Stablecoin Regulation and the GENIUS Act: A Case for Formal Verification

Executive Summary

As Web3 adoption continues to accelerate, many central banks and institutions are developing digital asset products, such as stablecoins, to support the stability of existing blockchain ecosystems while offering transparency, speed, and flexibility. However, such stablecoin innovations must win user trust, meet regulatory requirements, and integrate with existing Web3 systems in order to acquire mainstream adoption.

In the context of rigorous compliance frameworks, formal verification is a promising methodology to help build reliable stablecoin contracts by verifying essential compliance requirements. In this post, we will explore the following topics and more:

• Understanding the full scope of stablecoin regulatory requirements is key for all stablecoin issuers.
• The GENIUS Act is crucial for understanding stablecoin compliance risks for those who want to launch stablecoin projects in the United States.
• Formal verification can help stablecoin projects ensure compliance with the GENIUS Act.

The Stablecoin Regulation Landscape

Since the introduction of the first batch of crypto stablecoin projects in 2014, stablecoins have been considered bridges between traditional financial systems and Web3. Traditional financial systems are known for latency issues, lack of transparency, and sometimes high costs. To improve these downsides, stablecoins introduce:

• Instant settlement
• An immutable record
• Smart contracts that automatically check rules or reroute FX
• Greater financial inclusion, letting anyone participate conveniently

When the E-Money regulation was first introduced in 2009, it was not yet intended for Web3, but has since extended to include Web3-compatible solutions, such as stablecoins.

Currently, many authorities like Abu Dhabi’s ADGM and Hong Kong’s HKMA show that central banks are already testing these ideas. In the U.S., Congress has weighed in through the GENIUS Act, laying out a roadmap for stablecoins.

The GENIUS Act

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

Why does the GENIUS Act matter?

It creates a single federal “stamp of approval,” reducing regulatory fragmentation, and providing clear guardrails for product design, risk management, and audit readiness. Following the guidelines detailed in the Act is essential, not only to adhere to compliance frameworks, but to increase the security of users transacting with the given assets.

As a formal verification research group, we would like to introduce the formal verification methodology to help prove key smart-contract properties, ensuring that the code meets compliance and security requirements under any boundary conditions with the mathematical and logical tools.

From Legal Mandates to Formal-Verification Lemmas

Formal verification expresses each requirement as an on-chain invariant or liveness property. For instance, in the GENIUS Act, the legal mandates shown above can be formally expressed in the following lemmas:

Moreover, certain stablecoin technical invariants should be rigorously proved in order to guarantee that certain legal requirements are met.

Stablecoin technical invariants:

These become the proof obligations in your chosen verification framework (TLA⁺, Coq, K, Isabelle, or Why3).

Nevertheless, only some of these specifications are relevant in the formal verification process at the smart contract stage. In the following example, we completed an example using the Solana stablecoin system and formally verified its essential specifications.

A Solana Stablecoin Program Example That Enforces GENIUS Invariants

Below is a condensed version of our Solana Stablecoin program, illustrating how core invariants are enforced on-chain.

Formal Verification Output Example for Solana Stablecoin Program Example

Below is a condensed version of our Solana stablecoin program example, illustrating how core invariants are enforced on-chain.

With all obligations proven, the above is mathematically guaranteed to satisfy 4(a)(1)(A) One-to-one Reserve Backing requirements based on the given Solana stablecoin program example.

Why Formal Verification Isn’t “Nice-to-Have” but a Business Imperative in Meeting Stablecoin Compliance

Formal verification is far more than a “Nice-to-Have” feature. For stablecoin compliance, it is critical to preserve every participant’s funds and confidence. Any single flaw in the actual implementation could lead to catastrophic asset losses, regulatory fines, and brand damage.

Following the best practices detailed by formal verification will bring additional benefits to a stablecoin protocol:

1. Regulator Trust: Instead of assessing a plethora of legal documents or audit reports, a regulator can rely on machine-checked proofs.
2. Risk Reduction: Evolving code incurs automated proofs for its Handler contracts, leading to regression-free oversight.
3. Audit Efficiency: Security and CPA audits overlap as the financial and technical proof artifacts are examined simultaneously.
4. Market Differentiation: “Provably compliant” statements serve as powerful marketing and partnership leverage, signaling ironclad trustworthiness to banks, merchants, and DeFi integrators.

Moreover, when pitching your stablecoin to boards, communities, or regulatory agencies, being able to say, “Our protocol has been formally verified against mandates of the GENIUS Act, with zero unresolved proof obligations”

Instantly transforms compliance risk into a competitive advantage. It accelerates:

• Regulatory approval timelines (exams, sandbox acceptance)
• Enterprise integrations (banks and PSPs demand proof of soundness)
• DeFi partnerships (oracles and lending platforms trust mathematical guarantees)

Next Steps: Partner With CertiK to Go Live Safer and Faster

As global regulators sharpen their focus on stablecoins, the pressure to get compliance and security right has never been greater. For any issuer seeking GENIUS Act readiness or aiming to scale globally, security must be built into the foundation.

CertiK’s formal verification framework is purpose-built for real-world blockchain applications. Our approach moves beyond academic abstraction to deliver on-chain, machine-checked proofs that directly align with compliance requirements. It’s not theory; it’s production-grade assurance.

As the largest Web3 security service provider, CertiK stays true to its slogan, “Elevate Your Web3 Journey,” helping you launch with confidence, whether you’re building for GENIUS Act compliance or developing a globally trusted stablecoin.

We offer:

• Custom formal-verification frameworks tailored to your architecture
• Compliance consulting for GENIUS, ADGM, MAS, HKMA, and beyond
• End-to-end security audits, from threat modeling to penetration testing and on-chain formal proofs
• Regulatory liaison services, navigating you through the OCC, Fed, and state-level examinations.

What sets CertiK apart from traditional formal verification offerings?

Implementation Validation: We validate the actual implementation—not just abstract models—ensuring that source code complies with the intended specification.

Proprietary Property Verification: We verify custom, protocol-specific properties that go far beyond generic assumptions.

Complex Reasoning: We verify arbitrarily complex code and properties via mechanized reasoning beyond what developers, auditors, or even verification engineers can manually reason.

Production Oriented: Our tooling targets real production code with few restrictions or refactors instead of prototype or academic research.

CertiK stands at the forefront of formal verification and blockchain security, bringing the experience of securing over $530 billion in digital assets and serving more than 5,000 blockchain projects directly to your stablecoin roadmap.

Reach out to us to arrange a detailed workshop about proof-of-concept audits. Together, we can position your stablecoin as the most trusted and compliant, yet advanced blockchain payment instrument.