The US Department of the Treasury issued a notice of proposed rulemaking (NPRM) on Wednesday and is seeking public comment on proposed regulations for state-level stablecoin governance frameworks under the GENIUS Act.
The GENIUS stablecoin regulatory framework, also known as the “Guiding and Establishing National Innovation for US Stablecoins Act,” gives states the authority to regulate stablecoins with a market cap of less than $10 billion, as long as the regulations do not deviate significantly from federal policies.
The Treasury outlined several non-negotiable stablecoin regulations that must be in line with Federal regulations, including a 1:1 reserve backing with cash or high-quality cash equivalents and monthly reporting requirements.
The NPRM published by the US Treasury Department. Source: US Department of the Treasury
States must also fully comply with federal anti-money laundering and sanctions policies for stablecoins, while upholding bans on token rehypothecation, or the use of the same asset to support multiple claims.
Under the proposal, states are allowed to impose their own liquidity, reserve, risk management, regulatory procedures, enforcement and administrative rules, as long as the rules impose higher financial thresholds or are more restrictive than the federal regulations.
“State-level regulatory regimes must lead to regulatory outcomes that are at least as stringent and protective as the Federal regulatory framework,” the proposal said.
The public must submit comments within 60 days of the NPRM announcement. Once a stablecoin issuer passes the $10 billion threshold, it will automatically be under the regulatory jurisdiction of the federal government, meaning the largest stablecoin issuers will be regulated exclusively at the federal level.
Related: FSB flags dollar stablecoins as bigger risk for emerging markets in annual report
GENIUS Act becomes law, but uncertainty remains over yield-bearing stablecoins
US President Donald Trump signed the GENIUS Act into law in July, which was considered a landmark moment for crypto regulations.
Despite the landmark regulations, uncertainty about yield-bearing stablecoins and whether stablecoin issuers can share interest with token holders has stalled the CLARITY crypto market structure bill in Congress.
Some crypto companies, led by Coinbase, argue that yield-bearing stablecoins provide savers with a competitive alternative to traditional savings accounts, which typically have interest rates far below 1%.
The banking lobby continues to oppose yield-bearing stablecoins over fears that the tokens will cause deposit flight and erode the sector’s market share.
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