0.998 for two hours on a delayed wire is a breach for those two hours, whether or not it is cured by close of business. And comprising means the list is closed. An asset that is not in one of the eight clauses is not a reserve, however liquid, however highly rated.
The GENIUS Act reserve requirements name exactly eight classes, and most of them carry a condition that is easy to miss in a paraphrase.
| Clause | Asset | The condition that matters |
|---|---|---|
| (i) | United States coins and currency, or money in an account at a Federal Reserve Bank | A Federal Reserve account only where the issuer is eligible for one; section 4(a)(13) says the Act confers no new eligibility |
| (ii) | Demand deposits, or other deposits withdrawable on request at any time, or insured shares at an insured depository institution, including its foreign branches and correspondent banks | Withdrawable on request, so a time deposit is out; subject to limits the FDIC and NCUA set for the receiving institution’s safety and soundness |
| (iii) | Treasury bills, notes or bonds | Remaining maturity of 93 days or less, or issued with a maturity of 93 days or less; either limb suffices |
| (iv) | Money received under overnight repurchase agreements, the issuer as seller | Backed by Treasury bills with a maturity of 93 days or less |
| (v) | Overnight reverse repurchase agreements, the issuer as purchaser | Collateralised by Treasuries, overcollateralised on standard market terms, and tri-party, centrally cleared through an SEC-registered clearing agency, or bilateral with a counterparty the issuer has determined adequately creditworthy even in severe market stress |
| (vi) | Registered government money market fund shares | Invested solely in assets in clauses (i) to (v); a fund that may hold anything else does not qualify |
| (vii) | Any other similarly liquid Federal Government-issued asset | Only after the primary Federal regulator approves it, in consultation with the State regulator where there is one |
| (viii) | Tokenised forms of the above | Only clauses (i) to (iii) and (vi) to (vii); tokenised repo and reverse repo are not eligible, and the tokenised asset must comply with all applicable law |
The 93-day Treasury limb of the GENIUS Act reserve requirements repays a second look. A ten-year note with 90 days to run qualifies, because its remaining maturity is under 93 days. A 13-week bill qualifies for its whole life, because it was issued at 93 days or less. A two-year note with six months to run qualifies on neither limb and must not be held.
The bilateral reverse-repo limb in clause (v) is the other trap. Tri-party and centrally cleared trades need no counterparty judgement. A bilateral trade needs a documented determination that the counterparty is adequately creditworthy even in the event of severe market stress, which is a higher bar than an investment-grade rating and is the issuer’s own decision to defend.
Reserves may not be pledged, rehypothecated or reused by the issuer, directly or indirectly. “Indirectly” catches the arrangements a custody agreement or a fund structure can create without the issuer signing anything that says “pledge”. The only exceptions are the three in section 4(a)(2):
Exception (C) is the one that will be used, and its condition is the one that will be missed. It is also the point at which the GENIUS Act reserve requirements meet the liquidity standard the regulators will set. A liquidity repo that is neither cleared nor pre-approved is a reuse of reserves in breach of the GENIUS Act reserve requirements, however sensible it was on the day.
The GENIUS Act reserve requirements do not stop at holding the assets. Section 4(a)(1)(C) requires the issuer to publish the monthly composition of its reserves on its website, showing the total number of outstanding payment stablecoins and the amount and composition of the reserves, including the average tenor and geographic location of custody of each category of reserve instrument. Every element is mandatory. A category the issuer does not use is shown at zero, so a reader can see the list is complete.
Section 4(a)(3)(A) then requires that information to be examined each month by a registered public accounting firm, meaning a firm registered with the PCAOB. Section 4(a)(3)(B) requires the chief executive officer and the chief financial officer to submit a certification of the report’s accuracy to the regulator each month. Section 4(a)(3)(C) subjects a person who submits that certification knowing it to be false to the criminal penalties in 18 U.S.C. 1350(c), the Sarbanes-Oxley certification offence.
One drafting note for anyone reading the statute closely: section 4(a)(3)(A) refers to the monthly report as “paragraph (1)(D)”. There is no paragraph (1)(D). The report is paragraph (1)(C), and a program should cite it that way rather than reproduce the error.
The statutory GENIUS Act reserve requirements are the floor; section 4(a)(4)(A) requires the primary Federal payment stablecoin regulators, or the State regulator for a State qualified issuer, to issue regulations implementing capital requirements, the liquidity standard, reserve asset diversification standards including deposit concentration at banking institutions, interest-rate risk management standards, and operational, compliance and IT risk standards. The Act sets no numbers for any of these; it requires them to be tailored to the business model and risk profile and to go no further than ensuring the issuer’s ongoing operations.
The OCC’s March 2026 proposal, published in the Federal Register, did put numbers on several of those: daily and weekly liquidity floors, concentration ceilings per institution, a weighted-average-maturity cap and a redemption timeline. Every one of them was a proposal, and proposals change. A program that adopts them as requirements today is wrong on the day the final rule differs; a program built on the statute with a board-set interim limit adopts the final figure when it lands and keeps its own limit where stricter.
The GENIUS Act reserve requirements separate two pools that a bank treasury habitually merges. Reserves back the stablecoins and, under section 11, belong in priority to holders: their claims rank first on required reserves in insolvency, and section 541(b)(11) of the Bankruptcy Code as amended keeps required reserves out of the estate. Capital is the issuer’s own money and absorbs the issuer’s own losses. The two are held in separate accounts, and the coverage ratio counts only the first.
Income earned on assets held under the GENIUS Act reserve requirements is the issuer’s, which is the business model. What the issuer may never do with it is pay it to holders: section 4(a)(11) prohibits any interest or yield to a holder solely in connection with holding, using or retaining the stablecoin, whatever it is called and whatever it is paid in. That prohibition sits inside the wider section 4 requirements, and it binds foreign issuers too.
No. Neither appears in clauses (i) to (viii), and the list is closed. Agency securities that the Federal Government itself did not issue are also outside it unless the regulator approves them under clause (vii).
Yes, under clause (viii), provided the underlying Treasury meets the 93-day test in clause (iii) and the tokenised holding complies with all applicable law. Tokenised repo and reverse repo are excluded; clause (viii) lists (i) to (iii) and (vi) to (vii) only.
It is the statutory floor, measured against outstanding stablecoins at par. Because Treasury holdings move with rates, a prudent issuer measures coverage at the lower of cost and market so that 1.0 is a ratio it could realise on the day, and holds capital to make good any mark-to-market gap.
The chief executive officer and the chief financial officer, personally, under section 4(a)(3)(B). It cannot be delegated, and a knowingly false certification is a crime under section 4(a)(3)(C).
Turning the GENIUS Act reserve requirements into an operating reserve function takes a policy, an eligible-asset standard, a reuse procedure with the three exceptions pre-approved, a repo counterparty procedure, a daily coverage workbook and the monthly report template with the CEO and CFO certification behind it. Our GENIUS Act Toolkit carries all of them across ten reserve documents and six monthly-reporting documents, built on the statute with every proposed figure kept in a rulemaking tracker rather than in a policy. The cost of standing that function up is mostly people and custody, not paper.
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