Stablecoins: GENIUS or just Sterling Governance?

The stablecoin fever is not just in the air, it is trading on the ticker, and $CRCL has just rung the opening bell.  

Circle Internet Group Inc, a company providing a platform supporting stablecoins and blockchain-based financial applications, and the issuer of the fully reserved, U.S. dollar-backed stablecoin USDC widely used across crypto trading, payments and decentralised finance, has just floated on the New York Stock Exchange with the ticker $CRCL on Thursday 5 June 2025.  

Amidst the commotion regarding the potential passing of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in the United States Senate with strong bipartisan support, and the release of the Financial Conduct Authority’s (FCA) Consultation Paper on stablecoin issuance (CP25/14), the price of $CRCL soared almost 10x from its Initial Public Offering price of USD $31.00 to a lofty high of USD $298.99 within three weeks, the kind of gain some native crypto participants might be familiar with. 

While the ethos of Bitcoin and cryptocurrency in general has long carried anti-government and censorship-resistant undertones, stablecoins increasingly represent the most pragmatic bridge to regulatory acceptance, positioning them as a gateway for governments to engage with digital assets without compromising monetary control.  

Below we compare the current approaches between the US and the UK when it comes to their ideas on regulating stablecoins. 

The Similarities 

1:1 Backed Assets.

The GENIUS Act requires stablecoin issuers to maintain reserves equal to the amount of stablecoins issued, backed 1:1 by U.S. dollars or high-quality liquid assets like Treasury bills as collateral support. This aims to ensure that each stablecoin is fully redeemable, enhancing consumer confidence and reducing the risk of runs. The FCA has taken the same approach. The FCA propose that qualifying stablecoin issuers will be required to back their coins with high quality, liquid assets which should be equal in value to all outstanding stablecoins at all times. The backing pool asset will be required to consist of certain low-risk instruments such as “on demand deposits”, and short-term government debt that has a maturity of one year or less (core-backing assets). However, the FCA does not intend to prescribe specific compositions of the backing pool assets, just as long as the issuers can meet redemption requests from holders and maintain parity with their reference currency. 

Transparency.

The GENIUS Act requires issuers to publicly disclose reserve compositions monthly and undergo annual audits. The transparency provisions are rightfully intended to prevent fraud and market manipulation, and to avoid the obvious horror stories of the past like the FTX collapse. The FCA also propose that firms be required to implement procedures to reconcile the backing pool assets on a daily basis, correcting any shortfalls or excess in a timely fashion to maintain the 1:1 backing. Firms will be required to maintain accurate records and must be validated independently at least annually, with disclosures at least quarterly. 

Standard AML/KYC Requirements.

The GENIUS Act and the FCA both align stablecoin issuers with existing financial institutions regarding regular AML/KYC requirements to help detect and prevent the illicit use of stablecoins. There will be rights to delay withdrawals in certain limited circumstances such as AML requirements, or where there is a threat to the integrity of the stablecoin.  

The Differences 

Regulatory Framework.

The GENIUS Act splits oversight of stablecoin issuers between federal level and state level. If the stablecoin issuer is large (over $10b in market capitalisation), then it must be regulated at federal level. These issuers must comply with stricter and more uniform requirements covering reserves, disclosures and AML compliance due to the larger systemic risk of failure. Smaller stablecoin issuers (under $10b) can choose to be regulated by state authorities, provided the state’s regulatory regime is considered substantially similar to the federal requirements in the GENIUS Act. This dual approach could encourage innovation and competition between start-ups trying to bring novel ideas to life in the stablecoin space. 

Across the pond, the UK proposes a centralised and fully harmonised model under the FCA and Bank of England (BoE). All fiat-backed stablecoin issuers and custodians must seek authorisation under the Financial Services and Markets Act 2023, regardless of size. Stablecoin firms in the UK will be subject to existing consumer protection, prudential risk and financial conduct requirements, aligned with how e-money and payment service providers are regulated. Though uniform and clear, this could stifle flexibility for start-ups in the UK due to the high regulatory barriers to entry and the requirement for full FCA authorisation. 

Definition and Scope.

The GENIUS Act defines "payment stablecoins" as digital assets designed to maintain a stable value relative to the US dollar, used as a means of payment or settlement. It explicitly excludes these from being treated as securities under federal law, creating a bespoke classification. This definition excludes algorithmic stablecoins or stablecoins backed by commodities and focuses largely on payment use-cases, leaving out broader cryptoasset activity. 

However, the FCA defines stablecoins broadly as digital assets that seek to maintain a stable value by referencing one or more fiat currencies. The scope of the FCA’s regulation encompasses both the issuance of stablecoins and the custody of related digital assets. The FCA proposes a consolidated legal framework by embedding stablecoins within existing FSMA regimes. It explicitly categorises stablecoins used for payments as within the regulatory perimeter. It aims to ensure that only fiat-backed stablecoins are permitted for use in systemic and regulated payment chains. 

Consumer Protection in an Insolvency Event.

The GENIUS Act does not establish a clear resolution regime for stablecoin issuers in the event of insolvency. Unlike traditional banks which have mechanisms to protect depositors, stablecoin holders may lack similar safeguards, exposing them to losses.  

Conversely in the UK, stablecoin custodians will be required to segregate client assets from their own house assets by holding tokens in clearly identified individual or multi-signatory wallets or accounts which are separate from any house holdings. The clients’ assets must be held on trust for the holder’s benefit. If the custodian becomes insolvent, the client’s assets will be ring-fenced from the estate and returnable to them, similar to the rules for traditional finance. 

Conclusion 

While neither regime is yet finalised or in effect, the direction of travel is extremely apparent.  Governments are discovering the potential to modernise public finance. Other than the US and the UK, governments in the EU, Japan, Singapore and UAE are all leaning into broader acceptance of blockchain technology  and trying to find relevant ways to bridge the gap between decentralised finance and traditional finance after years of resistance. Circle could have fired the starting gun with their successful IPO in the US.  

Shennind Awat-Ranai, Solicitor at KaurMaxwell