[Federal Register Volume 91, Number 64 (Friday, April 3, 2026)]
[Proposed Rules]
[Pages 16844-16867]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-06489]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 91, No. 64 / Friday, April 3, 2026 / Proposed
Rules
[[Page 16844]]
DEPARTMENT OF THE TREASURY
12 CFR Chapter XV
[TREAS-DO-XX]
RIN 1505-AC90
GENIUS Act Broad-Based Principles for Determining Whether a
State-Level Regulatory Regime Is Substantially Similar to the Federal
Regulatory Framework
AGENCY: Department of the Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Department of the Treasury (Treasury) proposes to
implement section 4(c) of the Guiding and Establishing National
Innovation for U.S. Stablecoins (GENIUS) Act by establishing broad-
based principles for determining when a State-level regulatory regime
is substantially similar to the Federal regulatory framework.
DATES: Comments on the notice of proposed rulemaking (NPRM) must be
received on or before June 2, 2026.
ADDRESSES: Written comments may be submitted through one of two
methods:
Electronic Submission: Comments may be submitted
electronically through the Federal Government eRulemaking portal at
https://www.regulations.gov.
Mail: Send to U.S. Department of the Treasury, Attention:
Office of the General Counsel, 1500 Pennsylvania Avenue NW, Washington,
DC 20220.
Given potential delays in the receipt of comments by mail, we
strongly encourage comments to be submitted via https://www.regulations.gov. All comments should be captioned with ``GENIUS Act
State Similarity.'' Please include your name, organizational
affiliation, address, email address, and telephone number in your
comment. In general, all comments received, including attachments and
other supporting materials, will be part of the public record and
subject to public disclosure. Do not submit any information in your
comment or supporting materials that you consider confidential or
inappropriate for public disclosure.
FOR FURTHER INFORMATION CONTACT: Daniel Borman, Brendan Costello, and
Carol Rodrigues, Attorney-Advisors, Office of the General Counsel,
Treasury, at [email protected] or 202-622-0480.
SUPPLEMENTARY INFORMATION:
I. Background and Authority
The GENIUS Act, enacted on July 18, 2025, provides a comprehensive
framework for the regulation of payment stablecoins.\1\ As defined in
the GENIUS Act, a payment stablecoin is a digital asset \2\ (i) that
is, or is designed to be, used as a means of payment or settlement and
(ii) the issuer of which is obligated to convert, redeem, or repurchase
for a fixed amount of monetary value and represents or creates the
reasonable expectation that it will maintain a stable value relative to
a fixed amount of monetary value.\3\
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\1\ Public Law 119-27. 12 U.S.C. 5901 et seq.
\2\ The term ``digital asset'' means any digital representation
of value that is recorded on a cryptographically secured distributed
ledger. Id. at section 2(6) (12 U.S.C. 5901(6)).
\3\ See section 2(22) of the GENIUS Act (12 U.S.C. 5901(22)) for
the full definition of a payment stablecoin. National currencies,
deposits as defined in 12 U.S.C. 1813 (including deposits recorded
using distributed ledger technology), and securities are not payment
stablecoins.
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Under the GENIUS Act, only permitted payment stablecoin issuers may
issue a payment stablecoin in the United States, subject to certain
exceptions and safe harbors.\4\ The Board of Governors of the Federal
Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC),
the National Credit Union Administration (NCUA), and the Office of the
Comptroller of the Currency (OCC) (collectively, the primary Federal
payment stablecoin regulators) are generally tasked with establishing a
process and framework for the licensing, regulation, examination, and
supervision of permitted payment stablecoin issuers.\5\
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\4\ Section 3(a) of the Act (12 U.S.C. 5902(a)).
\5\ See, e.g., id. at section 4(b); 4(h)(1); 5(a)(1)(B);
5(a)(2); 5(g). (12 U.S.C. 5903(b), (h)(1);12 U.S.C. 5904(a)(1)(B),
(a)(2), (g)).
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However, State qualified payment stablecoin issuers (with a
consolidated total outstanding issuance of payment stablecoins of no
more than $10 billion) generally may opt for State regulation so long
as the State-level regulatory regime is substantially similar to the
Federal regulatory framework and the Stablecoin Certification Review
Committee \6\ has approved the State-level regulatory regime upon
determining that it meets or exceeds the standards and requirements
described in section 4(a) of the GENIUS Act (12 U.S.C. 5903(a)).\7\ To
effectuate this process, the GENIUS Act tasks Treasury with
establishing broad-based principles for determining whether a State-
level regulatory regime is substantially similar to the Federal
regulatory framework under the GENIUS Act.\8\
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\6\ Under the GENIUS Act, the Secretary of the Treasury chairs
the Stablecoin Certification Review Committee, an interagency
committee that also includes the Chair of the FRB (or the Vice Chair
for Supervision, if delegated by the FRB Chair) and the Chair of the
FDIC. See id. at section 2(27) (12 U.S.C. 5901(27).
\7\ See id. at section 4(c) (12 U.S.C. 5903(c)).
\8\ Id. at section 4(c)(2) (12 U.S.C. 5903(c)(2)). The GENIUS
Act also vests Treasury with general authority to issue regulations
to carry out the GENIUS Act. Id. at section 13 (12 U.S.C. 5913).
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On September 19, 2025, Treasury published in the Federal Register
an advance notice of proposed rulemaking (ANPRM) to solicit public
comment on questions relating to the implementation of the GENIUS
Act.\9\ In drafting this NPRM, Treasury considered comments received on
the ANPRM that were material and relevant to the subjects contained
herein.
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\9\ 90 FR 45159 (September 19, 2025). Comments on the ANPRM were
originally due on October 20, 2025, but Treasury later extended the
comment period by 15 days to November 4, 2025. 90 FR 47251 (October
1, 2025).
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II. Description of the Proposed Broad-Based Principles
A. Overview of the Rule
Proposed part 1520 sets forth the authority, purpose, and scope of
Subchapter C, while proposed part 1521 sets forth the broad-based
principles for determining whether a State-level regulatory regime is
substantially similar to the Federal regulatory framework.
Proposed Sec. 1521.1 defines key terms for use in the part and
provides that terms are otherwise used consistently with the
definitions in the GENIUS Act. In particular, the proposed rule defines
the term ``Federal regulatory framework'' to include both the relevant
provisions of the Act as well as a limited scope of interpretations and
[[Page 16845]]
regulations issued by Federal agencies to implement the Act. As
described further below, the proposed rule recognizes that the Act
provides States with broad discretion to design many aspects of their
own unique regulatory regimes and accordingly provides wide latitude
for States to deviate from certain Federal regulations while remaining
``substantially similar'' to the Federal regulatory framework.
Similarly, the term ``State-level regulatory regime'' is defined
broadly to provide States with discretion to design their regimes using
a mix of legislation, regulation, and enforceable guidance as they deem
appropriate.
Proposed Sec. 1521.2 sets out the overall broad-based principles
explaining how the statutory provisions of the Act apply to State
qualified payment stablecoin issuers and how State-level regulatory
regimes may be considered substantially similar to the Federal
regulatory framework. The proposed principles reflect that the Act
requires the Stablecoin Certification Review Committee to determine
that States ``meet or exceed'' the core prudential standards and
requirements described in section 4(a) of the Act (12 U.S.C. 5903(a)),
while providing more flexibility for States to design their own regimes
for other topics covered by the Act, such as applications, licensing,
supervision, and enforcement.
Within section 4(a) (12 U.S.C. 5903(a)), the Act provides that
States retain relatively more discretion in certain areas, such as
capital standards (which we refer to as ``State-calibrated
requirements''), while setting uniform standards that should be
consistent across Federal and State regimes in other areas, such as
reserve requirements and anti-money laundering and sanctions program
requirements (which we refer to as ``uniform requirements''). Proposed
Sec. Sec. 1521.3 and 1521.4 provide additional broad-based principles
for the uniform requirements and State-calibrated requirements,
respectively.
With respect to provisions of the Act other than section 4(a) (12
U.S.C. 5903(a)), proposed Sec. 1521.5 identifies broad-based
principles for several sections of the Act that are relevant to State-
level regulatory regimes: sections 4(d) (on transition to Federal
oversight), 5 (on applications and licensing), 6 (on supervision and
enforcement), 10 (on custody), and 11 (on insolvency) (12 U.S.C.
5903(d), 5904, 5905, 5909-5911). Proposed Sec. 1521.6 recognizes that
States may impose requirements beyond what is included in the Federal
regulatory framework and provides that such additional requirements are
permissible so long as they do not conflict with the Act, part 1521, or
other Federal law, and they do not modify the State-level regulatory
regime such that it can no longer be reasonably viewed as substantially
similar to the Federal regulatory framework. Finally, proposed Sec.
1521.7 includes a severability provision.
B. Proposed Part 1520
1. Authority, Purpose, and Scope (Proposed Sec. 1520.1)
Proposed Sec. 1520.1 sets forth the authority, purpose, and scope
of proposed Subchapter C.
Paragraph (a) describes the authority for Subchapter C, which
derives from the Act, including sections 4(c) and 13 (12 U.S.C.
5903(c), 5913). Paragraph (b) states the purpose and scope of
Subchapter C, stating that the Act tasks Treasury with issuing
regulations concerning payment stablecoins and that Subchapter C
contains Treasury's rules implementing certain sections of the Act.
