AML Compliance Policies for Stablecoin Oversight: What the U.S. GENIUS and STABLE Acts Could Mean for AML Compliance

Stablecoins like USDT and USDC surpassed $210 billion in global market capitalization by the end of last year. To back their tokens, issuers collectively invested around $40 billion in U.S. Treasury bills, rivaling major government money market funds.

In response to this growth, the U.S. introduced its first federal framework for stablecoins. The GENIUS Act, signed into law in July 2025, places stablecoin issuers under traditional banking oversight. They must meet standards for identity verification, transaction monitoring, and risk assessment. The pending STABLE Act focuses on legal classification rather than operational rules.

This blog outlines what the GENIUS and STABLE Acts mean for fintechs, banks, crypto platforms, and stablecoin issuers, and how businesses can stay compliant in this new regulatory environment.

AML Compliance in Stablecoin Oversight: Understanding the GENIUS Act of 2025

Passed in 2025, the GENIUS Act is the first U.S. law to establish clear regulatory standards for payment stablecoins. It brings stablecoin issuers under federal banking oversight, requiring them to operate with the same level of accountability expected from financial institutions.

The law requires issuers offering services in the U.S. to maintain formal compliance structures. These include identity verification through know-your-customer (KYC) processes, customer due diligence, and real-time monitoring of transactions. Issuers must also appoint compliance officers and implement ongoing risk assessments tailored to their business models.

Issuers are expected to conduct sanctions screening through the U.S. Treasury’s Office of Foreign Assets Control and establish technical capabilities that allow them to freeze or restrict tokens when instructed by legal authorities.

This requires maintaining internal policies, conducting risk assessments, appointing dedicated compliance officers, and monitoring all customer activity. Key obligations include:

• Customer Due Diligence and KYC: Issuers must implement know-your-customer processes that match the standards applied by banks and money service businesses. This involves confirming both the identity and the beneficial ownership of the involved parties.
• AML Program Design and Maintenance: Issuers must create and maintain a complete compliance program, including suspicious activity reporting, transaction monitoring, and mandatory staff training
• Sanctions Screening: Real-time sanctions list screening against the U.S. Treasury's Office of Foreign Assets Control is required before any transaction is processed.
• Technical Controls for Enforcement: Issuers must build internal capabilities to freeze, seize, or render tokens inactive when instructed by lawful authorities.

AML compliance is now mandatory for stablecoin issuers under the GENIUS Act. They must back tokens one-to-one with U.S. dollars or Treasury bills, submit monthly attestations, avoid offering yield, and implement enforcement-ready systems with full KYC, monitoring, and auditability. 

How the GENIUS Act Applies: Penalties, Risk Obligations, and Cross-Border Impact

The GENIUS Act moves beyond simply classifying stablecoins or setting reserve rules. It creates a full operational model for how stablecoin issuers are licensed, audited, and held accountable. Covering everything from international compliance and consumer protection to live enforcement capabilities, the law defines how digital dollar oversight works in practice. 

This section explains the mechanisms regulators will use to monitor compliance and ensure stablecoin issuers meet expectations globally.

Regulatory Enforcement and Audit Framework

Stablecoin issuers are placed under ongoing supervision by federal and state banking regulators. Agencies such as the OCC and FDIC are responsible for issuing licenses and for conducting routine and unannounced examinations. These can include targeted reviews of AML systems, internal controls, and data handling practices.

Issuers must submit monthly attestation reports from independent auditors that confirm full reserve backing and liquidity compliance. When discrepancies appear, regulators can pause new issuance, impose capital requirements, or revoke licenses entirely. 

Public disclosure of these audits and enforcement actions is required to increase transparency and reinforce trust among users and market observers.

Cross-Border AML Compliance for Foreign Issuers

Foreign stablecoin issuers that intend to serve U.S. users must meet specific conditions to gain access to the U.S. market. These include registration with the OCC and submission of a comprehensive AML compliance program for review. Issuers must also demonstrate that their home jurisdiction applies AML and sanctions regulations comparable to those in the U.S.

