How Does the GENIUS Stablecoin Act Compare to MiCA and VARA?
Reading the Fine Print
There has been a lot of (positive) hoopla around the Senate’s recent passage of the GENIUS Act in Congress. The industry is excited that *finally* we have clear stablecoin regulation on the table. Although the bill still needs to make it through the House and get a Presidential sign-off, so there’s still a ways to go.
But how does GENIUS compare with other global regulations? The European Union (with MiCA) and the UAE (with VARA Virtual Asset Issuance Rulebook) have already had policies out.
There are *a lot* of various aspects each of these regulations hit on, but there are a few that operators in digital finance find more important (and applicable to their day-to-day):
Interest payments - are interest payments to stablecoin holders allowed?
Reserve ratio and allowable assets - what is ultimately allowed to back the stablecoin?
Permissionless transfers - can users of the stablecoin peer-to-peer transfer the asset?
Asset segregation, custody and default - how are the assets segregated or treated in a default (remember the USDC de-peg in March 2023)?
Interest Payments
US GENIUS Act: not allowed
EU MiCA: not allowed
UAE VARA: not mentioned (looking at latest documentation dated May 2025)
Thoughts
Regulators in the West tend to see interest payments as making the asset a security, thereby not allowing interest on stablecoins.
The latest VARA docs do not explicitly mention interest payments… maybe a good thing for the possibility of interest bearing stables.
I have always found it strange that most regulators err to not allow interest payments on stablecoins.
With a stablecoin, you generally bear all of the risk of the underlying assets.
If the stablecoin issuer holds assets in a bank account and the bank defaults - you’re on the hook.
If the reserve assets default (likely cash equivalents, so unlikely) - you’re on the hook.
So without interest, you get all the underlying asset risk without the reward.
Reserve Ratio and Allowable Assets
US GENIUS Act: 100% cash equivalents → < 93 day treasuries, <7 day reverse repo, money market funds
EU MiCA: short term sovereign debt and cash equivalents, but MiCA has the kicker that 30% of reserves must be in bank deposits
UAE VARA: ≥ 100% reserve in reference-currency cash / cash-equivalents or ≤ 90-day sovereign debt, repo ≤ 7 days, short-term gov’t MMFs.
Thoughts
MiCA’s requirement to keep 30% of reserves in bank deposits is the standout. This led to Tether (USDT) opting to exit EU, rather than bother getting on board. EU exchanges have since delisted USDT.
Permissionless Transfers
US GENIUS Act: allowed
EU MiCA: allowed (some idiosyncratic language that node operators cannot be party to a transaction, other than verifying… but this doesn’t affect many of us)
UAE VARA: allowed
Thoughts
It is great news that permissionless transfers are being allowed across jurisdictions. This is excellent for DeFi.
However the issuers still must comply with OFAC and restricting transactions to restricted persons/jurisdictions. What this ends up meaning practically is the issuers maintain “blacklists” of bad actor wallets. Stablecoin issuers have already been doing this from the beginning.
Asset Segregation, Custody and Default
US GENIUS Act: no explicit segregation language, but stablecoins are explicitly senior to other obligations (so stablecoin holders are first in line to get back their money)
EU MiCA: assets are segregated from issuer assets, and a third-party custodian must also be used
UAE VARA: Reserve assets segregated from issuer estate, and custodied with licensed financial firms (see our table looking at regulations relating to custody)
Thoughts
It is interesting that the GENIUS Act does not mandate segregation of assets. Practically though, the senior treatment of stablecoins in a default means the protections look very similar (at least at first glance). Time will tell how that plays out in terms of actual protections.
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