The U.S. Department of the Treasury has taken a key step toward implementing U.S. stablecoin legislation, releasing its first proposed rule under the GENIUS Act and opening a 60-day public comment period.
The notice of proposed rulemaking [NPRM] outlines how payment stablecoin issuers may operate under either federal oversight or qualifying state-level regimes. This marks a shift from legislative intent to regulatory execution.
A hybrid model with strict limits
At the center of the proposal is a dual-track system. Stablecoin issuers with less than $10b in outstanding supply may opt for state-level supervision, but only if those regimes are deemed “substantially similar” to federal standards.
Treasury’s proposal makes clear that similarity does not mean flexibility on core safeguards. State frameworks must “meet or exceed” federal requirements for key areas such as reserve backing, anti-money laundering compliance, and consumer protections.
This effectively sets a federal floor while allowing limited state-level customization in areas like capital requirements, provided outcomes remain equally stringent.
A built-in transition to federal oversight
The framework also introduces a structural threshold. Once a stablecoin issuer exceeds $10b in supply, it would transition toward federal supervision, with the Office of the Comptroller of the Currency [OCC] positioned as the primary regulator.
Treasury’s proposal repeatedly anchors the federal benchmark to OCC rules and interpretations. This signals a long-term pathway where larger issuers are brought under a unified national framework.
This creates a tiered regulatory model: smaller issuers may operate under state regimes, but growth ultimately leads to federal oversight.
Limiting regulatory arbitrage
A central objective of the proposal is to prevent regulatory fragmentation. By requiring state regimes to align closely with federal standards, Treasury aims to eliminate incentives for issuers to seek out weaker jurisdictions.
State-level rules must remain consistent with federal law. They cannot dilute core protections such as reserve composition or disclosure frequency. Any deviation that weakens these standards would fail the “substantial similarity” test.
Stablecoins move closer to bank-like oversight
The proposal reinforces a broader trend of treating stablecoins as financial infrastructure rather than experimental assets.
Requirements around custody, insolvency treatment, and supervision mirror traditional banking safeguards, including prioritizing stablecoin holders in insolvency scenarios.
With this NPRM, Treasury is effectively laying the groundwork for a regulated, scalable stablecoin market that balances innovation with systemic safeguards.
Final Summary
- Treasury’s proposal sets a federal floor that limits state-level flexibility, reducing the risk of regulatory arbitrage.
- Smaller players can operate under state regimes, but growth beyond $10b will likely push them into federal oversight under the OCC.