C. Scope, Applicability, and Definitions (Proposed Sec. 1521.1)
Proposed Sec. 1521.1 sets forth the scope and applicability of
part 1521. Paragraph (a) provides that part 1521 is issued by Treasury
to implement section 4(c) of the GENIUS Act (12 U.S.C. 5903(c)),
establishing broad-based principles for determining whether a State-
level regulatory regime is substantially similar to the Federal
regulatory framework.
Proposed Sec. 1521.1(b) provides that unless otherwise defined in
part 1521, the terms used in this part have the same meaning as in
section 2 of the Act (12 U.S.C. 5901). Paragraph (c) defines the
following terms for purposes of part 1521.
Act or GENIUS Act. Treasury is proposing to define ``Act'' or
``GENIUS Act'' to mean the Guiding and Establishing National Innovation
for U.S. Stablecoins Act (12 U.S.C. 5901 et seq.).
Federal regulatory framework. The Act left the term ``Federal
regulatory framework'' undefined. Some commenters to the ANPRM
suggested that States should be measured only against the statutory
requirements of the Act (i.e., the Federal regulatory framework should
be defined to only include the Act's provisions), rather than any
implementation of the Act by the primary Federal payment stablecoin
regulators. Others suggested that complete consistency between States
and the Federal government, including with respect to Federal agencies'
implementing regulations and guidance, was necessary to promote a
unified and consistent regulatory framework for payment stablecoins.
Treasury believes that the best interpretation of the term
``Federal regulatory framework'' is that it encompasses not only the
statutory text of the Act but also the core regulatory framework set up
by Federal agencies to implement the statute. The plain text of the
Act, by referring to the ``regulatory'' framework, supports this
interpretation.\10\ Further, for several of the most critical
requirements at the heart of the payment stablecoin regulatory
framework--such as capital, liquidity, and reserve asset
diversification--the statute does not include a specific and detailed
framework that States could be measured against.\11\ If only the text
of the Act itself were relevant, it would be unclear how to evaluate
State-level regulatory regimes against the statutory text, potentially
rendering the statutory substantial similarity test difficult to
administer, and State and Federal standards might starkly deviate from
one another, potentially undermining the safety and soundness,
financial stability, and consumer protection purposes of the Act.
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\10\ See e.g., Regulatory, Black's Law Dictionary (12th ed.
2024) (defining ``regulatory'' as ``[o]f, relating to, or involving
one or more regulations'').
\11\ See, e.g., section 4(a)(4)(A)(i) (12 U.S.C.
5903(a)(4)(A)(i)) (providing only that capital requirements be
tailored to business models and risk profiles and do not exceed
requirements that are sufficient to ensure ongoing operations);
section 4(a)(4)(A)(ii) (12 U.S.C. 5903(a)(4)(A)(ii)) (requiring only
that liquidity standards be consistent with the list of reserve
assets and the one-to-one backing requirement in section
4(a)(1)(A)); section 4(a)(4)(A)(iii) (12 U.S.C. 5903(a)(4)(A)(iii))
(providing only that reserve asset diversification, deposit
concentration, and interest rate risk management requirements be
tailored to business models and risk profiles of permitted payment
stablecoin issuers and do not exceed requirements that are
sufficient to ensure ongoing operations).
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Other uses of the term ``Federal regulatory framework'' throughout
the Act confirm this interpretation. For example, section 4(d)(1) of
the Act (12 U.S.C. 5903(d)(1)), dealing with the transition of State
chartered depository institutions to Federal oversight, provides that
the institutions must ``transition to the Federal regulatory framework
of the primary Federal payment stablecoin regulator'' of the
institution. If the ``Federal regulatory framework'' were referring to
only the statute (and not implementing regulations promulgated by the
Federal regulators), it would make little sense for Congress to refer
to the Federal regulatory framework ``of the primary Federal payment
stablecoin regulator.''
[[Page 16846]]
Based on this rationale, for purposes of evaluating a State-level
regulatory regime under section 4(c) of the Act (12 U.S.C. 5903(c)),
Treasury is proposing to define ``Federal regulatory framework'' to
mean (i) the text of all relevant provisions of the Act, (ii) any
interpretations thereof, or regulations thereunder issued by the OCC
and published in the Federal Register (including those codified in
title 12 of the Code of Federal Regulations); (iii) with respect to
sections 4(a)(5) and 4(a)(6) of the Act (12 U.S.C. 5903(a)(5)-(6)), any
regulations, interpretations, or orders issued by the Department of the
Treasury (including those codified in titles 12 or 31 of the Code of
Federal Regulations); and (iv) with respect to section 4(a)(8) of the
Act (12 U.S.C. 5903(a)(8)), any interpretations, regulations, or orders
issued by the FRB (including those codified in title 12 of the Code of
Federal Regulations).
Treasury is proposing that, except for sections 4(a)(5), (a)(6),
and (a)(8) of the Act (12 U.S.C. 5903(a)(5), (a)(6), and (a)(8)), for
purposes of defining the Federal regulatory framework, the OCC's
interpretations and regulations published in the Federal Register
should be the baseline for comparison to a State-level regulatory
regime.
Among Federal implementing agencies, there are a number of reasons
for the term ``Federal regulatory framework'' to be based on the OCC.
First, outside of section 4(c) (12 U.S.C. 5903(c)), the Act uses the
term ``Federal regulatory framework'' without qualifiers only once--in
section 4(d)(2) of the Act (12 U.S.C. 5903(d)(2)), where it refers to
the transition of State qualified payment stablecoin issuers to
oversight by the OCC.\12\
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\12\ This suggests that references to ``the Federal regulatory
framework'' without the qualifying phrase ``of the primary Federal
payment stablecoin regulator'' (as the term is used in section
4(d)(1)) is best read to mean the OCC's regulatory framework.
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A broader examination of the statutory structure strongly supports
the use of the OCC's interpretations and regulations for this purpose.
Under the GENIUS Act, a State qualified payment stablecoin issuer is an
entity legally established under the laws of a State that is not an
uninsured national bank chartered by the OCC, a Federal branch, an
insured depository institution, or a subsidiary of such national bank,
Federal branch, or insured depository institution (section 2(31) (12
U.S.C. 5901(31))). For most States, this most clearly leaves nonbanks
as eligible State qualified payment stablecoin issuers; however, in
some States, State law may also permit certain uninsured depository
institutions or other types of State-chartered entities to issue
payment stablecoins. Nonbank entities that opt for a Federal charter
are regulated by the OCC.\13\ Additionally, absent a waiver, State
qualified payment stablecoin issuers that are nonbank entities
transition to regulation by the OCC, in coordination with the State
payment stablecoin regulator, once the issuer has a payment stablecoin
with a consolidated total outstanding issuance of more than $10
billion.\14\ Similarly, any State banks that are licensed as State
qualified payment stablecoin issuers must, per section 2(31)(B) of the
Act (12 U.S.C. 5901(31)(B)), be uninsured State banks, and thus are
closely analogous to uninsured national banks--which are also regulated
at the Federal level by the OCC. Thus, Treasury is proposing to define
the ``Federal regulatory framework'' for purposes of part 1521 to
include any of the OCC's interpretations of the Act or regulations
issued thereunder that are published in the Federal Register, including
those codified in title 12 of the Code of Federal Regulations.
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\13\ See section 2(11)(A) of the Act (12 U.S.C. 5901(11)(A))
(defining ``Federal Qualified Payment Stablecoin Issuer'' to include
``a nonbank entity, other than a State qualified payment stablecoin
issuer, approved by the Comptroller, pursuant to section 5, to issue
payment stablecoins'').
\14\ Id. at section 4(d)(2)(A) (12 U.S.C. 5903(d)(2)(A)).
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Treasury has considered whether the regulatory frameworks
promulgated by the other primary Federal payment stablecoin regulators
should also be included in the part 1521 definition of ``Federal
regulatory framework'' in addition to or in lieu of the OCC's
framework. The FRB, FDIC, and NCUA play a vital role in shaping the
Federal framework by issuing interpretations and regulations as well as
acting as primary Federal payment stablecoin regulators to supervise
the entities under their respective jurisdictions. The definition of
``Federal regulatory framework'' for the limited purpose of part 1521
does not diminish the crucial role of these regulators in implementing
the GENIUS Act. Rather, the definition is intended to ensure that State
qualified payment stablecoin issuers can rely on a framework that
largely accounts for their entity type and allows for, absent a waiver,
a seamless transition to OCC supervision for most State qualified
payment stablecoin issuers with an outstanding payment stablecoin
issuance that exceeds $10 billion. By contrast, we expect the
regulatory frameworks promulgated by the FRB, FDIC, and NCUA to be
predominantly calibrated to issuers that are subsidiaries of insured
member banks, insured nonmember banks, or insured credit unions,
respectively, which are categorically ineligible to be State qualified
payment stablecoin issuers under Section 2(31)(B) of the Act (12 U.S.C.
5901(31)(B)).
The proposed definition of ``Federal regulatory framework'' also
includes any regulations, interpretations, or orders issued by Treasury
(including those codified in chapters V or X in title 31 of the Code of
Federal Regulations) with respect to sections 4(a)(5) and (a)(6) of the
Act (12 U.S.C. 5903(a)(5), (a)(6)), which address Bank Secrecy Act
(BSA) and sanctions compliance requirements, as well as the
technological capabilities to comply with lawful orders. Similarly, the
definition includes interpretations, regulations, or orders issued by
the FRB related to the anti-tying provisions in section 4(a)(8) of the
Act (12 U.S.C. 5903(a)(8)). Treasury and the FRB are included with
respect to these provisions because these Federal agencies, rather than
the OCC, will likely issue the primary Federal regulations concerning
these sections.
