The U.S. Treasury has issued its first proposed rules to implement the GENIUS Act and opened a 60-day public comment period, focusing on when stablecoin oversight can be handled at the state level. Under the draft, issuers with less than $10 billion in circulating stablecoins may operate under state supervision if those frameworks are deemed “substantially similar” to federal rules.
Threshold for state supervision comes into focus
The proposal gives smaller issuers a path to state oversight, but it does not relax the core requirements. Treasury says eligible issuers must maintain full 1:1 reserve backing using cash or high-quality liquid assets, and they must provide monthly disclosures. The structure leaves some room for local supervision, but the baseline federal protections stay in place.
Federal anti-money laundering and sanctions compliance would remain mandatory in every jurisdiction. The draft also reinforces a ban on rehypothecation, blocking issuers from reusing reserves to support multiple obligations. That restriction goes to the heart of reserve integrity and how stablecoin backing is separated from other risks.
States can tighten standards, not weaken them
Treasury’s proposal also gives state regulators room to impose tougher requirements in areas such as liquidity thresholds, reserve standards, risk management, and enforcement. What states cannot do is offer a lighter framework. Any state regime must produce protections that match or exceed the federal outcome.
Questions about regulatory boundaries are still being worked out. U.S. regulators are continuing to sort through how the GENIUS framework will interact with existing money transmission laws and which agencies will supervise different parts of the market. Earlier consultations have already addressed digital forensic tools, tax reporting, and data collection.
Yield-bearing stablecoins remain a sticking point
The GENIUS legislation was signed into law by President Donald Trump in July, moving stablecoin regulation into an implementation phase. Even so, unresolved debate around yield-bearing stablecoins is still slowing progress on the broader CLARITY market structure bill.
Some industry participants argue that yield-generating stablecoins could deliver returns above traditional savings accounts. Banking groups, by contrast, remain concerned about the risk of deposit outflows. The Treasury’s current consultation is centered on how GENIUS should be applied in practice, while that yield debate remains unsettled.