Key takeaways
- Section 4(a)(1)(A) of the GENIUS Act requires a permitted payment stablecoin issuer to hold identifiable reserves backing outstanding stablecoins on at least a one to one basis.
- Only eight classes qualify: coins, currency and Federal Reserve balances; deposits withdrawable on demand; short Treasuries; two kinds of overnight repo; government money market funds; regulator-approved federal assets; and tokenized forms of these.
- Treasury bills, notes and bonds qualify if they have a remaining maturity of 93 days or less, or were issued with a maturity of 93 days or less.
- Reserves may not be pledged, rehypothecated or reused, except for three narrow purposes set out in section 4(a)(2).
- The Act takes effect on the earlier of January 18, 2027 or 120 days after final regulations; the OCC proposed its implementing rule on February 25, 2026.
What are the key facts on GENIUS Act reserves?
The GENIUS Act fixes, in statute, the short list of assets a US payment stablecoin issuer may hold as reserves.
| Item | Position |
|---|---|
| Rule | GENIUS Act (Public Law 119-27), section 4(a)(1)(A) and 4(a)(2) |
| Regulators | Primary federal payment stablecoin regulators, including the OCC, or the state regulator for a state qualified issuer |
| Applies to | Permitted payment stablecoin issuers |
| Enacted | July 18, 2025 |
| Effective | Earlier of January 18, 2027 or 120 days after final implementing regulations |
| Last checked | October 11, 2026, against Public Law 119-27 and OCC Bulletin 2026-3 |
What does section 4(a)(1)(A) require?
It requires identifiable reserves backing outstanding payment stablecoins at a ratio of at least one to one, made up only of listed assets.
The enacted text requires each permitted payment stablecoin issuer to maintain identifiable reserves backing its outstanding payment stablecoins on at least a one to one basis. Identifiable means the issuer can point to each reserve asset and show it is held for that purpose, not simply that its balance sheet is large enough. Our guide to what the GENIUS Act is covers the wider framework; this page deals only with what may sit in the reserve.
Which assets are eligible?
Eight classes are eligible, and anything outside them does not count toward the one to one backing.
| Clause | Eligible reserve | Main condition |
|---|---|---|
| (i) | United States coins and currency, or money standing to the credit of an account with a Federal Reserve Bank | None beyond being held for the reserve |
| (ii) | Funds held as demand deposits, or other deposits withdrawable on request at any time, or insured shares, at an insured depository institution | Subject to limitations set by the FDIC and the NCUA |
| (iii) | Treasury bills, notes or bonds | Remaining maturity of 93 days or less, or issued with a maturity of 93 days or less |
| (iv) | Money received under repurchase agreements, with the issuer as seller of securities | Overnight maturity, backed by Treasury bills with a maturity of 93 days or less |
| (v) | Reverse repurchase agreements, with the issuer as buyer | Overnight, collateralized by Treasury bills, notes or bonds, overcollateralized on standard terms, and tri-party, centrally cleared through an SEC-registered clearing agency, or bilateral with a counterparty judged adequately creditworthy in severe stress |
| (vi) | Securities issued by a registered investment company or other registered government money market fund | Invested solely in assets in clauses (i) to (v) |
| (vii) | Other similarly liquid federal government-issued assets | Approved by the primary regulator |
| (viii) | Reserves in clauses (i) to (iii) or (vi) to (vii) in tokenized form | Must comply with all applicable laws and regulations |
Assets commonly held by money market funds or other cash managers, such as commercial paper, certificates of deposit with notice periods, corporate bonds, longer-dated Treasuries and other stablecoins, are not on the list. A fund that holds them does not qualify under clause (vi).
How does the 93-day test work?
A Treasury security qualifies if either its remaining maturity or its original maturity is 93 days or less.
