lost its dollar peg in March 2023 during the Silicon Valley Bank collapse, underscoring the need for transparency and high-quality reserves. Cybersecurity and compliance challenges are another area of concern. The rapid and global nature of stablecoin transactions increases the risk of money laundering and cyberattacks if issuers and intermediaries do not implement robust know-your-customer and anti-money laundering controls. Additionally, vulnerabilities in smart contracts or digital wallets could expose users and banks to technical and financial risks. Lastly, market concentration poses a threat; if major technology companies enter the stablecoin space unchecked, they could marginalize traditional banks and interfere with monetary policy implementation. Recognizing both the risks and opportunities posed by stablecoins, Congress passed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in July 2025. This bipartisan legislation – the first comprehensive federal framework governing payment stablecoins – was signed into law on July 18, after passing the Senate by a vote of 68–30 and the House by 308–122. The GENIUS Act aims to strike a balance between encouraging financial innovation and safeguarding consumer protection and financial stability. Under the law, only specific entities are permitted to issue payment stablecoins. These include subsidiaries of insured depository institutions, newly chartered nonbank issuers regulated by the Office of the Comptroller of the Currency and state-regulated entities operating under frameworks deemed substantially similar to federal standards. Issuers are required to maintain 1:1 reserves in high-quality liquid assets, such as cash, short-term U.S. Treasuries or balances held at the Federal Reserve. They are prohibited from engaging in risky practices like rehypothecation of reserves. To promote transparency and oversight, the Act mandates monthly reserve disclosures, annual independent audits and technical capabilities to freeze or redeem stablecoins in compliance with lawful orders. A tiered supervision structure is also introduced, with federal oversight triggered once an issuer surpasses $10 billion in circulation. Additional consumer protection provisions include asset safeguards in the event of insolvency, requirements for interoperability and statutory clarification that properly issued payment stablecoins are not considered securities under federal law. Notably, the GENIUS Act confirms that banks may offer tokenized deposit products and custodial services for digital assets within existing legal frameworks. Regulators are now tasked with drafting implementing rules, and existing stablecoin issuers have been granted a three-year transition period to comply with the new standards or exit the U.S. market. For Indiana’s banks and the broader financial industry, stablecoins represent both a strategic opportunity and a competitive challenge. When responsibly regulated, these digital assets can modernize payments, lower costs and strengthen the U.S. dollar’s role in the global digital economy – while reinforcing the traditional strengths of banks in providing secure and community-based financial services. The GENIUS Act attempts to create clarity for banks to enter this space with confidence. By setting consistent standards for reserve quality, transparency and issuer eligibility, the law creates a more stable environment for innovation. Banks are now positioned to participate – whether by issuing their own stablecoins, developing tokenized deposit solutions or partnering with fintech firms to build blockchain-based payment systems. As Indiana banks begin exploring these opportunities, their mission remains unchanged: ensuring safety, soundness and sustained investment in local communities. Smart regulation and continued refinement of the structure created by recent stablecoin legislation will better help position Indiana’s financial institutions at the forefront of digital financial transformation. Dax Denton Chief Policy Officer Indiana Bankers Association DDenton@indiana.bank Dax joined the IBA in 2008 and, as of April 2023, also serves as executive director for the Indiana Mortgage Bankers Association. Away from the office, he serves on the Boy Scouts Crossroads of America Council Board. Dax graduated from Indiana University, the IBA Leadership Development Program and the Graduate School of Banking at the University of Wisconsin. Ross Teare Former Vice President – Government Relations Indiana Bankers Association Ross served the IBA as vice president-government relations from October 2021 - August 2025, analyzing issues, reviewing legislation, building relationships with policymakers and enhancing IBA’s grassroots advocacy. He also led the IBA’s BankLEAD internship program and efforts to grow banking programs at Indiana colleges. Ross graduated from Butler University and the IBA Leadership Development Program. September/October 2025 37
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