Treasury recognizes that Federal agencies' issuance of
interpretations and guidance can be voluminous and take various forms,
some of which are more binding, authoritative, or readily available
than others. Because the substantial similarity of a State-level
regulatory regime is evaluated relative to the Federal regulatory
framework, changes to the Federal regulatory framework by Federal
agencies may affect how substantial similarity is assessed under
Treasury's broad-based principles.\15\ Treasury does not believe it
would be efficient to require States continuously to search for
informal regulatory actions such as FAQs, interpretive letters, and
other guidance that are not published in the Federal
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Register and incorporate them into their own State frameworks, nor
would such granular mirroring appear to be consistent with the degree
of flexibility the statute contemplates that States will have.
Therefore, Treasury's proposed definition of ``Federal regulatory
framework'' does not include any guidance or interpretation issued by a
primary Federal payment stablecoin regulator that is not published in
the Federal Register.\16\
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\15\ The OCC has proposed its GENIUS Act implementing
regulations at 91 FR 10202 (March 2, 2026). Changes to the OCC's
regulations between proposal and final adoption may affect the
Federal regulatory framework against which State-level regulatory
regimes are evaluated under part 1521. In that event, Treasury may
adjust the final version of part 1521 to ensure that the substantial
similarity principles appropriately reflect the Federal regulatory
framework. Treasury also may change the substantial similarity
principles, including by adjusting the degree to which State-level
regulatory regimes must incorporate provisions of the Federal
regulatory framework, based on Treasury's determination of, among
other things, whether the OCC's final rules are practicable for
State implementation. Treasury therefore encourages the public to
carefully review and comment on the proposed implementing
regulations making up the Federal regulatory framework, including
those issued by the OCC or other primary Federal payment stablecoin
regulators, with due consideration to potential implications for
State-level regulatory regimes.
\16\ By contrast, the proposed definition of ``Federal
regulatory framework'' does not limit Treasury or FRB regulations,
interpretations, or orders implementing sections 4(a)(5),(a)(6), and
(a)(8) of the Act (12 U.S.C. 5903(a)(5), (a)(6), and (a)(8)) to
those published in the Federal Register. As a longstanding matter of
practice, many key documents governing the BSA/anti-money laundering
and sanctions frameworks are issued outside of the Federal Register.
Treasury believes that excluding such documents would effectively
nullify BSA/anti-money laundering and sanctions compliance and
therefore be in tension with the goal of the Act to subject State
qualified payment stablecoin issuers to these critical Federal
frameworks. Similarly, the Act expressly contemplates that the FRB
may implement the anti-tying provisions via orders in addition to
regulations, section (a)(8)(B) of the Act (12 U.S.C. 5903(a)(8)(B),
and those orders may not, by practice, be published in the Federal
Register. As described below, Treasury generally does not expect
States to reproduce such BSA/anti-money laundering, sanctions, or
anti-tying frameworks in their State-level regulatory regimes, and
therefore the burden of expanding the scope of covered documents is
more limited, and generally in accord with existing practice.
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State-Calibrated Requirement. Treasury proposes to define ``State-
calibrated requirement'' to mean a requirement under section 4(a) of
the Act (12 U.S.C. 5903(a)) that is applicable to a State qualified
payment stablecoin issuer and for which the Act grants substantive
discretion to a State payment stablecoin regulator to develop the
State-level regulatory regime. These requirements are distinct from the
uniform requirements, which are defined below. Appendix A to part 1521
lists the State-calibrated requirements.
State-level Regulatory Regime. With respect to a particular State,
Treasury proposes to define ``State-level regulatory regime'' as: (i)
all statutes enacted by the State regarding payment stablecoins; (ii)
any regulations regarding payment stablecoins or that apply to a State
qualified payment stablecoin issuer issued by a State payment
stablecoin regulator of the State or another regulator of the State;
and (iii) any interpretations thereof or guidance thereunder, only to
the extent they are enforceable against State qualified payment
stablecoin issuers. Treasury proposes to include relevant State
regulations in the definition of ``State-level regulatory regime''
because this interpretation is supported by the text and purpose of the
Act, as described above.\17\ Additionally, Treasury is proposing to
include related interpretations or guidance that are enforceable
against a State qualified payment stablecoin issuer, to provide States
with additional flexibility on how to best design and codify their
State-level regulatory regime, as discussed below.
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\17\ See supra note 10.
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Uniform Requirement. Treasury is proposing to define ``uniform
requirement'' as a requirement in section 4(a) of the Act (12 U.S.C.
5903(a)) that is applicable to a State qualified payment stablecoin
issuer and for which the Act does not grant substantive discretion to a
State payment stablecoin regulator. These requirements are distinct
from the State-calibrated requirements, which are discussed above.
Appendix A to part 1521 lists the uniform requirements.
Question 1: Are there any additional statutory terms that should be
defined in part 1521?
Question 2: Is the proposed definition of Federal regulatory
framework appropriately scoped? Should the definition differ for
purposes of section 4(a) (12 U.S.C. 5903(a)) and other sections of the
Act? Should the definition be limited to the Act's statutory text?
Should the definition be based on the regulations and interpretations
of more primary Federal payment stablecoin regulators rather than
primarily the OCC's (and in limited circumstances, Treasury's and the
FRB's)? If so, should States be permitted to choose among the primary
Federal payment stablecoin regulators' frameworks for substantial
similarity purposes? How would such an approach best achieve the
purposes of the Act? Are there discrete sections or subsections of the
Act for which another Federal agency's regulations and interpretations
should control? Should the definition of ``Federal regulatory
framework'' be expanded to include guidance and other subregulatory
documents that are not published in the Federal Register? Should the
determination of what is included in the Federal regulatory framework
instead be based on whether a document represents final agency action?
Is it sufficiently clear what an ``interpretation'' is under the
definition of ``Federal regulatory framework''?
Question 3: With respect to sections 4(a)(5) and 4(a)(6) of the Act
(12 U.S.C. 5903(a)(5) and (a)(6)), which interpretations, regulations,
and orders should be included in the Federal regulatory framework? Are
there other guidance documents or interpretations that should be
included?
Question 4: Is it appropriate to distinguish between uniform
requirements and State-calibrated requirements of section 4(a) (12
U.S.C. 5903(a)) as proposed? Are there other ways in which the
provisions of section 4(a) (12 U.S.C. 5903(a)) should be classified?
Should each provision instead be addressed separately in part 1521? How
would an alternative approach best achieve the purposes of the Act? Are
the provisions of section 4(a) of the Act (12 U.S.C. 5903(a)) correctly
classified in Appendix A as uniform requirements or State-calibrated
requirements? If not, which requirements should be re-classified?
Question 5: Is the proposed definition of ``State-level regulatory
regime'' appropriately scoped? Should the definition differ for
purposes of section 4(a) (12 U.S.C. 5903(a)) and other sections of the
Act? Should the definition be limited to the State's statutory text?
Should the definition be expanded to include guidance and other such
documents that are not published and enforceable, or alternatively
should it be narrowed to exclude subregulatory documents? Should part
1521 require that certain aspects of the State-level regulatory regime
be codified in statute or regulations, or omit such a requirement to
preserve maximum flexibility for the State to structure its regulatory
regime?
Question 6: Should the definition of State-level regulatory regime
include any statutes, regulations, interpretations, or guidance related
to foreign payment stablecoin issuers? If a State statute or regulation
includes a prohibition on foreign payment stablecoin issuers from
issuing payment stablecoins in the State (or to persons in the State)
absent a State license, whether or not such foreign payment stablecoin
issuer is registered with the Comptroller, should such a prohibition be
considered part of the State-level regulatory regime?
D. Overall Broad-Based Principles (Proposed Sec. 1521.2)
Proposed Sec. 1521.2 sets forth the overall broad-based principles
for determining whether a State-level regulatory regime is
substantially similar to the Federal regulatory framework under the
Act. These principles provide context for the additional broad-based
principles discussed in proposed Sec. Sec. 1521.3 through 1521.6.
Question 7: What broad-based principles should be considered in
determining whether a State-level
[[Page 16848]]
regulatory regime is ``substantially similar'' to the Federal
regulatory framework? Are the principles in proposed part 1521
appropriate? Should any additional principles be added? Are there any
principles that should be excluded from consideration?
1. Application of Statutory Provisions (Proposed Sec. 1521.2(a))
Section 2(23) of the Act (12 U.S.C. 5901(23)) defines ``permitted
payment stablecoin issuers'' to include State qualified payment
stablecoin issuers, and therefore statutory requirements that apply to
permitted payment stablecoin issuers generally apply as a matter of law
to State qualified payment stablecoin issuers, unless the Act provides
otherwise.\18\ Several comments on the ANPRM align with this reading.
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\18\ While section 4(c) of the Act (12 U.S.C. 5903(c)) provides
for the option of State regulation ``[n]otwithstanding the Federal
regulatory framework established under this Act,'' the same clause
makes clear that the State-level regulatory regime must remain
substantially similar to the Federal regulatory framework. Given the
overall context of the Act, as described above with respect to the
definition of ``Federal regulatory framework,'' the best reading of
that clause is that it does not displace the generally applicable
statutory requirements, which were carefully crafted by Congress to
apply to both State and Federal issuers.
