GENIUS Act rollout advances as Treasury seeks input on state rules

The US Treasury Department has advanced its efforts to define how stablecoin oversight will be divided between federal and state authorities, opening a fresh round of public consultation under the GENIUS Act.

A notice of proposed rulemaking released on Wednesday sets out the first formal regulatory proposal tied to the Guiding and Establishing National Innovation for US Stablecoins Act, legislation signed into law last July.

Officials said the rulemaking is intended to establish broad principles for assessing whether state-level regulatory frameworks align closely enough with federal standards.

Under the law, smaller stablecoin issuers with less than $10 billion in circulation may choose to operate under state supervision rather than direct federal oversight.

Such flexibility depends on whether the relevant state regime can meet a “substantially similar” threshold, a standard that regulators are now seeking to define more clearly.

Treasury outlines various requirements

The Treasury’s proposal lays out several baseline requirements that states must follow without exception.

Stablecoin issuers are expected to maintain a full 1:1 reserve backing using cash or high-quality liquid assets, while also providing monthly disclosures.

Compliance with federal anti-money laundering and sanctions rules remains mandatory, alongside a prohibition on rehypothecation practices that would allow the same collateral to support multiple claims.

States can still introduce their own supervisory measures, including stricter liquidity thresholds, enhanced reserve standards, and additional risk management or enforcement procedures.

Any such framework, however, must produce outcomes that match or exceed the level of protection offered at the federal level.

The Treasury emphasised that state regimes should deliver safeguards that are at least as rigorous as those applied nationally.

Work on translating the GENIUS Act into operational rules remains ongoing.

Regulators are continuing to examine how the framework will interact with existing money transmission laws and how responsibilities will be distributed across federal agencies.

A 60-day public comment period has now opened following publication in the Federal Register, continuing a series of consultations that began soon after the law was enacted.

Earlier outreach included requests for input on digital forensic tools, tax considerations, and data collection requirements tied to stablecoin activity.

Concerns remain over stablecoin legislation

President Donald Trump signed the GENIUS Act into law in July, marking a significant step in formalizing the regulatory approach to stablecoins in the United States.

Even so, some areas remain unresolved, particularly around yield-bearing stablecoins and whether issuers should be allowed to pass interest on to token holders.

Uncertainty on that front has slowed progress on the broader CLARITY market structure bill in Congress.

Industry views remain divided. Firms such as Coinbase have argued that yield-bearing stablecoins could offer a more competitive option for savers compared to traditional bank accounts, where returns often sit below 1%.

Banking groups, on the other hand, continue to raise concerns that such products could draw deposits away from the traditional financial system and weaken existing funding models.