What Does the GENIUS Act Require of Accountants?

Views expressed are those of the author and do not reflect the views or position of the Center for Audit Quality.

Jeffrey Johanns is an Associate Professor of Instruction in the Accounting department at the McCombs School of Business at the University of Texas at Austin. He was formerly a U.S. Assurance Risk Management Leader at PricewaterhouseCoopers LLP. 

Drafting legislation, or regulations and bank credit agreements that require accountants to perform certain functions for that matter, is an imperfect science and sometimes the resulting rules may require further explanation to provide clarity for real-world situations.

In my analysis, this is the case with the recently enacted Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act” or the “Act”). The GENIUS Act, introduced as bipartisan legislation in 2025, represents the first major federal framework to regulate payment stablecoins in the United States with the objective of providing consumer protection and regulatory clarity for the digital asset ecosystem.

The legislation creates a comprehensive framework for stablecoin issuance, regulation, and reporting, and includes both audit and examination requirements by PCAOB-registered public accounting firms. The details of these requirements may benefit from additional guidance to support effective implementation of the Act.

Audit and Examination Requirements

1. Stablecoin issuers with more than $50 billion in outstanding stablecoins issued (and not already subject to the Securities and Exchange Act of 1934) will need to have full financial statements prepared and audited annually as well as an audit of internal controls, if not otherwise required.
2. All stablecoin issuers will need to prepare and publish monthly reports certified by the CEO and CFO and examined by an external public accounting firm. The monthly reports, posted to the company’s website, must disclose (i) the total number of outstanding payment stablecoins issued by the issuer, and (2) the amount and composition of the reserves backing the outstanding stablecoins. This type of monthly report is commonly known as a “proof of reserves” report.

Questions Raised

The GENIUS Act specifies that required audits and examinations be performed by a firm registered with the industry’s regulator, the Public Company Accounting Oversight Board (PCAOB). The audit requirement is fairly straightforward: financial statements are prepared in accordance with generally accepted accounting principles (GAAP) and the external audit performed under PCAOB standards.

However, implementation of the GENIUS Act may benefit from additional clarification on the monthly proof of reserves examination reports, which are distinct from an audit and serve a different purpose.

An “examination” is similar, but different, from an “audit”. Both represent forms of positive assurance, but the rules and objectives are different. For example, in an examination, the auditor reports on the fairness of a management assertion, not on financial statements, and generally accepted accounting principles are replaced with management’s self-defined criteria underlying its assertion.

The following questions regarding examination requirements under the GENIUS Act warrant further explanation by policymakers:

1. What is the scope of the PCAOB’s authority?: As discussed above, the Act requires that any firm performing an examination be registered with the PCAOB. However, the PCAOB’s oversight authority under the Sarbanes-Oxley Act (SOX) is understood, in language and practice, to apply only to financial statement audits. The PCAOB has confirmed this limited scope in other circumstances, and the PCAOB Board has publicly asserted that inspection of proof of reserves reports is beyond the scope of SOX. Thus, because proof of reserves reports are not traditional financial statements, it may be reasonable to conclude that the PCAOB will not be able to require use of its standards, nor is its authority to inspect an external accounting firm’s work, or bring enforcement actions against firms performing poor work in their examinations clear based on the letter of the law. It remains unclear whether Congress intended examinations to fall under the PCAOB’s regulatory scope, and whether the Board will modify its current position on the scope of its authority.  Follow-on legislation may be necessary to clarify the specific actions required, and the responsible parties. If examinations remain outside of the PCAOB’s scope, consideration should be given to whether these engagements would be subject to peer review at some level. It is a positive development that Congress assigned attestation authority to CPA firms, however that authority should come with a corresponding obligation for quality. The PCAOB’s established framework for inspection and enforcement makes it well-positioned to provide oversight in this area.
2. Are these firms required to implement QC 1000?: The PCAOB’s recently adopted QC 1000, effective December 15, 2026, includes new requirements for an audit firm’s internal quality control system, including an annual internal evaluation of the effectiveness of the quality control system. The design requirement applies even if the firm hasn’t performed any financial statement audits. Firms intending to only perform proof of reserves examinations may find the QC 1000 requirements excessive. Due to the high-risk nature of proof of reserves examinations, firms performing this service would benefit from designing and implementing internal control systems subject to full QC 1000 compliance. Again, the question of the PCAOB’s authority hangs over the QC 1000 compliance matter.
3. Why does the Act require the examination to be performed by PCAOB registered firms if the PCAOB does not provide oversight over examinations beyond registration?:Some firms that want to perform proof of reserves examinations are not currently registered with the PCAOB because they don’t audit public companies and may not want to go through a registration process. It could be that registration alone may have been viewed as a “seal of approval” of firms providing examination attestations, yet the PCAOB does not permit the use of registration as a marketing tool and has consistently made it clear that registration is not correlated to quality. It will be important for stakeholders to understand the scope of the PCAOB’s role and what authority it possesses.
4. Did Congress intend that only PCAOB standards be applied to stablecoin examinations or will use of AICPA or international standards be allowed?: The Genius Act does not specify that PCAOB attestation standards must be used in examinations performed under the requirements of the Act. In fact, most examinations are currently performed in accordance with AICPA standards. The PCAOB is in the process of updating its extant examination standards to remain in accordance with AICPA and international standards. It remains to be seen whether the PCAOB will accelerate its standard-setting project beyond those of the AICPA and other international bodies or just seek alignment.

The effective date of the GENIUS Act is January 18, 2027 – 18 months after the date of its enactment, July 18,2025.  This is an important piece of legislation intended to provide clarity and consumer protections related to stablecoin payment. In my reading, these questions need to be answered, through the rulemaking process or other means as may be necessary, to clarify the GENIUS Act’s requirements before it goes into effect.