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Accordingly, proposed Sec. 1521.2(a) provides that except as
otherwise provided in part 1521 or the Act, a State qualified payment
stablecoin issuer is subject to all requirements under Federal
statutes, including the Act, applicable to permitted payment stablecoin
issuers. State-level regulatory regimes may not conflict with any
Federal statutory requirements. For example, section 4(a)(1)(C) of the
Act (12 U.S.C. 5903(a)(1)(C)) requires certain information to be
disclosed by a permitted payment stablecoin issuer each month. That
disclosure requirement applies to State qualified payment stablecoin
issuers to the same extent that it applies to Federal issuers, so
State-level regulatory regimes may not purport to permit disclosure
less frequently than monthly. Similarly, section 4(a)(9)(A)(i) of the
Act (12 U.S.C. 5903(a)(9)(A)(i)) provides that permitted payment
stablecoin issuers may not use certain terms in the name of a payment
stablecoin. This prohibition applies to State qualified payment
stablecoin issuers to the same extent that it applies to Federal
issuers, so State-level regulatory regimes may not purport to permit
use of those terms.
Additionally, if Congress in the future enacts legislation that
applies to permitted payment stablecoin issuers outside of the GENIUS
Act, such legislation would also apply to State qualified payment
stablecoin issuers unless Congress specifies otherwise, and State-level
regulatory regimes may not conflict with those Federal statutory
requirements.
Question 8: What, if any, other Federal laws that apply to State
qualified payment stablecoin issuers should Treasury consider with
respect to the substantial similarity analysis?
Question 9: For substantial similarity purposes, what should be the
effect if Congress in the future amends that Act or passes a law that
does not amend the Act but nonetheless expressly imposes new
requirements on State qualified payment stablecoin issuers or permitted
payment stablecoin issuers more generally?
2. ``Substantial Similarity'' and ``Meet or Exceed'' the Standards and
Requirements Described in Section 4(a) of the Act (Proposed Sec.
1521.2(b)(1))
Proposed Sec. 1521.2(b) establishes overall broad-based principles
for determining whether a State-level regulatory regime is
substantially similar to the Federal regulatory framework. The first
principle, in proposed Sec. 1521.2(b)(1), is that (i) the State-level
regulatory regime must meet or exceed the standards and requirements
described in section 4(a) of the Act (12 U.S.C. 5903(a)) such that (A)
implementation of each of the uniform requirements in the State-level
regulatory regime is consistent with the Federal regulatory framework
in all substantive respects, in accordance with the requirements of
part 1521; and (B) implementation of each of the State-calibrated
requirements is consistent with the applicable provisions of the Act
and leads to regulatory outcomes that are at least as stringent and
protective as the Federal regulatory framework.
By requiring that a State-level regulatory regime ``meet or
exceed'' the standards and requirements described in section 4(a) of
the Act (12 U.S.C. 5903(a)) to be considered ``substantially similar''
to the Federal regulatory framework, Treasury is seeking to clarify how
these broad-based principles relate to the Stablecoin Certification
Review Committee's review. Specifically, each of sections 4(c)(1),
4(c)(2), 4(c)(4)(A), and 4(c)(4)(B) of the Act (12 U.S.C. 5903(c)(1),
(c)(2), (c)(4)(A), and (c)(4)(B)) refer to a State-level regulatory
regime being substantially similar to the Federal regulatory framework
under the GENIUS Act. However, under section 4(c)(5)(A) (12 U.S.C.
5903(c)(5)(A)), the Stablecoin Certification Review Committee may only
approve a State's initial certification or recertification if it
``unanimously determines that the State-level regulatory regime meets
or exceeds the standards and requirements described in [section 4(a) of
the Act].''
Treasury believes that the two terms refer to overlapping but
distinct subsets of the Act. While the Stablecoin Certification Review
Committee's review for meeting or exceeding Federal standards is
limited to only those standards and requirements described in section
4(a) of the Act (12 U.S.C. 5903(a)), a State's certification of
substantial similarity is not limited to section 4(a) (12 U.S.C.
5903(a)) and rather must take into account the entire ``Federal
regulatory framework under this Act.'' Therefore, Treasury has
carefully considered what substantial similarity means in the context
of (i) section 4(a) of the Act (12 U.S.C. 5903(a)), which is the focus
of Stablecoin Certification Review Committee review and (ii) relevant
provisions of the Act other than section 4(a) (12 U.S.C. 5903(a)).
Treasury proposes to interpret ``substantial similarity'' to mean that
the State and Federal frameworks must bear a close resemblance to each
other and that the State-level regulatory regime must meet or exceed
the standards and requirements described in section 4(a) of the Act (12
U.S.C. 5903(a)), including as implemented through the Federal
regulatory framework.
With respect to section 4(a) (12 U.S.C. 5903(a)), Treasury believes
that ``substantial similarity'' should be understood in the context of
a State-level regulatory regime ``meet[ing] or exceed[ing]'' the
standards and requirements described in section 4(a) (12 U.S.C.
5903(a)). Standing alone, the words ``substantial similarity'' could be
interpreted to imply that the State and Federal frameworks must closely
resemble one another, but not necessarily that the Federal standards
act as a floor (i.e., State standards could be either more or less
stringent than Federal standards to some extent while remaining
substantially similar to the Federal standards). However, the statutory
context makes that interpretation untenable. Interpreting the statute
to allow for a State-level regulatory regime to have requirements that
fall below the Federal floor would preserve State flexibility, but
would lead to an incoherent regime in which a State could accurately
certify that its regulatory regime is ``substantially similar'' to the
Federal regulatory framework but the Stablecoin Certification Review
Committee would be required to reject the certification because the
State's regulatory regime
[[Page 16849]]
does not meet or exceed the standards and requirements described in
section 4(a) (12 U.S.C. 5903(a)). Therefore, Treasury proposes to
interpret the Act to align the standard in State certifications with
the Stablecoin Certification Review Committee's standard of review for
those certifications. Treasury interprets the phrase ``the standards
and requirements described in [section 4(a) of the Act]'' to mean the
Federal regulatory framework implementing section 4(a) of the Act (12
U.S.C. 5903(a)), and not just the statutory provisions in section 4(a)
of the Act (12 U.S.C. 5903(a)).\19\
---------------------------------------------------------------------------
\19\ Treasury considered, in the alternative, whether to
consider Federal regulations for the purpose of ``substantial
similarity'' but consider only the statutory text when evaluating
whether a State-level regulatory regime ``meets or exceeds'' the
standards and requirements described in section 4(a) (12 U.S.C.
5903(a)). However, while such an approach may reflect the
requirements expressly imposed by section 4(a), it would not fully
take into account the standards and requirements ``described in''
section 4(a), which include, for example, ``regulations implementing
capital requirements applicable to permitted payment stablecoin
issuers'' that must be issued by primary Federal payment stablecoin
regulators. Further, Treasury believes that this bifurcated approach
would create similar unworkable and absurd inconsistencies between
the two standards in section 4(c) (12 U.S.C. 5903(c)) and frustrate
the administrability of the State certification review process, for
the reasons described above. In addition, the core prudential
standards that require looking at the full Federal regulatory
framework for any meaningful comparison (e.g., capital and
liquidity) are all contained in section 4(a).
---------------------------------------------------------------------------
Requiring State-level regulatory regimes to meet or exceed the
standards and requirements described in section 4(a) (12 U.S.C.
5903(a)), but only to be substantially similar to the requirements
under other provisions of the Act, is consistent with the statutory
context, where the most important, foundational, and prudential
requirements (e.g., 1:1 reserves) are contained within section 4(a) (12
U.S.C. 5903(a)).\20\
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\20\ One commenter to the ANPRM noted that using ``meets or
exceeds'' as the governing test for section 4(a) (12 U.S.C. 5903(a))
creates a Federal floor and ensures commonality across all U.S.
regimes on the prudential elements most correlated with run risk and
consumer harm. By contrast, that commenter noted that relying on a
more permissible ``substantially similar'' standard would invite
interpretive drift and regulatory arbitrage that at a national and
global level can produce significant flight-to-safety dynamics and
price dislocations during stress as well as complicate the U.S.
government's ability to advocate for a single global standard.
---------------------------------------------------------------------------
Accordingly, proposed Sec. 1521.2(b)(1)(i) provides that
implementation of each of the uniform requirements in a State-level
regulatory regime must be consistent with the Federal regulatory
framework in all substantive respects, in accordance with the
requirements of part 1521. As noted above, Treasury is proposing to
group the standards and requirements described in section 4(a) (12
U.S.C. 5903(a)) into two distinct categories: uniform requirements and
State-calibrated requirements. The latter are requirements for which
section 4(a) (12 U.S.C. 5903(a)) grants some degree of discretion to a
State payment stablecoin regulator to develop the State-level
regulatory regime, and the former are the remaining requirements
described in section 4(a) (12 U.S.C. 5903(a)).
