The U.S. Treasury on Thursday introduced its first draft of rules to implement the GENIUS Act, taking an initial step toward clearer stablecoin regulation. It has also opened a 60-day public comment period, giving industry players, state regulators and the public a chance to weigh in on how oversight should work.
Under the proposal, smaller stablecoin issuers, those with less than $10 billion in circulation, could continue operating under state supervision, as long as their rules closely match federal standards.
The goal is to spell out who regulates what as the framework develops, reducing uncertainty for companies and helping create a more consistent approach to stablecoin oversight across the U.S.
Small stablecoin firms get state route
The proposal gives smaller stablecoin issuers a pathway to operate under state supervision, but with strict safeguards in place. The Treasury is sending a message that flexibility does not mean less oversight. There will still be a need for issuers to hold fully backed reserves on a 1:1 basis using cash or other high-quality liquid assets, so users can safely redeem their tokens. There is also a need for monthly reports.
Compliance with federal anti-money laundering and sanctions rules remains mandatory everywhere. The proposal further reinforces a ban on rehypothecation, preventing companies from reusing customer reserves for other financial purposes.
At the same time, state regulators are being given the authority to apply even tougher standards if needed. States can create stricter rules about liquidity, reserves, risk management, and enforcement, as long as these rules offer protections that are equal to or better than federal standards, rather than creating a less strict system.
Regulators are still working out how the GENIUS framework will fit alongside existing money transmission laws and which agencies will oversee different parts of the market, building toward a more coordinated and predictable regulatory system for stablecoins.
Trump law is a turning point for U.S. stablecoin regulation
The legislation, which was signed into law by U.S. President Donald Trump in July, is an important turning point for U.S. stablecoin regulation. This is because it shows that lawmakers are no longer content to simply talk about regulating stablecoins, but are now starting to take concrete steps to make it happen.
For many crypto companies, such certainty is an essential component for building trust with investors.
Despite this, there is one outstanding question, which continues to slow down progress on the larger CLARITY market structure legislation. This is with regard to yield-bearing stablecoins, which are stablecoins that pay users to hold them. These are, in essence, stablecoins that pay interest to users, akin to savings accounts.
The rationale provided by the crypto community for supporting such yield-generating stablecoins is that it can give consumers access to better returns than what is possible with traditional savings accounts, especially as financial products in the digital sphere become more competitive.
On the other hand, banking groups are concerned that if consumers are putting large amounts of money into these products, then banks will lose deposits. The conflict between promoting financial innovation and supporting the traditional banking system is now at the heart of what is being referred to as the next chapter in crypto regulation in the U.S.