U.S. Treasury Unveils Comprehensive Stablecoin Rulemaking Under GENIUS Act
The U.S. Department of the Treasury has officially launched the implementation process for the GENIUS Act, a landmark stablecoin regulation passed in 2025. This week, the Treasury released an extensive 87-page Notice of Proposed Rulemaking (NPRM), marking a critical step towards establishing a robust legal framework for stablecoins within the United States.
The proposed rules are now subject to a 60-day public comment period, inviting industry experts, businesses, and the general public to provide feedback on the intricate details of the regulatory framework. Signed into law by President Donald Trump in July 2025, the GENIUS Act’s primary objective is to create a definitive and authoritative legal structure for stablecoins operating across the nation.
The Treasury emphasizes that this rulemaking is the foundational step in translating the Act’s provisions into an enforceable regulatory system. According to the current timeline, the complete regulatory framework is anticipated to become fully effective by November 2026.
This latest move builds upon initial feedback collection efforts from August 2025, when the Treasury solicited broad input on the application of the Act. The process has now advanced to a more granular stage of specific rule formulation.
Dual Regulatory Pathways: The $10 Billion Threshold for Stablecoin Oversight
A pivotal element of the Treasury’s proposal is the precise definition of “substantially similar” when comparing state-level regulations to federal standards. Under the GENIUS Act, smaller stablecoin issuers with an asset circulation below $10 billion retain the option to be regulated by state governments. However, a crucial caveat mandates that state regulatory frameworks must maintain a high degree of consistency with federal rules, ensuring that all supervised entities adhere to equally stringent safety standards, regardless of their primary oversight body.
The draft introduces a tiered regulatory mechanism, granting state regulators flexibility in areas such as license issuance, day-to-day supervision, and specific enforcement procedures. Crucially, there is no room for compromise on fundamental requirements like reserve mandates and Anti-Money Laundering (AML) compliance.
Should a stablecoin issuer’s circulation surpass the $10 billion mark, regulatory authority will automatically transfer to federal agencies. At this juncture, the issuer will fall under the joint jurisdiction of the Federal Reserve (Fed), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC). This innovative dual-track design aims to foster growth for small and medium-sized innovators at the local level while simultaneously ensuring that larger institutions, which could pose systemic risks to the broader financial system, are subject to more rigorous federal supervision.
Ensuring Stability: Rigorous Reserve and Transparency Mandates for Stablecoin Issuers
To safeguard user assets and mitigate systemic financial risks, the proposal outlines exceptionally stringent operational guidelines for “approved payment stablecoin issuers.” Qualified issuers are mandated to maintain a full 1:1 reserve ratio, with reserve assets strictly limited to cash or high-quality cash equivalents. This means that for every billion units of stablecoins issued, an equivalent billion dollars in secure assets must be held in reserve.
Furthermore, the new regulations explicitly prohibit “rehypothecation,” preventing issuers from leveraging the same asset to back multiple claims. Regarding transparency, issuers are required to publish detailed reserve composition reports at least monthly and undergo regular, independent third-party audits. The Act also provides a critical layer of consumer protection, emphasizing that users will hold statutory priority claims in the event of an issuer’s bankruptcy or insolvency.
Significantly, the Treasury’s federal benchmarks are primarily anchored to the norms and interpretations set forth by the Office of the Comptroller of the Currency (OCC). This strategic alignment indicates that the OCC is poised to play a central role in the federal-level regulation of non-bank stablecoins. While state frameworks retain the flexibility to impose stricter or higher financial thresholds than federal law, they are unequivocally barred from weakening core disclosure standards or Anti-Money Laundering (AML) regulations.
Industry Debates and the Broader Digital Asset Regulatory Landscape
While the GENIUS Act establishes a legitimate operational framework for stablecoins, a contentious debate persists between the cryptocurrency and traditional banking industries regarding “interest-bearing stablecoins.” Leading crypto firms, including Coinbase, advocate for allowing stablecoins to generate interest, positioning them as highly competitive alternatives to traditional bank savings accounts.
Conversely, banking industry lobbyists staunchly oppose this stance, expressing concerns that yield-bearing digital assets could trigger a significant outflow of bank deposits, thereby eroding banks’ market share. This ongoing conflict of interest has already impacted the progress of other digital asset market structure bills in Congress, such as the CLARITY Act.
Concurrently, the Treasury is leveraging the authority granted by the GENIUS Act to bolster its regulatory tools against illicit finance and cryptocurrency mixers. The Act is widely regarded as a pivotal piece of legislation for solidifying the U.S. dollar’s preeminent position in the evolving era of digital sovereignty. As the 60-day public comment period unfolds, the feedback received will directly shape the final form of these crucial regulations, underscoring America’s commitment to advancing a comprehensive digital asset regulatory system that skillfully balances innovation with robust risk management within the financial ecosystem.