To meet or exceed the standards and requirements described in
section 4(a) of the Act (12 U.S.C. 5903(a)), a State must not interpret
the uniform requirements in a way that substantively deviates from
their meanings reflected in the Federal regulatory framework. Doing so
would both risk an unworkable nationwide regulatory regime where the
same statutory terms have been interpreted by regulators in multiple
different and potentially inconsistent ways,\21\ and would allow for
State-level regulatory regimes that do not meet or exceed the standards
and requirements described in section 4(a) of the Act (12 U.S.C.
5903(a)). For instance, if a State were to interpret section 4(a) (12
U.S.C. 5903(a)) to allow State qualified payment stablecoin issuers to
hold as reserves digital assets other than those permitted under
section 4(a)(1)(A)(viii) of the Act (12 U.S.C. 5903(a)(1)(A)(viii)),
the State-level regulatory regime would likely fail to be consistent
with the Federal regulatory framework in all substantive respects, as
required in proposed Sec. 1521.2(b)(1)(i). The broad-based principles
for uniform requirements and how States can incorporate those
principles into their State-level regulatory regimes are discussed at
length in section II.E below.
---------------------------------------------------------------------------
\21\ Cf. Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 400
(2024) (``Courts instead understand that such statutes, no matter
how impenetrable, do--in fact, must--have a single, best
meaning.'').
---------------------------------------------------------------------------
Proposed Sec. 1521.2(b)(1)(ii) requires that in order to meet or
exceed the standards and requirements described in section 4(a) of the
Act (12 U.S.C. 5903(a)), implementation of each of the State-calibrated
requirements must also be consistent with the applicable provisions of
the Act and lead to regulatory outcomes that are at least as stringent
and protective as the Federal regulatory framework. While some
provisions of section 4(a) of the Act (12 U.S.C. 5903(a)) provide the
States with discretion to implement such requirements,\22\ that
discretion must be considered in connection with the ``meets or
exceeds'' standard and the substantial similarity requirement.
Therefore, it is important that a State's implementation of State-
calibrated requirements does not deviate from the Federal regulatory
framework in a way that would undermine the purpose of such provisions.
For example, with respect to the capital requirements in section
4(a)(4) of the Act (12 U.S.C. 5903(a)(4)), it is clear that Congress
contemplated that State payment stablecoin regulators would issue their
own capital rules. However, if a State were to adopt capital provisions
in its State-level regulatory regime by providing that a State
qualified payment stablecoin issuer need only hold a de minimis amount
of capital, regardless of the size or scope of its operations, such an
approach would likely not produce regulatory outcomes that are at least
as stringent and protective as those under the Federal regulatory
framework and would not be substantially similar to the Federal
regulatory framework. Proposed Sec. 1521.4, discussed in section II.F
below, outlines the broad-based principles for the State-calibrated
requirements to provide States with a better understanding of how they
can exercise their discretion under the Act while also meeting or
exceeding the standards and requirements described in section 4(a) of
the Act (12 U.S.C. 5903(a)).
---------------------------------------------------------------------------
\22\ Cf. Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 394
(2024) (``the statute's meaning may well be that the agency is
authorized to exercise a degree of discretion'').
---------------------------------------------------------------------------
Question 10: Should substantial similarity be assessed on a
section-by-section basis or a holistic basis? That is, can a State-
level regulatory regime be substantially similar to the Federal
regulatory framework even if it is not substantially similar with
respect to certain discrete requirements under section 4(a) of the Act
(12 U.S.C. 5903(a))? Should there be a numerical score or other
weighting system to determine substantial similarity?
Question 11: How do the standards of substantial similarity and
``meet or exceed'' relate to one another? Is it appropriate to
conclude, as in the proposed principles, that the State-level
regulatory regime is substantially similar to the Federal regulatory
framework only if it meets or exceeds the standards and requirements
described in section 4(a) of the Act (12 U.S.C. 5903(a))?
Question 12: When evaluating whether a State-level regulatory
regime meets or exceeds the standards and requirements described in
section 4(a) of the Act (12 U.S.C. 5903(a)), is it appropriate to
consider the entire Federal regulatory framework relating to section
4(a) of the Act (12 U.S.C. 5903(a)), as proposed, or only the
[[Page 16850]]
statutory text? If only the statutory text, how will it be determined
that a State ``meets or exceeds'' the standards in section 4(a) (12
U.S.C. 5903(a))?
Question 13: Is the appropriate standard for meeting or exceeding
the standards and requirements described in section 4(a) of the Act
whether the State-level regulatory regime leads to outcomes that are at
least as ``stringent and protective'' as the Federal regulatory
framework? Would a different standard be more appropriate, such as
whether the outcomes of the State-level regulatory regime ``meet or
exceed'' the outcomes of the Federal regulatory framework, or whether
the regime itself is ``functionally equivalent or superior to,'' the
Federal regulatory framework?
Question 14: Is the proposed standard for meeting or exceeding the
uniform requirements appropriate and clear? Are there any cases in
which a State should be able to adopt a materially different
interpretation of a Federal statute or rule than the Federal regulatory
framework?
Question 15: Is the proposed standard for meeting or exceeding the
State-calibrated requirements appropriate and clear? Does it provide an
appropriate amount of discretion to States compared to the uniform
provisions?
Question 16: Should substantial similarity be measured based on the
Federal regulatory framework in effect at the time of finalization of
these broad-based principles, or at the time of each State's
certification, or at some other time? What should be the effective date
of any final rule for part 1521 relative to final regulations issued as
part of the Federal regulatory framework? How should Treasury's
principles account for any future changes to the Federal regulatory
framework?
Question 17: How should any provisions in the State-level
regulatory regime relating to foreign payment stablecoin issuers be
compared to the Federal regulatory framework for purposes of
substantial similarity?
3. Sections of the Act Other Than 4(a) (Proposed Sec. 1521.2(b)(2) and
(b)(3))
With respect to sections of the Act other than section 4(a) (12
U.S.C. 5903(a)), ``substantial similarity'' is not constrained by the
requirement that the State standards ``meet or exceed'' the Federal
standards. Treasury believes that additional flexibility for States
with respect to those sections would be appropriate and consistent with
the Act. Accordingly, proposed Sec. 1521.2(b)(2) provides that in
order to be considered substantially similar to the Federal regulatory
framework, a State-level regulatory regime must include frameworks
addressing other relevant provisions of the Act (transition to Federal
oversight, applications and approval, and supervision and enforcement,
under sections 4(d), 5, and 6 (12 U.S.C. 5903(d), 5904, and 5905)) that
(i) are consistent with those provisions of the Act, and (ii) provide
for similar levels of authority and oversight over payment stablecoin
issuers as provided under the Federal regulatory framework.
The Act provides States with discretion to shape frameworks
regarding transition to Federal oversight, applications and approval,
and supervision and enforcement in ways that may differ from rules
adopted by the OCC or the other primary Federal payment stablecoin
regulators, as a State payment stablecoin regulator only needs to
certify that its regime is substantially similar to the Federal
regulatory framework. Nevertheless, to be substantially similar to the
Federal regulatory framework, States should provide similar levels of
authority and oversight over payment stablecoin issuers as under the
Federal regulatory framework. For example, section 6(a)(3) of the Act
(12 U.S.C. 5905(a)(3)) grants the primary Federal payment stablecoin
regulators examination authority over certain permitted payment
stablecoin issuers. Treasury expects that a State-level regulatory
regime would confer upon the State payment stablecoin regulator
examination authority over State qualified payment stablecoin issuers
that is consistent with this authority under the Act. A State-level
regulatory regime that nominally provides examination authority but
limits its exercise--for example, by permitting examinations only upon
the request or consent of a State qualified payment stablecoin issuer--
would likely not satisfy proposed Sec. 1521.2(b)(2).
Section 10 of the Act (12 U.S.C. 5909), relating to custody,
establishes limitations on who can be a custodian, limits the
commingling of certain assets, and provides that certain assets are
treated as customer property. Section 11 of the Act (12 U.S.C. 5910 and
5911), relating to insolvency, among other things, establishes priority
for claims of a person holding payment stablecoins issued by a
permitted payment stablecoin issuer. Proposed Sec. 1521.2(b)(3)
requires that a State-level regulatory regime must include frameworks
for custody and insolvency that (i) are consistent with sections 10 and
11 of the Act (12 U.S.C. 5909, 5910, and 5911); and (ii) provide
substantially similar protections for payment stablecoin holders as
provided for under the Federal regulatory framework.
For example, if a State-level regulatory regime expands potential
custodians to unsupervised entities in contravention of section
10(a)(1) of the Act (12 U.S.C. 5909(a)(1)), the regime likely would not
comply with proposed Sec. 1521.2(b)(3). Similarly, if a State-level
regulatory regime treated payment stablecoin holders as general
unsecured creditors in an insolvency proceeding, with no priority over
other classes of claim holders, the regime would likely not comply with
proposed Sec. 1521.2(b)(3).
Section II.G below, which discusses proposed Sec. 1521.5, provides
further detail on how State-level regulatory regimes can include
frameworks addressing sections of the Act other than section 4(a) (12
U.S.C. 5903(a)) and be considered substantially similar to the Federal
regulatory framework.
