Stablecoin Regulation and the 'GENIUS Act': The Necessity of Formal Verification

With the continuous acceleration of Web3[ 1 ] applications, an increasing number of central banks and institutions are developing digital asset products, with stablecoins being one of the key directions. Stablecoins combine the efficiency and transparency of blockchain with the stability of traditional finance, poised to reshape the global payment system and financial infrastructure. However, to truly mainstream stablecoins[ 2 ], a solid foundation must be laid in terms of user trust, regulatory compliance, and compatibility with existing Web3 systems.

Under strict compliance frameworks, formal verification is considered a highly promising methodology that can verify critical compliance requirements while helping to build reliable stablecoin contracts. This article will focus on the following directions:

• A comprehensive understanding of stablecoin regulatory requirements is crucial for all stablecoin issuers;

• When launching a stablecoin project in the U.S., the GENIUS Act is an indispensable basis for assessing compliance risks;

• Formal verification can help stablecoin projects more effectively meet the compliance requirements of the GENIUS Act.

Real-time settlement

Immutable records

Smart contracts that can automatically verify rules or redirect foreign exchange paths

Broader financial inclusion, allowing anyone to participate conveniently

The e-Money regulatory framework[ 4 ], introduced as early as 2009, was not initially designed for Web3 scenarios but has gradually extended to include Web3-compatible solutions, including stablecoins.

Currently, regulatory authorities in various regions, including the Abu Dhabi Global Market (ADGM) and the Hong Kong Monetary Authority (HKMA), have their central banks testing related solutions. The U.S. Congress has outlined a regulatory roadmap for the compliant development of stablecoins through the GENIUS Act.

The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), launched in June 2025, establishes a mandatory compliance framework for stablecoin payments in the U.S.:

Partial legal provisions are referenced in Chinese as follows:

The Act establishes a unified federal-level "certification" for stablecoins, helping to reduce regulatory fragmentation and providing clear institutional guidance for product design, risk management, and audit preparation. Following the norms of the GENIUS Act is not only a basic compliance requirement but also a key guarantee for enhancing the security of user asset transactions.

As CertiK's formal verification research team, we aim to introduce formal verification methodologies to help prove the critical attributes of stablecoin smart contracts. Utilizing rigorous mathematical derivation and machine-checkable logical arguments, we ensure that the code meets compliance and security requirements under any boundary conditions.

Formal verification expresses each compliance requirement as an on-chain invariant or liveness. Taking the GENIUS Act as an example, the aforementioned legal provisions can be formally expressed as the following lemma:

Additionally, certain technical invariants of stablecoins should be strictly proven to meet specific legal requirements.

Stablecoin technical invariants:

These formal lemmas will become proof obligations in the selected verification framework (TLA⁺, Coq, K, Isabelle, or Why 3).

However, only some of these specifications are related to the formal verification process at the smart contract stage. In the following example, we have built a case based on the Solana stablecoin system and formally verified its specifications.

Below is a streamlined version of the Solana stablecoin program we built, demonstrating how all operations on the chain satisfy its core invariants:

Example of Formal Verification Output for Solana Stablecoin Program

The following is a streamlined version of the Solana stablecoin program example, used to demonstrate how core invariants are enforced on-chain:

In the complete results, we were able to formally prove the invariant: total supply ≤ total reserve, where

• Total supply (total_supply) = ∑i Account[i].amount

• Total reserve (total_reserve) = ∑k Bank[k].reserve

• Core invariant:

After all proof obligations were proven, the above Solana stablecoin program example was mathematically strictly proven to meet the compliance requirements of the GENIUS Act Section 4(a)(1)(A) regarding "one-to-one reserve support."

Formal verification is not a "nice-to-have" feature. For stablecoin compliance, it is crucial for protecting the funds and confidence of every participant. Any vulnerabilities in the actual code implementation can lead to significant asset losses, regulatory penalties, and even long-term negative impacts on the brand.

Following formal verification best practices will bring additional advantages to stablecoin protocols:

1. Winning regulatory trust: Regulatory agencies do not need to review a large number of legal documents or audit reports one by one; they can directly refer to machine-verified compliance proofs.

2. Reducing risks: During code iteration, its processing program contracts will automatically generate proofs, avoiding potential risks brought by regression issues.

3. Improving audit efficiency: Since financial and technical proofs are checked simultaneously, security audits and CPA audits can be conducted in parallel.

4. Achieving market differentiation: The "provably compliant" statement can effectively enhance the trust of banks, merchants, and DeFi platforms, becoming an important fulcrum for brand reputation and partnership expansion.

Moreover, when presenting your stablecoin to the board, community, or regulatory agencies, being able to say, "Our protocol has undergone formal verification according to the requirements of the GENIUS Act, with no unresolved proof obligations," turns compliance risks into competitive advantages.

This not only enhances project credibility but also significantly accelerates several key processes, including:

• Regulatory approval timelines (review approval, entry into regulatory sandbox)

• Enterprise-level integration (completeness proofs required by banks and payment service providers)

• DeFi partnerships (oracles and lending platforms prefer protocols verified mathematically)

As global regulatory attention on stablecoins deepens, compliance and security[ 5 ] have become core challenges faced by issuers. Whether to meet the requirements of the GENIUS Act or to expand globally, stablecoin projects need to build a reliable security foundation from the ground up.

CertiK's self-developed formal verification framework is specifically built for real blockchain application scenarios. Our approach breaks through the abstract models at the academic level, generating on-chain, machine-verifiable security proofs that directly correspond to compliance requirements. This is not theoretical exploration but reliable protection for actual production environments.

As the largest security company in Web3, CertiK has always adhered to the mission of "Full Protection, Extraordinary Achievement." Whether you are meeting the compliance requirements of the GENIUS Act or aiming to build a globally trusted stablecoin, CertiK can safeguard your project, helping it to launch safely and efficiently.

We offer:

• Custom formal verification frameworks tailored to your system architecture;

• Compliance consulting services for the GENIUS Act, ADGM, MAS, HKMA, and other regulations;

• End-to-end security audits, covering threat modeling, penetration testing, on-chain formal verification, and more;

• Regulatory communication services to assist you in smoothly navigating OCC, Federal Reserve, and state-level regulatory reviews.

Achieving hierarchical verification: Ensuring that the source code complies with specifications, not just the abstract hierarchical model of the protocol.

Proprietary attribute verification: Verifying the unique attributes of custom code, beyond conventional generic attributes.

Complex reasoning capabilities: Through automated reasoning, verifying arbitrarily complex code and attributes, far exceeding what developers, auditors, or even formal verification engineers can achieve through manual reasoning.

Production-oriented: Applicable to actual production environment code, verifiable without large-scale refactoring, unlike formal verification solutions limited to prototypes or academic research.

As a leader in formal verification and blockchain security, CertiK, with experience in securing over $530 billion in digital assets, has safeguarded more than 5,000 blockchain projects, laying a solid foundation for the compliance and security of stablecoin projects.

We welcome further communication and can arrange technical discussions on proof-of-concept audits to explore how systematic, provably secure methods can help your stablecoin project achieve compliant, highly reliable operation.

https://www.certik.com/resources/blog/Web3

https://www.certik.com/resources/blog/the-rise-of-stablecoins-in-unstable-times

https://blog.bitmex.com/a-brief-history-of-stablecoins-part-1/?utm_source=chatgpt.com

https://finance.ec.europa.eu/consumer-finance-and-payments/payment-services/e-money_en

[ 5 ] Security: https://www.certik.com/resources/blog/security-risks-of-stablecoins