As the digital asset ecosystem matures, governments are racing to create legal frameworks that encourage innovation while safeguarding financial integrity. The United States recently made a landmark move with the introduction of the GENIUS Act. This proposed legislation outlines a robust federal framework for stablecoin regulation, focusing on transparency, reserve backing, and anti-money laundering (AML) compliance.
However, stablecoin issuers must consider more than just domestic U.S. obligations. Across the Atlantic, the European Union’s Markets in Crypto-Assets (MiCA) Regulation imposes stringent AML, consumer protection, and licensing rules on digital asset service providers, including U.S.-based companies that market or offer tokens to EU users.
This article examines the novel aspects of the GENIUS Act, the continued obligations under MiCA, and the growing importance of AML compliance as a unifying requirement across jurisdictions.
The U.S. GENIUS Act: A Federal Framework for Stablecoins
The GENIUS Act marks a turning point in U.S. regulatory policy toward stablecoins, which are cryptocurrencies pegged to fiat currencies like the U.S. dollar. The Act aims to foster innovation while addressing systemic risk, consumer protection, and illicit finance concerns.
Key Provisions of the GENIUS Act:
- Federal Licensing Regime: Stablecoin issuers must obtain approval from the OCC or relevant federal regulators depending on their charter type
- Reserve Requirements: Stablecoins must be backed 1:1 by high-quality liquid assets such as U.S. Treasuries or insured bank deposits. Reserves must be held in segregated accounts and audited regularly.
- AML and KYC Compliance: Issuers must implement robust AML and Know Your Customer (KYC) programs in line with the Bank Secrecy Act (BSA) and guidance from FinCEN. The GENIUS Act explicitly subjects issuers to federal AML oversight and reporting requirements, including:
- Customer identity verification (KYC)
- Suspicious activity reporting (SARs)
- Transaction monitoring and risk assessments
- Sanctions screening and OFAC compliance
- Technology Neutrality: The Act is blockchain-agnostic, allowing flexibility in how stablecoins are issued and transacted.
- Consumer Disclosures: Issuers must provide transparent disclosures about redemption rights, risks, and reserve composition.
- Preemption of State Laws: A federal license preempts most state-level money transmitter laws, offering a more scalable compliance path.
The GENIUS Act positions the U.S. to compete globally in digital asset innovation while ensuring that stablecoin issuers meet the same rigorous AML standards as traditional financial institutions.
The EU’s MiCA Regulation: A Comprehensive Regime with Extraterritorial Reach
While the GENIUS Act modernizes domestic policy, MiCA (Markets in Crypto-Assets Regulation) is the EU’s attempt to regulate the crypto economy across its 27 member states. MiCA includes a sweeping framework for crypto-asset issuers, exchanges, custodians, and stablecoin providers, regardless of where they are based.
U.S.-based stablecoin issuers may fall under MiCA if they offer, promote, or facilitate access to their tokens within the EU.
MiCA Requirements for Stablecoin Issuers (E-Money Tokens – EMTs):
- EU Authorization: Only EU-authorized e-money institutions or credit institutions can issue EMTs. U.S. firms must either partner with or establish an EU-regulated entity to offer services legally.
- White Paper & Regulatory Approval: Issuers must publish a MiCA-compliant white paper, disclosing key information about the token, reserve assets, redemption rights, and risk factors. Approval by a national competent authority is typically required.
- Reserve and Safeguarding Requirements: EMTs must be backed 1:1 by fiat currency, held in segregated accounts, and redeemable at par value. Funds must be safeguarded in line with the EU’s E-Money Directive.
- AML/CTF Obligations Under MiCA and AMLD: MiCA is closely integrated with the EU’s Anti-Money Laundering Directive (AMLD) framework. Issuers and crypto-asset service providers (CASPs) must:
- Verify customer identities and assess risk profiles
- Monitor transactions and report suspicious activity
- Maintain AML policies, internal controls, and training
- Cooperate with Financial Intelligence Units (FIUs) in EU states
- Marketing and Distribution Restrictions: Tokens cannot be promoted or distributed to EU users without full MiCA compliance. Even passive accessibility (e.g., availability on a DeFi platform) may trigger legal obligations.
- EBA Oversight for Significant EMTs: EMTs that reach systemic thresholds, based on market cap, daily volume, or user base, face enhanced supervision by the European Banking Authority (EBA).
AML Compliance as a Global Imperative
AML has emerged as the common thread tying together regulatory regimes across the globe. Both the GENIUS Act and MiCA place a strong emphasis on anti-money laundering and counter-terrorism financing (CTF) compliance, making it a cornerstone of any stablecoin issuer’s legal strategy.
Key AML Challenges for Cross-Border Stablecoin Issuers:
- Dual Compliance: U.S. issuers must meet FinCEN/BSA standards and the EU’s AMLD requirements. This includes overlapping obligations for identity verification, transaction screening, and suspicious activity reporting.
- Data Sharing & Localization: AML obligations often require secure, cross-border data handling, which raises issues of GDPR compliance when EU user data is involved.
- Decentralized Models: For algorithmic or hybrid stablecoin models, implementing effective AML controls without centralized oversight can be particularly difficult and may invite regulatory scrutiny.
- Third-Party Risk: Partnering with custodians, wallets, or exchanges—especially those operating in the EU—requires thorough vendor due diligence and contractual enforcement of AML standards.
Strategic Considerations for non-EU / U.S. Stablecoin Issuers
As the regulatory landscape evolves, stablecoin projects must adopt a proactive, jurisdiction-aware compliance strategy. Companies should consider the following steps:
- Regulatory Mapping: Determine where the token is available, promoted, or used. If EU users are involved, MiCA and AMLD likely apply.
- Implement a Global AML Framework: Design AML programs that comply with both U.S. and EU standards. This may include hiring compliance officers with international experience and implementing dual reporting capabilities.
- Build Internal Audit and Training Programs: Regulatory authorities increasingly expect stablecoin issuers to demonstrate ongoing AML controls through internal audits, staff training, and board-level oversight.
- Coordinate With EU Counsel: Establishing a regulated EU entity or partnering with one may be the most viable path for stablecoin distribution in Europe. Local legal counsel can assist in navigating white paper approvals, licensing, and AML supervision.
- Geofence and Limit EU Exposure (If Necessary): If an issuer does not wish to engage with MiCA or AMLD obligations, they should consider restricting access to EU users through geofencing, disclaimers, and marketing limitations.
