GENIUS Act and Stablecoin Settlement Infrastructure for Tokenized Securities
Published February 16, 2026 · SEC Tokenization Research
GENIUS Act Foundation
The GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins Act), signed into law in July 2025, establishes the regulatory framework for payment stablecoins that will serve as the settlement layer for tokenized securities. The Act requires issuers to maintain 1:1 reserves in cash or short-term US Treasuries, publish monthly third-party attestation reports, and operate under federal (OCC) or state regulatory supervision. Payment stablecoins are explicitly excluded from securities and commodities classification — a critical distinction that enables their use as settlement media without triggering securities law complications. The Act prohibits stablecoin issuers from paying interest or yield, distinguishing payment stablecoins from interest-bearing tokenized deposits.
Bank-Issued Stablecoins and Tokenized Deposits
The GENIUS Act creates two complementary settlement instruments: bank-issued payment stablecoins (through approved subsidiaries of insured depository institutions) and tokenized deposits (preserved under existing banking authority). JP Morgan's JPMD — a tokenized representation of commercial bank deposits on Coinbase's Base network — demonstrates the tokenized deposit model, enabling 24/7 institutional settlement backed by JP Morgan's balance sheet. Unlike payment stablecoins, tokenized deposits can bear interest and carry FDIC insurance — making them attractive for institutional settlement where deposit insurance provides additional counterparty risk mitigation.
Atomic Delivery-versus-Payment Settlement
The convergence of GENIUS Act infrastructure with SEC tokenized securities guidance enables atomic delivery-versus-payment (DvP) settlement: simultaneous exchange of tokenized security and regulated stablecoin or tokenized deposit on blockchain. This eliminates settlement risk — the risk that one leg of a transaction settles while the other fails — which currently requires institutional participants to maintain capital buffers for settlement exposure. Atomic DvP reduces settlement from T+1 to near-instantaneous, frees capital currently held as settlement buffers, and eliminates the reconciliation costs of managing asynchronous settlement legs across disparate systems.
Implementation Timeline and Institutional Readiness
GENIUS Act implementation is proceeding through multiple regulatory workstreams: Treasury Department ANPRM soliciting public comment on implementation questions, FDIC proposed rulemaking for application procedures for FDIC-supervised institutions, OCC licensing framework for federal non-bank stablecoin issuers, and Federal Reserve oversight of systemically important stablecoin activities. Institutional readiness for stablecoin-settled tokenized securities requires: custody infrastructure supporting both tokenized securities and regulated stablecoins, compliance systems monitoring stablecoin issuer reserve attestations and regulatory status, treasury management integration for real-time settlement against institutional cash positions, and risk framework updates incorporating stablecoin counterparty and operational risks.
2026-2028 Institutional Outlook
The trajectory for genius act and stablecoin settlement infrastructur within US capital markets points toward significant institutional expansion through 2026-2028. The convergence of regulatory clarity (SEC January 2026 taxonomy), infrastructure development (DTCC tokenization services launching H2 2026), and settlement innovation (GENIUS Act stablecoin framework) creates the institutional foundation for meaningful market scaling. Tokenized US Treasuries alone are projected to reach $20-30 billion by end of 2026, with the broader tokenized securities market potentially reaching $500 billion by 2030 according to institutional projections from McKinsey and BCG. The participation of BlackRock, DTCC, Nasdaq, JP Morgan, Goldman Sachs, and Franklin Templeton — representing trillions in institutional infrastructure — confirms that securities tokenization has entered the institutional mainstream. Market participants should prepare for tokenized securities to become a standard feature of US capital markets by end of decade.
Institutional Due Diligence Framework
Before engaging with tokenized instruments in this category, institutional participants should verify: SEC registration or exemption qualification for any tokenized security (check EDGAR filings), broker-dealer registration and FINRA membership of facilitating intermediaries, transfer agent registration for entities maintaining on-chain ownership records, smart contract audit history from recognized security firms (CertiK, Trail of Bits, OpenZeppelin), custody architecture including key management procedures and SIPC coverage applicability, secondary market liquidity metrics including average daily volume and bid-ask spreads on registered ATS platforms, AML/KYC compliance program adequacy under Bank Secrecy Act requirements, and tax reporting infrastructure for accurate Form 1099-B and cost basis tracking. This due diligence framework ensures tokenized securities allocation decisions meet the same institutional standards applied to traditional securities investments.
Key Market Data Points
Essential metrics for institutional evaluation: the tokenized US Treasury market exceeded $8.7 billion in early 2026 with BlackRock BUIDL leading at $1.87 billion AUM, DTCC processes over $300 trillion in annual transactions and plans tokenization services launch in H2 2026, Nasdaq has filed with the SEC to trade tokenized securities on national exchanges, the GENIUS Act establishes regulated stablecoin settlement infrastructure with $250+ billion in stablecoin market capitalization, over 86% of institutional investors surveyed by S&P Global reported digital asset exposure or active allocation intent, and the global tokenized RWA market is projected to reach $18.9 trillion by 2033 according to Ripple and BCG research. These data points establish the institutional credibility of tokenized securities as an emerging infrastructure upgrade for the world's largest capital market rather than a speculative experiment.
The GENIUS Act creates the regulatory foundation for a fully on-chain securities settlement ecosystem where both the security leg and the payment leg of transactions are represented as regulated digital instruments. This end-to-end digitization eliminates the reconciliation costs, settlement delays, and counterparty risks that characterize the current hybrid system where securities settle through DTCC while payments flow through separate banking rails. Institutional treasury management is being fundamentally reshaped by the availability of regulated, on-chain settlement media that can be integrated directly into automated trading and portfolio management systems.
The convergence of regulated stablecoins with tokenized securities creates a complete on-chain capital markets stack that will define institutional finance for the next decade.