Stablecoins Act, permits states to regulate stablecoins with a market cap below $10 billion, provided their frameworks do not fall below federal standards.
Stablecoin News
The U.S. Department of the Treasury published a notice of proposed rulemaking on Wednesday, inviting public comment on how states should regulate stablecoins under the GENIUS Act. The comment window runs 60 days from the announcement date.
The GENIUS Act, formally the Guiding and Establishing National Innovation for U.S. Stablecoins Act, permits states to regulate stablecoins with a market cap below $10 billion, provided their frameworks do not fall below federal standards. Once an issuer crosses that $10 billion threshold, it moves automatically under federal jurisdiction.
The Treasury's proposal sets several non-negotiable baseline requirements for state-level regimes. These include a 1:1 reserve backing with cash or high-quality cash equivalents, monthly reporting obligations, full compliance with federal Anti-Money Laundering and sanctions rules, and a prohibition on rehypothecation, which is the practice of using the same asset to back multiple claims.
States retain the ability to set their own liquidity ratios, reserve compositions, risk management procedures, and enforcement mechanisms, but only where those rules are more restrictive than the federal floor. "State-level regulatory regimes must lead to regulatory outcomes that are at least as stringent and protective as the Federal regulatory framework," the proposal states.
President Donald Trump signed the GENIUS Act into law in July, marking a milestone in federal crypto regulation. The stablecoin market capitalization was approaching $300 billion at the time of the Treasury's announcement.
Despite the law's passage, debate over yield-bearing stablecoins has stalled the CLARITY crypto market structure bill in Congress. Coinbase and other companies argue that allowing stablecoin issuers to share interest with token holders would give retail savers a competitive option that traditional savings accounts, which typically yield below 1%, cannot match.
The banking lobby has pushed back, arguing that yield-bearing stablecoins could trigger deposit flight from traditional banks and erode their market share. The standoff has kept the CLARITY Act in limbo as lawmakers weigh the competing interests.
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