The US Department of the Treasury has issued a notice of proposed rulemaking seeking public input on state-level stablecoin governance frameworks under the Guiding and Establishing National Innovation for US Stablecoins Act. The proposal arrives as the market capitalization of dollar-pegged stablecoins approaches $300 billion, highlighting the growing importance of regulatory clarity in the sector.
Under the GENIUS Act framework, states will have the authority to regulate stablecoin issuers with a market capitalization below $10 billion. However, state-level regulations must not significantly deviate from federal standards and must produce outcomes that are equally strict or more protective than federal rules.
Mandatory Reserve Backing and Federal Compliance Requirements
The Treasury outlined several mandatory rules that state frameworks must follow. These include maintaining a 1:1 reserve backing with cash or high-quality cash equivalents and providing monthly disclosure reports to regulators. Stablecoin issuers must also fully comply with federal anti-money laundering and sanctions requirements.
Additionally, the proposal includes a ban on token rehypothecation, meaning issuers cannot reuse the same collateral to support multiple claims. States are permitted to introduce stricter liquidity standards, reserve requirements, risk management practices, and enforcement mechanisms, provided they exceed federal minimum thresholds.
Federal Oversight Triggered After $10 Billion Threshold
The Treasury stated that stablecoin issuers exceeding the $10 billion market capitalization threshold will automatically transition to federal regulatory oversight. This means the largest stablecoin issuers will ultimately fall under direct federal jurisdiction.
The public has been given 60 days to submit feedback on the proposed rules. The GENIUS Act became law in July after being signed by Donald Trump, marking a significant milestone in the development of comprehensive cryptocurrency regulation, though uncertainty remains regarding the treatment of yield-bearing stablecoins.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.