The GENIUS Act and the new cryptocurrency rules

On July 18, 2025, when the bipartisan Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act was enacted into law, it became the most significant national law to date in the digital assets industry. Since then, this law has prompted many questions about what it is about, and how it will affect tax year 2025 tax planning and compliance.

The law primarily focuses on stablecoins that are meant to have an underlying asset from which it derives value, different from a standard cryptocurrency that may not have an underlying value tied to anything.

The good news: This law does not change how the IRS taxes cryptocurrency as intangible property, but it does introduce new regulatory and reporting requirements for brokers and cryptocurrency traders.

What is a stablecoin?

Similar to a money market fund that invests in short-term, low-risk debt, a stablecoin seeks to keep its value tied to something more “stable” for those who are more risk adverse or need to keep their funds tied to something less volatile than a cryptocurrency such as Bitcoin or Ethereum. 

The GENIUS Act defines a stablecoin as “ … a digital asset. It is designed to be used as a means of payment or settlement, and the issuer is obligated to convert, redeem, or repurchase for a fixed amount of monetary value, not including a digital asset denominated in a fixed amount of monetary value. The Act represents that such issuer will maintain, or create the reasonable expectation that it will maintain, a stable value relative to the value of a fixed amount of monetary value.”

Tax pros need to know that a stablecoin is a type of cryptocurrency that acts like digital money used to pay for things. The companies that issue them must exchange it back for real money at a set, predictable rate, and claim they’ll keep its value steady compared to regular money. It is not actual money, or a stock, bond, or other investment security that would be subject to wash sale rules. Instead, stablecoin is meant to act like a digital version of a US dollar with a stable value, and the assumption that you’ll always be able to cash it out at the promised rate. 

What regulatory requirements now exist?

The GENIUS Act now requires stablecoin issuers to maintain specific reserves to buy back stablecoins that are held in highly liquid assets, such as cash, on a 1:1 basis. If an issuer sells $1 million in stablecoins, they must hold $1 million in cash or other liquid assets in order to be ready to buy back any stablecoin at a moment’s notice.

Issuers are now required to publish monthly the amount they have in reserve, undergo monthly external audits, and certify reserve accuracy. In addition, issuers are now treated as financial institutions, and must implement standard procedures such as anti-money laundering programs and due diligence. They are neither allowed to pay interest on stablecoins, nor can they market suggesting that their product is government backed or legal tender.

How does this affect my clients?

While the GENIUS Act primarily provides regulatory guidance, many crypto investors will have questions about how this impacts their tax reporting requirements.

• Like other cryptocurrency, stablecoins are still treated as property with tax reporting requirements upon certain transactions. Businesses that accept stablecoin as a payment must record the fair market value (FMV) at the time of receipt to track basis, gains, and losses. 
• For business reporting purposes, a stablecoin on a balance sheet can only be classified as cash or a cash equivalent if it is issued by a permitted entity. 
• Stablecoins are designed to have less fluctuation in their value, but they still are likely to create capital gains and losses due to timing differences between their purchase and redemption, which requires detailed record keeping of FMV at time of purchase and at redemption. 
• Acquiring stablecoin from international entities may create additional reporting requirements around foreign currencies and accounts, such as the  Foreign Account Tax Compliance Act (FATCA) and Report of Foreign Bank Accounts (FBAR). 

Recommended steps for tax professionals

• Identify which of your clients currently buys or trades cryptocurrency and work with them to determine if any of their holdings are stablecoins. 
• Review the GENIUS Act, and take a CPE course in them if you have any individual or business clients who trade cryptocurrency.
• Stay up to date on IRS guidance around stablecoins because this is new legislation and reporting standards are not always available immediately. Form 1099-DA, Digital Asset Proceeds From Broker Transactions, is a new reporting form in 2025 that some brokers will be required to use to report proceeds and basis information on digital assets. Some clients may be surprised to receive this information. 
• Educate your cryptocurrency trading clients on the risks of international stablecoin trade, ensuring that stablecoin comes from permitted issuers, and classification requirements on the balance sheet. 

Bottom line

Stablecoin regulation helps bring this currency into the mainstream by making it less risky for traders. In the future, taxpayers may be able to use stablecoin in mainstream shopping, and businesses will be able to accept it with fewer transfer fees. Keeping excellent records on stablecoin transactions is the key to our clients moving into this next digital era with confidence.