Question 18: Which sections of the Act, beyond section 4(a) (12
U.S.C. 5903(a)), are appropriate to consider when evaluating whether a
State-level regulatory regime is substantially similar to the Federal
regulatory framework? Is the proposed list (sections 4(d), 5, 6, 10,
and 11 of the Act (12 U.S.C. 5903(d), 5904, 5905, 5909-5911))
appropriate or under- or over-inclusive? For example, should the
Federal regulatory framework as defined in part 1521 reflect any of the
following sections of the Act: section 3 (12 U.S.C. 5902) (e.g.,
regarding issuance, offer, and sale of payment stablecoins or the
treatment of payment stablecoins not issued by a permitted payment
stablecoin issuer), section 4(e) (12 U.S.C. 5903(e)) (e.g., regarding
marketing and misrepresentations), section 4(f) (12 U.S.C. 5903(f))
(regarding officers and directors convicted of certain felonies),
sections 8 or 9 (12 U.S.C. 5907 or 5908) (anti-money laundering),
section 16 (12 U.S.C. 5915) (regarding authority of banking
institutions), section 17 (amendments to clarify that payment
stablecoins are not securities or commodities and that permitted
payment stablecoin issuers are not investment companies), section 18
(12 U.S.C. 5916) (regarding certain foreign payment stablecoin
issuers), or section 19 (regarding certain disclosure)?
Question 19: With respect to sections of the Act beyond section
4(a) (12 U.S.C. 5903(a)), are the standards required for being
substantially similar appropriately scoped and clear? Are the standards
set forth related to sections 4(d), 5, and 6 (12 U.S.C. 5903(d), 5904,
and 5905) sufficiently clear? If not, how
[[Page 16851]]
could they be clarified? Similarly, are the standards related to
sections 10 and 11 of the Act (12 U.S.C. 5909-5911) sufficiently clear?
Question 20: Are there portions of the Federal regulatory framework
that States will be unable to replicate in a substantially similar
manner?
4. Deviations in Form or Procedure
Treasury believes that substantial similarity refers to the
substantive standards that apply to permitted payment stablecoin
issuers. Accordingly, proposed Sec. 1521.2(c) provides that, except as
provided in the Act, a State-level regulatory regime may deviate from
the Federal regulatory framework with respect to nonsubstantive matters
of form or procedure while remaining substantially similar to the
Federal regulatory framework. Requiring rigid adherence to Federal
procedure or form that is not mandated by the Act would likely cause
undue burdens and costs for States and conflict with the statutory
purpose of providing an appropriate degree of flexibility to States to
implement their own regulatory regimes. For example, to the extent that
the OCC requires the reserve composition report mandated by section
4(a)(1)(C) of the Act (12 U.S.C. 5903(a)(1)(C)) to be uploaded in a
specified data format, the States may not have the infrastructure to be
able to process such reports in the same or similar format. A State
could instead specify a different data format while remaining
substantially similar to the Federal regulatory framework.
Question 21: Are there any areas in which the State-level
regulatory regime should be required to match the Federal regulatory
framework in terms of form or procedure? For example, should the State-
level regulatory regime require the monthly composition report of an
issuer's reserves in the same format (e.g., including the same required
fields) as the OCC or another primary Federal payment stablecoin
regulator? Would there be benefits of uniform data reporting standards
under Federal and State regulatory requirements?
Question 22: Are the distinctions between the substantive and
procedural aspects of the Federal regulatory framework likely to be
sufficiently clear in practice? Is there additional guidance that would
be appropriate to distinguish between substance and procedure?
E. Broad-Based Principles for Uniform Requirements Under Section 4(a)
of the Act (Proposed Sec. 1521.3)
Proposed Sec. 1521.3 establishes the broad-based principles for
determining whether a State-level regulatory regime is substantially
similar to the Federal regulatory framework with respect to the uniform
requirements under section 4(a) of the Act (12 U.S.C. 5903(a)). First,
proposed Sec. 1521.3(a) provides that each of the uniform requirements
listed in Appendix A to part 1521 must be fully enforceable by the
State payment stablecoin regulators against State qualified payment
stablecoin issuers. While the statutory requirements of the Act apply
to State qualified payment stablecoin issuers as a matter of law, a
State-level regulatory regime that fails to establish how State
regulators will enforce the uniform requirements would not be
substantially similar to the Federal regulatory framework. Such a lack
of enforceability could encourage a race to the bottom where State
qualified payment stablecoin issuers seek to operate in States that
signal that they will not enforce the requirements of the Act. In
addition, because Treasury proposes to define ``State-level regulatory
regime'' such that it excludes non-enforceable guidance, such guidance
would not be considered when determining whether a State-level
regulatory regime is substantially similar to the Federal regulatory
framework.
Proposed Sec. 1521.3(b) provides that the implementation of each
of the uniform requirements in the State-level regulatory regime must
be consistent with the Federal regulatory framework in all substantive
respects, including that (i) there are no material deviations in
definitions or interpretations of statutory terms between the Federal
regulatory framework and the State-level regulatory regime; and (ii)
each of the uniform requirements is applied and construed in the State-
level regulatory regime in a manner that does not materially narrow,
condition, or limit its scope compared to the Federal regulatory
framework.
While the statutory requirements apply as a matter of law, Treasury
believes that incorporating relevant requirements into State law will
reduce confusion among State qualified payment stablecoin issuers
regarding which requirements apply to them. Additionally, Treasury
expects that States will incorporate interpretations of the Act and
regulations issued by the OCC (or the FRB or Treasury in certain
circumstances) that are published in the Federal Register. Recognizing
the variations in legal authorities and practices among States, and
consistent with certain requests submitted in response to the ANPRM,
Treasury is not proposing to mandate a single path for States to
incorporate the statutory and regulatory requirements and proposes
instead to provide States with flexibility to determine the most
efficient and effective procedural mechanism for doing so. For example,
States may find it more efficient to incorporate the uniform
requirements by reference. To the extent States incorporate by
reference, it should be made clear that all of the individual uniform
requirements are accounted for. In other words, merely stating
generally that the requirements of section 4(a) (12 U.S.C. 5903(a)) of
the Act apply, without any reference to the relevant Federal
regulations, would likely be insufficient to comply with proposed Sec.
1521.3(b).
Treasury is proposing that the implementation of the uniform
requirements must be consistent with the Federal regulatory framework
such that there are no material deviations in definitions or
interpretations of statutory terms between the Federal regulatory
framework and the State-level regulatory regime. For example, if a
State-level regulatory regime adds a definition of ``rehypothecation''
that greatly narrows its meaning compared to the Federal regulatory
framework, such that it waters down the prohibition on rehypothecation
in section 4(a)(2) of the Act (12 U.S.C. 5903(a)(2)), the State
standard would likely not be substantially similar to the Federal
regulatory framework.
Similarly, the State-level regulatory regime must not materially
narrow, condition, or limit the scope of the uniform requirements
compared to the Federal regulatory framework. For example, if a State-
level regulatory regime requires State qualified payment stablecoin
issuers to publicly disclose the issuer's redemption policy under
section 4(a)(1)(B) of the Act (12 U.S.C. 5903(a)(1)(B)), but does not
require that the issuer publicly, clearly, and conspicuously disclose
in plain language all fees associated with purchasing or redeeming
payment stablecoins, the State-level regulatory regime would materially
diverge from the Federal regulatory framework.
One important application of this principle is the BSA and
sanctions compliance provisions \23\ in section 4(a)(5) of the Act (12
U.S.C. 5903(a)(5)) and the provision in section 4(a)(6)(B) (12 U.S.C.
5903(a)(6)(B)) regarding compliance with lawful orders.
[[Page 16852]]
Treasury expects to address these provisions in a forthcoming
rulemaking, and such rules will necessarily apply to State qualified
payment stablecoin issuers. Specifically, for all BSA, anti-money
laundering and combating the financing of terrorism, and sanctions
program requirements as directed by the GENIUS Act, State qualified
payment stablecoin issuers will be subject to Federal regulation by
Treasury's Financial Crimes Enforcement Network (FinCEN) or the Office
of Foreign Assets Control, respectively.\24\ It is therefore
particularly important that the State-level regulatory regime avoids
deviation and ensures that the requirements are uniform with the
Federal requirements for BSA and sanctions program requirements with
the exception of technical, non-substantive amendments. Treasury
generally expects that States would cross-reference these requirements
rather than reproduce them in their own State-level regulatory regime.
Treasury does not expect States to reproduce BSA/anti-money laundering
or sanctions compliance interpretations or guidance in their State-
level regulatory regimes, though States must also enforce these rules.
Similarly, because under section 4(a)(8) (12 U.S.C. 5903(a)(8)), the
FRB's anti-tying regulations and orders directly apply to all permitted
payment stablecoin issuers, including State qualified payment
stablecoin issuers, Treasury generally expects that States would cross-
reference the FRB's anti-tying requirements, rather than reproduce them
in their own State-level regulatory regime, though States must also
enforce these rules. If a State or State-level regulatory regime
indicates that the State will not enforce federal rules implementing
sections 4(a)(5), 4(a)(6)(B), or 4(a)(8) of the Act (12 U.S.C.
5903(a)(5), (a)(6)(B), or (a)(8)) or it otherwise becomes clear that
the State is not enforcing such rules, the State-level regulatory
regime would not be considered substantially similar to the Federal
regulatory framework.\25\
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\23\ Since permitted payment stablecoin issuers are limited to
``a person formed in the United States,'' under section 2(23) of the
Act (12 U.S.C. 5901(23)), permitted payment stablecoin issuers will
be ``U.S. persons'' under existing OFAC regulations once the Act
takes effect and will be subject to the same U.S. sanctions
obligations that currently to apply to all other U.S. persons. See,
e.g., 31 CFR 510.326; 31 CFR 555.313; 31 CFR 583.314.