In addition, foreign firms must appoint a U.S.-based compliance officer who can respond to inquiries from American regulators. Failing to meet these obligations may result in a denial of access to the U.S. market. These requirements create consistent expectations for all participants and reduce gaps that bad actors might otherwise exploit.

Technical Safeguards for Financial Crime Enforcement

The GENIUS Act requires stablecoin issuers to build compliance functionality directly into their technology systems. These safeguards must include features that allow the freezing, blocking, or reversal of transactions based on legal directives.

Systems should also support full traceability so that any enforcement action, whether triggered by a court or internal controls, is logged, time-stamped, and available for audit. Regulators expect issuers to demonstrate that their systems cannot be easily manipulated to avoid detection. 

This includes proving that measures are in place to detect tactics like transaction splitting, sanctions evasion, or other evasive behavior.

Consumer Protections and Anti-Speculation Measures

To preserve the stability of digital payments, the law prohibits stablecoin issuers from offering yield, staking, or other interest-bearing features. This reduces speculation and keeps the asset focused on value preservation rather than investment return.

Consumer funds must be clearly segregated, with full disclosures about how redemptions are handled. In the case of issuer insolvency, users holding stablecoins are prioritized over institutional creditors. 

Redemptions must occur at par value without fees or delays, ensuring users can trust that each token maintains a 1-to-1 value with its underlying reserve. These protections are central to building user confidence in regulated stablecoins.

Objectives And The Implications of the STABLE Act of 2025

The STABLE Act of 2025, formally called the Stablecoin Transparency and Accountability for a Better Ledger Economy Act, remains under consideration in Congress. Unlike the GENIUS Act, it does not yet impose operational AML requirements. 

Instead, its primary purpose is to create legal clarity by defining how stablecoins should be classified under U.S. financial law. This clarity has major implications for issuers and investors, even though its direct impact on AML compliance is less pronounced.

STABLE Act Objectives and Classification Impact

The STABLE Act seeks to confirm that payment stablecoins are not securities, commodities, or investment products. It does this by amending several foundational laws, including the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940. 

If passed, these changes would prevent stablecoin issuers from being regulated by the Securities and Exchange Commission or treated as investment companies. For issuers, this legal certainty would lower the risk of overlapping or conflicting regulatory demands. 

For investors, it provides reassurance that stablecoins are not speculative securities but rather designed for payment use. Although this clarification does not create specific AML compliance rules, it reinforces the argument for oversight by banking and payments regulators, where AML requirements are already well established.

Regulatory Overlap and Potential Harmonization

Because the GENIUS Act has already been signed into law, the STABLE Act must eventually align with it. Analysts expect that if the STABLE Act is passed, its provisions will be reconciled with the GENIUS framework to avoid gaps or duplication. 

The GENIUS Act already mandates full AML compliance under the Bank Secrecy Act. Therefore, any entity relying on the STABLE Act’s legal clarity would still need to implement AML obligations set out in GENIUS.

This overlap means the STABLE Act functions more as a supporting measure than a standalone regulatory framework. It could strengthen legal certainty for issuers while reinforcing the importance of banking-style AML programs. 

The two acts together may create a unified standard that clarifies stablecoin classification while ensuring financial integrity through comprehensive compliance.

Implications for AML Compliance Programs

Even though the STABLE Act does not include explicit AML requirements, it is still relevant for compliance planning. Removing securities law as an obstacle shifts regulatory focus more directly to banking authorities. This increases the likelihood that GENIUS-style AML frameworks will become the baseline for all issuers.

For financial institutions and fintechs, this means preparing for AML compliance under GENIUS should be the default strategy. Waiting for the STABLE Act to pass without building an AML program is not viable. 

In practice, both domestic and foreign issuers must assume that AML compliance will remain central to stablecoin regulation in the U.S., regardless of the outcome of the STABLE Act.

