Treasury Formally Initiates GENIUS Act Rulemaking
The U.S. Department of the Treasury this week published a 87-page Notice of Proposed Rulemaking (NPRM), marking the implementation phase of the GENIUS Act passed in 2025. Signed by President Donald Trump in July 2025, the act aims to establish a comprehensive legal framework for stablecoins in the United States. This follows an initial request for information in August 2025, and now moves into detailed rulemaking. The NPRM addresses key aspects of state vs. federal oversight, reserve requirements, and consumer protections.
State-Federal Dual Track with $10 Billion Threshold
The core of the proposal defines 'substantial similarity' between state regulations and federal standards. Under the GENIUS Act, stablecoin issuers with less than $10 billion in circulation can opt for state-level regulation, provided state rules are substantially similar to federal ones. The Treasury draft establishes a tiered system: state regulators retain flexibility in licensing, supervision, and enforcement procedures, but reserve requirements and anti-money laundering (AML) compliance are non-negotiable. This design allows smaller innovators to grow locally while ensuring systemic institutions face robust federal oversight.
Stringent Reserve Asset Standards and Transparency Compliance
To protect user assets and prevent systemic risks, the proposal imposes strict operational rules for 'qualified payment stablecoin issuers.' They must maintain a 1:1 reserve fully backed by cash or high-quality cash equivalents—meaning for every 1 billion tokens, 1 billion in safe assets must be held. Issuers must also grant users a statutory priority claim in bankruptcy. The Treasury anchors federal requirements to OCC rules, signaling the OCC’s core role in non-bank stablecoin oversight. State frameworks may impose stricter financial limits but cannot water down disclosure or AML standards.
Industry Yield-Bearing Stablecoin Debate and Broader Digital Asset Legislation
Despite providing a legal pathway for stablecoins, the battle over 'yield-bearing stablecoins' continues between crypto firms like Coinbase and traditional banks. Crypto advocates argue for allowing stablecoins to share interest, competing with savings accounts. Banking lobbyists oppose this, fearing deposit outflows and market share erosion. This conflict has slowed congressional deliberation on the CLARITY Act and other market structure bills. Meanwhile, the Treasury uses GENIUS Act powers to strengthen tools against illicit finance and crypto mixers. The act is seen as a key to securing U.S. dollar leadership in the digital age. With a 60-day comment period open, public input will directly shape the final rules, pushing the U.S. toward a balanced digital asset regulatory framework.