By: Rashonda Harris
Since the Guiding and Establishing National Innovation for U.S. Stablecoins Act (hereinafter, the “GENUIS Act”) was passed by Congress and signed into law by President Trump, there is increased interest in digital assets among both regulators and industry participants.[1] The GENIUS Act enhances the legitimacy of the cryptocurrency market by bringing stablecoins under federal financial oversight, but the scope of its regulatory framework remains unclear.[2] The purpose of the GENIUS Act is to provide consumer protection measures for investors using stablecoins for payments and to strengthen the U.S. dollar in the global financial system.[3] Despite the enhanced federal oversight, risks remain for stablecoin investors.[4] As an alternative, the banking industry is championing a different kind of digital asset that leverages existing bank supervision to ensure against consumer losses.[5] Tokenized deposits offer deposit-backed digital tokens that can be used for payments, similar to a stablecoin, but offer significantly less risk to consumers.[6]
The GENIUS Act delineates reserve requirements and mandates federal licensing for stablecoin issuers, but outlines a dual supervisory system for oversight.[7] Federal regulators are responsible for stablecoin issues above $10 billion, while state regulators retain authority below that threshold, so long as their frameworks are substantially similar to federal standards.[8] While the legislation formally assigns federal regulators oversight, it does not designate a lead regulator for stablecoins, thereby maintaining the oversight patchwork of the past.[9] For stablecoin issuers, successful compliance may require coordinating across as many as five separate agencies.[10]
On the other end of the digital asset regulation spectrum are tokenized deposits, which, unlike stablecoins that have risen in prominence in recent years, are issued by fully licensed depository institutions subject to stringent oversight by financial regulators.[11] Tokenization converts traditional asset rights into a digital token that can be accessed through a distributed ledger such as a blockchain.[12] Tokenized deposits leverage that framework to represent commercial deposits as tokens on a bank’s private blockchain.[13] Each token is backed by actual bank deposits and can be leveraged by banks to accelerate payment settlements.[14] As those deposits are still subject to federal deposit insurance, they offer a less risky distributed ledger digital asset that can be used for payment.[15]
While these technologies have enormous potential to revolutionize financial services, integrating crypto into them has had disastrous results in the past.[16] The GENIUS Act sets licensing requirements for stablecoin issuers, including reserve and custody requirements; its safety and soundness requirements pale in comparison to those applicable to banks.[17] The risk of consumer losses from digital asset “runs” remains, despite the additional reserve requirements for issuers.[18] The regulatory patchwork may increase the likelihood of an oversight, since no single agency has complete authority over stablecoin issuers. Similarly, while the Act includes consumer protection provisions in addition to reserve requirements, these provisions apply to stablecoins used for payments rather than to the financial instrument itself.[19] This could cause consumers to falsely assume that any stablecoin is subject to government oversight.
In contrast, tokenized deposits offer capabilities like those of a stablecoin, with clear oversight and consumer protection for bank deposits.[20] This offers consumers a safe, reliable alternative to stablecoins without additional compliance requirements.[21] It is true that the risk of bank runs persists despite federal guarantees; however, the government is positioned to respond quickly to mitigate losses in the event of a bank failure.[22]
As digital assets continue to permeate the highly regulated field of financial services, our lawmaking approach can provide clues to future industry participants. The current paradigm maintains the U.S.’s murky approach to technology in financial services. However, federal regulators can and should support innovation within historically supervised entities.
[1] See Guiding and Establishing National Innovation for U.S. Stablecoins Act, 12 U.S.C. §§ 5901–5916 (2025); Zennon Kapron, Tokenized Deposits Vs. Stablecoins: The Quiet War For Cross‑Border Money, Forbes (May 26, 2025, at 12:01 ET), https://www.forbes.com/sites/zennonkapron/2025/05/26/tokenized-deposits-vs-stablecoins-the-quiet-war-for-crossborder-money/ [https://perma.cc/49KT-A3TZ]; see, e.g., Vantage Bank and Custodia Announce Launch of Tokenized Deposits for U.S. Banks, PRnewswire (Oct 23, 2025, at 10:40 ET), https://www.prnewswire.com/news-releases/vantage-bank-and-custodia-announce-launch-of-tokenized-deposits-for-us-banks-302592931.html [https://perma.cc/VC3R-3CJR].
[2] See Natalie Sherman, US Passes First Major National Crypto Legislation, BBC (Jul. 17, 2025), https://www.bbc.com/news/articles/cd78lvd94zyo [https://perma.cc/29K4-39YG]. But see GENIUS Act, supra note 1 (assigning oversight authority to relevant federal authorities, but not identifying which agent should lead oversight).