\24\ Section 4(a)(5)(A) (12 U.S.C. 5903(a)(5)(A)) of the GENIUS
Act subjects permitted payment stablecoin issuers, including State
qualified payment stablecoin issuers, to all Federal laws applicable
to a financial institution relating to economic sanctions prevention
of money laundering, and due diligence. Section 4(a)(5) (12 U.S.C.
5903(a)(5)) also requires Treasury to adopt rules to implement this
provision.
\25\ State examiners currently refer violations of the BSA to
FinCEN and share examination findings that identify willful
violations of the BSA. Nothing in this proposal is intended to
interfere with States' ability to refer violations or share
examination findings with FinCEN or OFAC regarding potential or
identified violation of the BSA or sanctions, respectively.
---------------------------------------------------------------------------
Question 23: Are there any uniform requirements for which the
States would need to materially deviate from the definitions or
interpretations of the Federal regulatory framework? Similarly, are
there any uniform requirements where the State-level regulatory regime
would be unworkable unless the States could materially narrow,
condition, or limit the scope of certain uniform requirements compared
to the Federal regulatory framework?
Question 24: For purposes of section 4(a)(12) of the Act (12 U.S.C.
5903(a)(12)), relating to certain non-financial companies, should the
Federal regulatory framework include any interpretive rules issued by
the Stablecoin Certification Review Committee pursuant to section
4(a)(12)(D) (12 U.S.C. 5903(a)(12)(D)) or any related procedural rules?
Should these principles otherwise make clear that State payment
stablecoin regulators must ensure that the Stablecoin Certification
Review Committee has made the findings required under section 4(a)(12)
(12 U.S.C. 5903(a)(12)) before the State licenses any State qualified
payment stablecoin issuers that would be covered under section 4(a)(12)
of the Act (12 U.S.C. 5903(a)(12))?
Question 25: Are there challenges to implementing or complying with
a BSA and sanctions compliance framework that references Federal
requirements as a part of a State-level regulatory regime?
F. Broad-Based Principles for State-Calibrated Requirements Under
Section 4(a) of the Act (Proposed Sec. 1521.4)
The State-calibrated requirements are the requirements of the Act
that provide discretion to the State payment stablecoin regulator to
develop the State-level regulatory regime. However, such discretion is
cabined by the requirement that the Stablecoin Certification Review
Committee must determine whether the regime meets or exceeds the
standards and requirements described in section 4(a) of the Act (12
U.S.C. 5903(a)) and that the State-level regulatory regime must be
substantially similar to the Federal regulatory framework. Proposed
Sec. 1521.4 establishes the broad-based principles for determining
whether a State-level regulatory regime is substantially similar to the
Federal regulatory framework with respect to the State-calibrated
requirements. Treasury expects that a State's implementation of the
State-calibrated requirements will lead to regulatory outcomes that are
at least as stringent and protective as the Federal regulatory
framework. The principles described below took into consideration the
OCC's proposed rule that was published in the Federal Register on March
2, 2026.\26\ The OCC's rule may change at the final rule stage, and
Treasury may modify the final text of part 1521 to account for such
changes or may choose not to implement such changes when Treasury
finalizes this proposal. Treasury encourages stakeholders to read and
comment on the OCC's proposed rule because it will inform the final
form of part 1521, including the extent to which State-level regulatory
regimes will be responsible for incorporating the uniform and State-
calibrated requirements.
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\26\ 91 FR 10202.
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Question 26: In general, to the extent the Federal regulatory
framework or State-level regulatory regimes include specific
consequences associated with specific regulatory requirements (e.g.,
automatic limitations triggered when breaching reserve or capital
requirements), are those aspects best viewed as components of the
requirements (e.g., reserve requirements or capital) to be evaluated
using the standards applicable to requirements under section 4(a) of
the Act (12 U.S.C. 5903(a)), or instead as enforcement mechanisms to be
evaluated using the standards for supervision and enforcement under
section 6 of the Act (12 U.S.C. 5905)?
1. Reserve Assets
Section 4(a)(1)(A) of the Act (12 U.S.C. 5903(a)(1)(A)) outlines
the list of permissible reserve assets for permitted payment stablecoin
issuers. Under section 4(a)(1)(A)(vii) of the Act (12 U.S.C.
5903(a)(1)(A)(vii)), the primary Federal payment stablecoin regulator,
in consultation with the State payment stablecoin regulator, if
applicable, may approve ``any other similarly liquid Federal
Government-issued asset'' as a permissible reserve asset for permitted
payment stablecoin issuers. The Act's language indicates that the
primary Federal payment stablecoin regulators make the final
determination of which assets are similarly liquid Federal Government-
issued assets and that they may consult the State payment stablecoin
regulators, if applicable.
Therefore, proposed Sec. 1521.4(a) provides that a State-level
regulatory regime may allow, or may permit the State payment stablecoin
regulator to allow, assets not listed in section 4(a)(1)(A) of the Act
(12 U.S.C. 5903(a)(1)(A)) only if such assets have been approved by the
OCC as similarly liquid Federal Government-issued assets in accordance
with section
[[Page 16853]]
4(a)(1)(A)(vii) of the Act (12 U.S.C. 5903(a)(1)(A)(vii)). Treasury
expects that, when relevant, the OCC will consult with the States when
making determinations on which reserve assets would qualify. Since the
Act does not contemplate independent State determinations of similarly
liquid Federal Government-issued assets, States may only allow
additional reserve assets if such assets have been approved by the OCC.
The OCC's approval of such assets may be conveyed through guidance and
interpretive materials that are not published in the Federal Register;
to the extent such materials are current, States may rely on them in
determining which assets the OCC has approved under section
4(a)(1)(A)(vii) of the Act (12 U.S.C. 5903(a)(1)(A)(vii)). For the
avoidance of doubt, a State may also choose not to allow such a
similarly liquid Federal Government-issued asset allowed by the OCC.
Question 27: Should States be permitted to allow a reserve asset
that has been approved by a primary Federal payment stablecoin
regulator other than the OCC?
Question 28: Should States be permitted to narrow the set of
permissible reserve assets for State qualified payment stablecoin
issuers?
Question 29: Should States be permitted to allow a reserve asset
that has not been approved by any primary Federal payment stablecoin
regulator?
Question 30: Should States be required to allow, for their State
qualified payment stablecoin issuers, a reserve asset that has been
approved by the OCC?
2. Redemption
Section 4(a)(1)(B)(i) of the Act (12 U.S.C. 5903(a)(1)(B)(i))
provides that permitted payment stablecoin issuers shall publicly
disclose the issuer's redemption policy, which ``shall establish clear
and conspicuous procedures for timely redemption . . . provided that
any discretionary limitations on timely redemptions can only be imposed
by a State qualified payment stablecoin regulator, the [FDIC], the
[OCC], or the [FRB], consistent with section 7.'' Treasury interprets
this provision as allowing a State payment stablecoin regulator to set
its own discretionary limitations on timely redemption. Specifically,
proposed Sec. 1521.4(b)(1) states that the State-level regulatory
regime may set, or may permit the State payment stablecoin regulator to
set, discretionary limitations on timely redemptions in accordance with
section 4(a)(1)(B)(i) of the Act (12 U.S.C. 5903(a)(1)(B)(i)), provided
that those limitations are (i) appropriately disclosed by the State
qualified payment stablecoin issuer and (ii) consistent with section 7
of the Act (12 U.S.C. 5906).
A State-level regulatory regime might describe only the general
circumstances under which a State payment stablecoin regulator may
impose such limitations. For example, a State-level regulatory regime
could provide that a State payment stablecoin regulator may impose a
temporary limitation on timely redemptions in the event of a
technological disruption preventing the State qualified payment
stablecoin issuer from effectuating redemptions. If a discretionary
limitation is included in the State-level regulatory regime, proposed
Sec. 1521.4(b)(1) would require the State or the State payment
stablecoin regulator to ensure that the State qualified payment
stablecoin issuer clearly discloses the possibility of such a
limitation.
Additionally, the text of the Act makes clear that any
discretionary limitations on timely redemption imposed must be
consistent with section 7 (12 U.S.C. 5906). Accordingly, such
limitations may not interfere with, restrict, or otherwise impair the
ability of the FRB or the OCC, pursuant to their respective statutory
authorities, to take appropriate action with respect to a State
qualified payment stablecoin issuer in the event of unusual or exigent
circumstances. Treasury notes that section 7(a) of the Act (12 U.S.C.
5906(a)) provides State payment stablecoin regulators with supervisory,
examination, and enforcement authority over all State qualified payment
stablecoin issuers of such State. Accordingly, a State exercising its
authority over State qualified payment stablecoin issuers consistent
with section 7(a) of the Act (12 U.S.C. 5906(a)) is not interfering
with, restricting, or otherwise impairing the ability of the FRB or the
OCC to exercise their enforcement authority under unusual and exigent
circumstances pursuant to section 7(e) of the Act (12 U.S.C. 5906(e)).
Question 31: Should States be required to incorporate the OCC's
proposed interpretation of timely redemption, which the OCC has
proposed may not exceed two business days following the date of
requested redemption? Should the States also be required to incorporate
the OCC's proposed provision that would extend timely redemption if
redemption demands exceed a certain threshold?