The two tests are alternatives. A 4-week or 13-week bill qualifies from the day it is bought, because it was issued with a maturity of 93 days or less. A 26-week bill or a 2-year note does not qualify when bought, but becomes eligible once its remaining maturity falls to 93 days. Issuers that buy longer instruments in anticipation must therefore track each holding's maturity date and exclude it from the reserve count until it crosses the threshold. The same 93-day limit applies to the Treasury bills backing clause (iv) repos.
Can reserves be pledged or reused?
No, except for three purposes listed in section 4(a)(2).
Reserves may not be pledged, rehypothecated or reused by the issuer, directly or indirectly. The exceptions are: meeting margin obligations for reserve investments in overnight repos and reverse repos under clauses (iv) and (v); meeting obligations arising from standard custodial services; and creating liquidity to meet reasonable redemption requests by selling Treasury bills under repurchase agreements of 93 days or less, provided the repo is cleared through an SEC-registered clearing agency or the issuer's regulator has approved it in advance. The Act also requires that, where an issuer carries on other approved activities, stablecoin holders' claims on reserve assets rank senior to the claims of other creditors.
How does the reserve connect to redemption?
The reserve exists to meet redemptions, so the Act pairs it with a published redemption policy.
Section 4(a)(1)(B) requires the issuer to publicly disclose its redemption policy, with clear and conspicuous procedures for timely redemption. Fees must be disclosed in plain language and can change only after at least 7 days' notice to consumers. A reserve made only of eligible assets can still fail this test in practice if too much of it cannot be turned into cash on the day redemptions arrive. Treasury bills settle quickly, overnight repos unwind the next morning, but a bank deposit can be frozen if the bank fails, and a money market fund can impose its own settlement timing. That is why section 4(a)(4) leaves liquidity and diversification standards to the regulators on top of the statutory list.
How does the GENIUS list compare with money transmitter rules?
It is much narrower than the permissible investment lists most money transmitters use.
| Asset | GENIUS Act reserve | MTMA permissible investment |
|---|---|---|
| Cash and insured deposits | Eligible | Counts in full |
| Treasuries | Only within the 93-day test | Counts in full, any maturity |
| State and local government obligations | Not listed | Counts in full |
| Commercial paper and rated corporate bonds | Not eligible | Up to 20% per category, 50% combined |
| Receivables from agents | Not eligible | Up to 50%, 10% per delegate |
| Standby letter of credit | Not eligible | Full drawable amount |
A firm that holds both a money transmitter license and a stablecoin issuer approval cannot use one portfolio for both tests without checking each asset against both lists. Our state-by-state table of permissible investments sets out the money transmitter side, and our guide to DFAL reserve requirements covers California's separate rules for digital asset businesses.
What will the implementing rules add?
They will add capital, liquidity, diversification and interest rate risk standards on top of the statutory list.
Section 4(a)(4) directs the primary regulators to issue rules on capital, the liquidity standard, reserve asset diversification and interest rate risk management, and operational, compliance and information technology risk. Capital and diversification standards must be tailored to the issuer's business model and must not exceed what is sufficient to ensure the issuer's ongoing operations. The OCC published its proposed rule, a new 12 CFR part 15, on February 25, 2026 in OCC Bulletin 2026-3; it covers reserve assets and redemption, risk management, audits and reports, custody, and a capital and operational backstop. Firms should check for final rules before relying on any proposed figure.
How is a reserve portfolio tested?
Each holding is checked against the eight classes, and only eligible assets are compared with tokens outstanding.
