The GENIUS Act: A Game-Changer for Credit Unions and Their Members

On July 18, 2025, President Donald Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act into law, marking a historic milestone as the first federal regulatory framework for stablecoins. This legislation enables federally insured credit unions to issue – opening up new opportunities for innovation while maintaining regulatory compliance and member protection.

The Unique Opportunity for Credit Unions

The GENIUS Act allows federally insured credit unions and their subsidiaries, such as Credit Union Service Organizations (CUSOs), to issue or stablecoins, which are digital assets pegged to the U.S. dollar. These partnerships enable credit unions to offer innovative payment solutions, generate new revenue streams, and compete with payment leaders like PayPal and Square.

By leveraging stablecoins, credit unions can reduce transaction costs and provide services like instant loan disbursements or 24/7 payment settlements. This means faster access to funds for members and improved liquidity for businesses. Stablecoin rails can also facilitate cross-border transfers at lower costs, reduce currency fluctuation risks, streamline back-office payment processing, and integrate seamlessly with digital wallets.

Additionally, stablecoins can make it easier for credit unions to pay foreign contractors or employees – potentially expanding hiring opportunities and operational flexibility. Together, these capabilities give credit unions a competitive edge and increased relevancy in today’s digital-first financial landscape.

Ways Credit Union Members Can Benefit

Stablecoins offer members faster, cheaper, and more flexible payment options. Imagine a small business owner receiving instant invoice payments, saving hours on settlement times; or, a member sending $500 to family abroad for just $2 in fees instead of $20 via traditional methods.

Stablecoins also promote financial inclusion: underbanked members or gig workers can access real-time, low-cost transactions. Programmable features, such as automated savings or bill splitting, enhance the member experience. Although stablecoins are not NCUA-insured (National Credit Union Administration), the Act’s consumer protections – including prioritizing stablecoin holders in bankruptcy – emphasize trust and security.

Understanding Regulatory Risk & Member Protection Is Key

Credit unions and their members must understand that stablecoins are NOT NCUA-insured deposits, meaning they lack the federal deposit insurance protection that traditional savings and checking accounts provide. Despite being backed by USD reserves, stablecoins still carry market volatility risk that could affect their value stability.

Technology and cybersecurity risks are also inherent in digital asset operations, and robust security measures and incident response protocols must be prioritized. Regulatory changes at the federal or state level could also impact stablecoin operations and compliance requirements, potentially affecting service availability or costs. Additionally, credit unions will have third-party provider dependencies when partnering with stablecoin issuers, creating operational and counterparty risks that must be carefully managed.

However, the legislation establishes several key safeguards to protect stablecoin holders and maintain market confidence. Full reserve backing requires stablecoin issuers to maintain one-to-one support with U.S. dollars or short-term Treasury securities, ensuring adequate liquidity for redemptions. In bankruptcy proceedings, stablecoin holders receive priority treatment, meaning their claims are prioritized over general creditors when accessing reserve assets. Transparency requirements mandate monthly reserve disclosures and annual independent audits, which provides ongoing verification of reserve adequacy and proper fund management. Finally, customer funds must be segregated from issuer assets, creating a legal firewall that protects stablecoin holders even if the issuing entity faces financial difficulties.

From a regulatory compliance perspective, credit unions must implement comprehensive AML and CFT (Anti-Money Laundering and Countering the Financing of Terrorism) aligning with existing NCUA oversight. Institutions subject to the BSA must also undergo an independent review of their BSA/AML programs at least annually (or every 12–18 months for lower-risk entities) to ensure compliance and address the unique risks associated with digital assets. The GENIUS Act also establishes tiered oversight, placing issuers with over $25 billion in circulation under the Office of the Comptroller of the Currency, while smaller issuers – including most credit unions – can opt for state-level regulation if certified as equivalent.

To Seize the Opportunity, Credit Unions Must Act Today

To capitalize on the GENIUS Act, credit unions must act quickly to stay ahead of competitors like PayPal, with its PYUSD stablecoin, and Square, which supports crypto payments through Cash App.

There are four keys to getting started:

• Leverage a compliant, regulated stablecoin provider with audited reserves and established banking relationships to support issuing or custody of stablecoins – reducing operational complexity and accelerating service deployment. If needed, seek an experienced advisor with experience in facilitating CUSO partnerships.
• Strengthen compliance by updating AML and CFT and cybersecurity programs to meet the Act’s standards, building on established NCUA frameworks. A trusted advisor can provide guidance here, but proven experience in this sector is paramount.
• Educate members with clear resources on stablecoin benefits (such as faster payments, lower costs, and ease of transfer). Also educate members on potential risks, including the fact that stablecoins are not NCUA-insured (National Credit Union Administration) and do not have the same protections as traditional deposits. Include guidance on potential tax obligations, like capital gains reporting, so members understand both the opportunities and responsibilities, and to foster transparency and trust.
• Innovate services by integrating stablecoins into mobile apps for seamless payments, remittances, or programmable features like automated savings.

With strategic partnerships, credit unions can deepen member relationships, attract tech-savvy and underbanked individuals, and reinforce their role as trusted financial partners. By maintaining regulatory compliance and member protections, credit unions can seize new opportunities for innovation.

To learn more about Wolf & Company’s Digital Assets practice and how we support credit unions navigating stablecoin innovation, contact our team today.