[3] See Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law, White House (Jul. 18, 2025), https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-signs-genius-act-into-law/ [https://perma.cc/QH98-XFT2].
[4] E.g., Jiageng Liu, Antoinette Schoar & Igor Makarov, Anatomy of a Run: The Terra Luna Crash, Harv. L. Sch. F. on Corp. Governance (May 22, 2023), https://corpgov.law.harvard.edu/2023/05/22/anatomy-of-a-run-the-terra-luna-crash/ [https://perma.cc/RNW2-EUJM].
[5] See Generated by AI Agent Coin World, JPMorgan Explores Tokenized Deposits Amid Regulatory Shift Away from Stablecoins, AInvest (July 20, 2025, at 14:35 ET), https://www.ainvest.com/news/jpmorgan-explores-tokenized-deposits-regulatory-shift-stablecoins-2507 [https://perma.cc/6NS8-3TTN].
[6] Brooke Ybarra & Yikai Wang, Decoding Digital Money: The Real Difference Between Stablecoins and Tokenized Deposits, ABA Banking J. (Sep. 22, 2025), https://bankingjournal.aba.com/2025/09/decoding-digital-money/ [https://perma.cc/K67M-M36S].
[7] See Guiding and Establishing National Innovation for U.S. Stablecoins Act, 12 U.S.C. §§ 5905–5906 (2025).
[8] Id.
[9] See id. at §§ 5901, 5903, 5913; 12 U.S.C. § 1813 (defining “Appropriate Federal Banking Agency” as the various agencies assigned responsibility in the Federal Deposit Insurance Act and assigning rulemaking to “Federal Banking Agencies”).
[10] See Letter from Jonathan V. Gould, Senior Deputy Comptroller and Chief Counsel, OCC Chief Counsel’s Interpretation on National Bank and Federal Savings Association Authority to Hold Stablecoin Reserves, Off. of the Comptroller of the Currency (Sep. 21, 2020), https://www.occ.gov/topics/charters-and-licensing/interpretations-and-actions/2020/int1172.pdf [https://perma.cc/F8Y5-EQT7]; see also SEC FinHub Staff, SEC FinHub Staff Statement on OCC Interpretation, U.S. Sec. and Exch. Comm’n (Sept. 21, 2020), https://www.sec.gov/newsroom/speeches-statements/sec-finhub-statement-occ-interpretation [https://perma.cc/W8VL-C99K]; Press Release, Commodity Futures Trading Comm’n, CFTC Orders Tether and Bitfinex to Pay Fines Totaling $42.5 Million (Oct. 15, 2021), https://www.cftc.gov/PressRoom/PressReleases/8450-21 (on file with the American University Business Law Review); see also 12 U.S.C. §§ 5901–5916 (2025) (requiring compliance with money transmission laws and bank secrecy act requirements).
[11] See Ybarra & Wang, supra note 6; Arthur E. Wilmarth, Jr., We Must Protect Investors and our Banking System from the Crypto Industry, 101 Wash. U. L. Rev. 235, 293–298 (2023), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4360175 [https://perma.cc/6FC7-A24F].
[12] Debarshi Bandyopadhyay, Deposit Tokens: Bridging Traditional Banking and the Digital Economy, KPMG, https://kpmg.com/xx/en/our-insights/value-creation/deposit-tokens-bridging-traditional-banking-and-the-digital-economy.html [https://perma.cc/7GUG-JDC9] (last visited Nov. 8, 2025).
[13] Id.
[14] Id.
[15] See Wilmarth, Jr., supra note 11, at 295.
[16] See What To Know About Cryptocurrency and Scams, Fed. Trade Comm’n (May 2022), https://consumer.ftc.gov/articles/what-know-about-cryptocurrency-scams [https://perma.cc/3LM9-Y7JL].
[17] Compare Guiding and Establishing National Innovation for U.S. Stablecoins Act, 12 U.S.C. § 5903 (2025) with Acts and Regulations, Am. Bankers Ass’n, https://www.aba.com/banking-topics/compliance/acts#sort [https://perma.cc/R2DL-Y7PE] (last visited Nov. 10, 2025).
[18] E.g., Liu, Schoar & Makarov, supra note 4.
[19] See 12 U.S.C. § 5906.
[20] See Wilmarth, Jr., supra note 11, at 293–94; Ybarra & Wang, supra note 6.
[21] See Wilmarth, Jr., supra note 11, at 295–96.
[22] See id. at 293–94; see, e.g., Michael Evans, What Happened to Silicon Valley Bank, Investopedia (Mar. 31, 2025), https://www.investopedia.com/what-happened-to-silicon-valley-bank-7368676 [https://perma.cc/ANE9-F8GC].