Worked example. An issuer has 2,000,000,000 tokens outstanding at month end, each redeemable for one US dollar. Its reserve portfolio is shown below.
| Holding | Value ($m) | Eligible? | Counted ($m) |
|---|---|---|---|
| Demand deposits at two insured banks | 300.0 | Yes, clause (ii) | 300.0 |
| 13-week Treasury bills | 1,100.0 | Yes, clause (iii), issued at 93 days or less | 1,100.0 |
| 26-week Treasury bills with 120 days remaining | 150.0 | No, neither test met | 0.0 |
| Overnight tri-party reverse repo against Treasuries | 400.0 | Yes, clause (v) | 400.0 |
| Government money market fund holding only eligible assets | 100.0 | Yes, clause (vi) | 100.0 |
| Commercial paper rated A-1+ | 50.0 | No, not a listed class | 0.0 |
| Total | 2,100.0 | 1,900.0 |
The portfolio is worth $2,100.0 million, 105% of tokens outstanding, but only $1,900.0 million is eligible, so backing is 95% and the issuer is $100.0 million short. Selling the commercial paper and buying 4-week bills restores $50.0 million at once. The 26-week bills become eligible once their remaining maturity reaches 93 days, which in this example is 27 days later, so the issuer must cover the other $50.0 million from eligible assets in the meantime.
What should an issuer check?
These checks keep the reserve inside the statutory list every day.
- Map every reserve holding to a clause in section 4(a)(1)(A), and exclude anything that does not map.
- Record the issue date and maturity of every Treasury holding and test both 93-day conditions daily.
- Confirm each repo is overnight and record whether it is tri-party, centrally cleared or bilateral.
- Obtain the money market fund's holdings to confirm it invests solely in eligible assets.
- Keep evidence that no reserve asset is pledged, other than under the three permitted exceptions.
- Reconcile reserves to bank and custody statements and tokens outstanding to on-chain supply at the same cut-off.
- Track proposed and final rules from the issuer's primary regulator for diversification and liquidity limits.
Our guides to stablecoin reserve reconciliation and the GENIUS Act monthly reserve report cover the daily and monthly evidence.
How does Safeheld help?
Safeheld reconciles bank and custody records and the issuance ledger every day, so the reserve that is tested is the reserve actually held.
Differences between tokens outstanding and eligible reserves are raised as breaks for investigation. See daily reconciliation.
Frequently asked questions
What reserves are allowed under the GENIUS Act?
US coins and currency or Federal Reserve balances, deposits withdrawable on demand at insured institutions, Treasury bills, notes or bonds within the 93-day test, certain overnight repos and reverse repos, government money market funds holding only those assets, other federal assets approved by the regulator, and tokenized forms of these.
What is the 93-day rule?
Treasury bills, notes and bonds qualify if their remaining maturity is 93 days or less, or if they were issued with a maturity of 93 days or less.
Can commercial paper or corporate bonds back a payment stablecoin?
No. They are not among the eligible classes in section 4(a)(1)(A), and a fund holding them does not qualify as an eligible money market fund.
Can GENIUS Act reserves be rehypothecated?
No, except to meet margin on overnight repos and reverse repos, for standard custodial services, or to raise liquidity for redemptions through cleared or pre-approved short Treasury repos.
Can reserves be held in tokenized form?
Yes. Clause (viii) allows reserves in clauses (i) to (iii) and (vi) to (vii) in tokenized form, if they comply with applicable laws and regulations.
When do the reserve requirements apply?
When the Act takes effect: the earlier of January 18, 2027 or 120 days after the primary regulators issue final implementing regulations.
Does the reserve need to exceed one to one?
The Act sets a minimum of one to one. Capital, liquidity and diversification standards come from the regulators' implementing rules.
References
- Public Law 119-27, Guiding and Establishing National Innovation for U.S. Stablecoins Act (govinfo.gov)
- Public Law 119-27, enrolled text (PDF)
- OCC Bulletin 2026-3, Notice of proposed rulemaking implementing the GENIUS Act (February 25, 2026)
About Safeheld
Safeheld is reconciliation and regulatory financial control software for regulated firms that hold client money. For stablecoin issuers it reconciles tokens outstanding, bank and custody balances and the issuance ledger every day, so the eligible reserve position is known before the month-end report. To discuss your reserve operations, contact us at safeheld.com/contact.
This article is general information on US stablecoin and digital asset rules and is not legal or regulatory advice.