Client Alert: GENIUS and CLARITY in Practice: Action Steps for Crypto Compliance
What Companies Should Be Focused on Now
Date: November 4, 2025
The next 12 months will separate leaders from laggards in U.S. digital finance. Congress’s passage of the GENIUS Act and rapid advancement of the CLARITY Act signal a turning point for stablecoin issuers, DeFi platforms, exchanges, and digital asset service providers. As federal agencies move quickly to draft implementing rules, businesses face pressing calls to prepare for “regulation-by-rulebook.”
Proactive compliance is not merely defensive – it is a competitive advantage. Firms that invest in robust governance, transparent operations, and strategic regulatory engagement will be best positioned to capture institutional trust and global capital flows.
For in-house counsel, compliance officers, and companies in the digital asset space, the time for preparation is now. Deals being negotiated today, payments accepted in crypto, and budgets being set for next year will all be judged against these new standards. Getting ahead means building compliance into operations while the rules are still being written.
What Should You Be Doing Today?
If your company issues stablecoins, operates a DeFi platform, runs a crypto exchange, or invests in digital assets, here are the most important steps to take right now:
- Conduct a Compliance Gap Audit: Review reserves, redemption processes, monthly audits, KYC/AML protocols, and documentation. Identify what needs updating to meet upcoming federal standards.
- Develop Your Licensing Roadmap: Federal registration will be required for most issuers; smaller firms (<$10B) may have state options if those states “substantially comply” with the federal regulations. Know what applications, filings, and internal processes you’ll need to move quickly.
- Update Your User Agreements & Disclosures: Align terms of service with the new redemption guarantees, enhanced transparency rules, and dispute resolution processes mandated by regulation. Early alignment prevents costly rewrites under regulatory pressure.
- Engage in Active Rulemaking: Treasury, the SEC, and the CFTC are launching public comment periods. Submit substantive input – either directly, through trade associations, or through counsel – to influence custody standards, audit frequency, and decentralization criteria.
- Prepare for Federal/State Coordination & Enforcement: Watch for regulatory overlap or conflicting requirements. Retain counsel ready to defend due process or preemption disputes. Early engagement helps reduce risk and protect your interests.
- Acceptance of Crypto Payments: If your company currently accepts crypto payments or plans to do so, treat them as a regulated activity under the new regime. Classify inflows: are they payment for goods/services, investment, or stablecoin redemptions? Each triggers different obligations.
- Secure Experienced Counsel: Engage lawyers who are deeply embedded in the crypto ecosystem – not just as regulators, but as active participants. These advisors can work shoulder-to-shoulder with your team to help trace on-chain activity to map reserve backing, simulate redemption scenarios under new reserve rules, and shape comment letters that reflect real-world liquidity needs.
Regulatory Timeline at a Glance
| Date | Milestone |
|---|---|
| Oct 2024 | GENIUS Act Discussion Draft Released |
| Feb 2025 | GENIUS Act Introduced |
| July 2025 | Full Senate Passage of GENIUS Act |
| Q4 2025 | CLARITY Act Reconciliation & Expected Passage |
| Q3 2026 | Licensing Applications Open / Enforcement Begins |
Federal agencies have begun the arduous process of rule drafting, inviting industry input and laying the groundwork for registration procedures, custody requirements, audit standards, and qualification tests. Early compliance will be key to avoiding enforcement scrutiny and maximizing institutional investor interest.
Practical Challenges and Cost Implications
- Stablecoin Issuers: Transitioning to 1:1 reserves and monthly attestations will carry annual compliance costs.
- DeFi Platforms: Must navigate the SEC’s Innovation Exemption—showing decentralization, robust security, and clear governance.
- Exchanges: Prepare for new AML, custody, disclosure, and registration standards, all of which will demand significant systems upgrades.
- Institutional Capital: Prior fraud-based losses have made compliance certainty a prerequisite for capital deployment. Regulatory clarity could unlock tens of billions in institutional inflows.
- Budgeting For Compliance: Mid and large-sized stablecoin operations should plan for $2-5 million annually in compliance costs. Smaller firms should weigh state vs. federal options early.
Litigation, Enforcement, and Policy Risks
- Retroactivity: Existing issuers may challenge penalties or registration requirements imposed retroactively.
- Federal vs. State Preemption: Historic disputes, like the NY BitLicense battles, foreshadow litigation between federal and state agencies under the new acts.
- Due Process and Procedure: Legal teams must anticipate due process claims, complex enforcement actions, and multi-agency investigations.
Global Implications and Market Positioning
- Foreign Issuers: Must decide whether to implement U.S.-aligned compliance or adopt geofencing, risking liquidity pool fragmentation.
- Institutional Investors: Proactive compliance gives stablecoin issuers and platforms a first-mover advantage for capturing global capital flows.
Overseas Companies Considering U.S. Entry
- Align Early With U.S. Compliance Standards: Begin adapting governance, AML/KYC, 1:1 reserve audits, and disclosure protocols now – so your launch or market entry won’t be delayed by licensing or registration hurdles.
- Anticipate Cross-Border Licensing and Legal Reviews: The GENIUS Act and upcoming SEC/CFTC rules will require non-U.S. issuers serving American users to meet U.S. standards or risk enforcement/gating measures (e.g., geofencing or market exclusion).
- Assess Jurisdictional & Operational Risk: International structures may require U.S. subsidiary formation, joint ventures, or hybrid compliance models to satisfy federal expectations while preserving access to global liquidity.
- Engage U.S. Counsel Early: Proactively engage legal, audit, and compliance advisors familiar with both U.S. and cross-border digital asset rules to design a tailored entry plan and navigate evolving requirements.
Looking Ahead
The next year will reward companies that treat compliance as a strategy, not just legal overhead.
If you have questions about compliance diagnostics, licensing preparation, comment letter drafting, or cross-border structuring, feel free to contact us to schedule a consultation.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.