How Lucinity Helps Enforce AML Compliance in Stablecoin Oversight

For stablecoin issuers under the GENIUS Act, AML compliance is a mandatory requirement. The law requires systems that handle KYC, real-time monitoring, sanctions screening, audit records, and the technical ability to respond to enforcement requests. Lucinity offers stablecoin businesses the technology framework to meet these obligations while maintaining their current operations.

Case Manager: Lucinity’s Case Manager enables stablecoin issuers to manage all compliance-related activities from a single interface. It unifies transaction alerts, investigation tasks, compliance escalations, and audit documentation in one streamlined environment. 

This is especially valuable when responding to regulatory audits or preparing monthly reserve attestations. Case Manager makes the entire AML process visible, consistent, and fully auditable, reducing operational risk and manual overhead across high-volume token ecosystems.

Luci AI Agent: For issuers managing high transaction volumes and facing regulatory demands for rapid detection of suspicious activity, Luci offers a clear efficiency gain. Within the Case Manager, Luci reviews transactions, compiles case summaries, flags risk indicators, and prepares regulatory documents such as SARs far faster than a manual team could.

It also conducts negative news checks, adverse media analysis, and sanctions screening, all in a secure and explainable format. With Luci, compliance teams can act faster and with greater confidence, while still maintaining oversight and accountability.

Luci Plug-in: Stablecoin firms often operate across fragmented tech stacks, relying on spreadsheets, web portals, and third-party monitoring tools. The Luci plug-in allows them to automate AML workflows directly within these environments, without needing custom integrations. 

Whether retrieving transaction details from Excel or running a money flow analysis through a web dashboard, the plug-in makes Luci’s functions available within the team’s existing tools. This allows stablecoin issuers to maintain consistent AML controls across systems while improving efficiency and reducing delays.

Customer 360: Customer-level visibility is a core requirement under the GENIUS Act. Lucinity’s Customer 360 tool aggregates KYC data, behavioral patterns, and third-party inputs to deliver a full profile of wallet holders and transaction counterparties. 

Risk scores update dynamically based on new activity, enabling compliance teams to detect shifts in user behavior, emerging jurisdictional risks, or transaction anomalies. This provides issuers with an efficient and scalable way to meet evolving expectations for customer due diligence and continuous monitoring.

Wrapping Up

The GENIUS Act has changed how digital asset compliance is handled in the United States. Stablecoin issuers are now expected to meet the same AML requirements as traditional financial institutions, starting with systems that are enforceable, well-documented, and able to scale. The STABLE Act, which emphasizes legal definitions, is expected to align with GENIUS over time, adding further weight to these regulatory demands.

Key Takeaways

1. The GENIUS Act requires all stablecoin issuers serving the U.S. market to fully comply with the Bank Secrecy Act.
2. The STABLE Act, though not yet law, provides legal certainty that complements existing AML compliance requirements rather than replaces them.
3. Foreign stablecoin issuers must meet U.S.-equivalent AML and sanctions standards and register with U.S. regulators to operate legally.
4. Stablecoin businesses need modular, automation-ready technology like Lucinity’s platform to stay compliant at scale and avoid enforcement risks.

For compliance leaders and product teams in fintech and digital finance who want to invest in operational systems that make AML compliance efficient, auditable, and regulator-ready, visit Lucinity today!

FAQs

What is AML Compliance in the context of stablecoins?AML compliance means implementing systems to prevent money laundering, including customer due diligence, transaction monitoring, and sanctions checks.

How does the GENIUS Act affect AML Compliance?It mandates that stablecoin issuers follow Bank Secrecy Act rules, including risk assessments, KYC, and full auditability.

Does the STABLE Act reduce AML Compliance requirements?No. The STABLE Act clarifies legal definitions but does not override AML compliance expectations set by the GENIUS Act.

How can technology support AML Compliance for stablecoins?Tools like Lucinity’s Case Manager and Luci Agent streamline investigations, improve consistency, and automate reporting.