Question 32: Should State-level regulatory regimes be required to
include the same information the OCC's proposal requires for redemption
disclosures, including the name of the permitted payment stablecoin
issuer and a link to the monthly composition report of the issuer's
reserves? Should other specific information requirements be mandated?
3. Rehypothecation
Section 4(a)(2) of the Act (12 U.S.C. 5903(a)(2)) prohibits
permitted payment stablecoin issuers from pledging, rehypothecating, or
reusing reserve assets, with limited exceptions. One such exception,
under section 4(a)(2)(C) of the Act (12 U.S.C. 5903(a)(2)(C)), provides
that this prohibition does not apply if the rehypothecation of the
reserve asset is for the purpose of creating liquidity to meet
reasonable expectations of requests to redeem payment stablecoins, such
that reserves in the form of Treasury bills may be sold as purchased
securities for repurchase agreements, provided that either (i) the
repurchase agreements are cleared by a clearing agency registered with
the Securities and Exchange Commission; or (ii) the permitted payment
stablecoin issuer receives the prior approval of its primary Federal
payment stablecoin regulator or State payment stablecoin regulator, as
applicable.
Proposed Sec. 1521.4(c)(1) provides that the State-level
regulatory regime must prohibit rehypothecation in accordance with
section 4(a)(2) of the Act (12 U.S.C. 5903(a)(2)) and consistent with
any prohibition in the Federal regulatory framework. Since the Act does
not provide the States with discretion for this prohibition, the State-
level regulatory regime must be consistent and not substantively
deviate from the Act.
With respect to the exception in section 4(a)(2)(C)(ii) of the Act
(12 U.S.C. 5903(a)(2)(C)(ii)), the OCC has proposed to deem any
repurchase agreement as approved under section 4(a)(2)(C) of the Act
(12 U.S.C. 5903(a)(2)(C)), provided that the Treasury bills sold as
purchased securities have a maturity date of 93 days or less and the
maturity of the repurchase agreement is overnight.\27\ Treasury
reviewed the reasoning contained in the OCC's proposal carefully and
determined that it agreed with the OCC's assessment that such pre-
approval is consistent with the Act and will enhance the ability of
issuers to obtain liquidity quickly and facilitate the timely
redemption of payment stablecoins. Accordingly, proposed Sec.
1521.4(c)(2) similarly provides that the State-level regulatory regime
may pre-approve, or may permit a State payment
[[Page 16854]]
stablecoin regulator to pre-approve, the use of repurchase agreements
under section 4(a)(2)(C)(ii) of the Act (12 U.S.C. 5903(a)(2)(C)(ii))
consistent with the Federal regulatory framework. Recognizing that the
Act provides discretion to State qualified payment stablecoin issuers
to determine whether to approve such repurchase agreements, a State-
level regulatory regime need not provide for the pre-approval of such
repurchase agreements. States may also develop their own pre-approval
process, so long as it is consistent with the conditions under the Act.
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\27\ 91 FR 10202, 10213 (March 2, 2026).
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Question 33: Should States be allowed to pre-approve the use of
repurchase agreements under section 4(a)(2)(C)(ii) (12 U.S.C.
5903(a)(2)(C)(ii))? Should States be required to preapprove such
repurchase agreements, rather than having the option to approve them?
Question 34: Should States be required to substantively adopt any
OCC interpretations of or limitations on the rehypothecation provision?
4. Certifications Related to Monthly Report
Under section 4(a)(3)(B) of the Act (12 U.S.C. 5903(a)(3)(B)), the
Chief Executive Officer and Chief Financial Officer of a permitted
payment stablecoin issuer are required to submit a monthly
certification as to the accuracy of the monthly report on the
composition of its reserves to, as applicable, its primary Federal
payment stablecoin regulator or State payment stablecoin regulator.
Proposed Sec. 1521.4(d) provides that a State-level regulatory regime
must require and accept monthly certifications from State qualified
payment stablecoin issuers in accordance with section 4(a)(3) of the
Act (12 U.S.C. 5903(a)(3)) as to the accuracy of the monthly report
required under section 4(a)(1)(C) (12 U.S.C. 5903(a)(1)(C)), but the
form of those certifications may deviate from those promulgated by the
primary Federal payment stablecoin regulators. Treasury believes that
the statutory direction to provide certifications to a State payment
stablecoin regulator gives some discretion to the State payment
stablecoin regulator to set the form of the certification that they
expect to receive.
Question 35: Should States be required to accept certifications in
the exact form required by the Federal regulatory framework? Would
there be benefits of requiring States to accept the form required under
the Federal regulatory framework? Does allowing States to accept
certifications in a different form compared to the Federal regulatory
framework indicate that the State regime is not substantially similar
to the Federal framework?
5. Capital
Under section 4(a)(4)(A)(i) of the Act (12 U.S.C.
5903(a)(4)(A)(i)), the primary Federal payment stablecoin regulators,
or in the case of a State qualified payment stablecoin issuer, the
State payment stablecoin regulator, shall, consistent with section 13
of the Act (12 U.S.C. 5913), issue capital requirements that are
tailored to the business model and risk profile of permitted payment
stablecoin issuers and do not exceed requirements that are sufficient
to ensure the ongoing operations of such issuers. However, under
proposed Sec. 1521.2(b), Treasury expects that in order for a State-
level regulatory regime to be substantially similar to the Federal
regulatory framework, the State's implementation of the State-
calibrated requirements, including the capital provision, must lead to
regulatory outcomes that are at least as stringent and protective as
the Federal regulatory framework. Accordingly, Treasury believes that
while States have discretion to develop their capital rules, there are
some aspects of the OCC's capital framework a State must implement to
be considered substantially similar to the Federal regulatory
framework.
Specifically, proposed Sec. 1521.4(e)(1) provides that the State-
level regulatory regime must require, in accordance with section
4(a)(4)(A)(i) of the Act (12 U.S.C. 5903(a)(4)(A)(i)), that a State
qualified payment stablecoin issuer maintains common equity tier 1
capital and additional tier 1 capital (as defined in the Federal
regulatory framework) \28\ that is commensurate with the nature of all
risks to which the issuer is exposed, including risks for off-balance
sheet activities. This requirement is consistent with the OCC's
language in its proposed 12 CFR 15.41(a)(2)(i) and also reiterates the
language in section 4(a)(4)(A)(i)(I) of the Act (12 U.S.C.
5903(a)(4)(A)(i)(I)) that requires capital requirements to be tailored
to the business model and risk profile of permitted payment stablecoin
issuers and must not exceed requirements that are sufficient to ensure
the ongoing operations of a State qualified payment stablecoin issuer.
While States have discretion to set their own capital rules, for the
purpose of substantial similarity, the definition of the eligible
capital elements and the quality of those elements should be uniform to
ensure comparability between the State-level regulatory regime and the
Federal regulatory framework.
---------------------------------------------------------------------------
\28\ These terms are currently defined in the OCC's proposed 12
CFR part 15, subpart E. 91 FR 10202, 10300-301 (March 2, 2026).
---------------------------------------------------------------------------
Proposed Sec. 1521.4(e)(2), similar to the OCC's requirement in
its proposed 12 CFR 15.41(a)(2), states that a State-level regulatory
regime must require State qualified payment stablecoin issuers to have
a process for assessing their overall capital adequacy in relation to
their business model and risk profile and a comprehensive strategy for
maintaining an appropriate level of capital to maintain operations.
Without this requirement, a State-level regulatory regime would lack a
core component of the Federal regulatory framework and could allow for
State qualified payment stablecoin issuers to engage in little or no
capital planning, compared to permitted payment stablecoin issuers
regulated by the OCC.
In its proposed rule, the OCC is proposing to require an
operational backstop to help ensure that during a business disruption
that impacts operations of a payment stablecoin issuer, a liquid pool
of identifiable assets exists to allow the issuer to meet short-term
liquidity needs, stabilize the issuer after the disruption, and
continue or resume normal operations.\29\ In proposed Sec.
1521.4(e)(3), Treasury is similarly proposing that a State-level
regulatory regime must require that a State qualified payment
stablecoin issuer maintain an operational backstop that has assets
equal or greater than the amount required under the operational
backstop in the Federal regulatory framework. By mandating that States
require an operational backstop equal to or greater than the amount
required under the Federal regulatory framework, Treasury seeks to
establish a clear baseline for determining that a State-level
regulatory regime is substantially similar to the Federal regulatory
framework.
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\29\ 91 FR 10202, 10242 (March 2, 2026). In the proposal, that
backstop requires that an issuer maintain assets equal to 12 months
of total expenses. Id.
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In Sec. 1521.4(e)(4), Treasury is also proposing to require that
the State-level regulatory regime must include provisions that
establish consequences for issuers failing to meet the minimum capital
or operational backstop requirements that meet or exceed the standard
in the Federal regulatory framework. For example, the OCC's proposed 12
CFR 15.41(c) includes consequences for failing to meet minimum capital
and operational backstop requirements that (i) prohibit permitted
payment stablecoin issuers that fail to meet minimum capital or
[[Page 16855]]
operational backstop requirements at the end of a quarter from issuing
any new payment stablecoins, except in limited circumstances; (ii)
require a permitted payment stablecoin issuer that fails to meet its
minimum capital or operational backstop requirements at the end of two
consecutive quarters to (A) begin liquidation of reserve assets and
redemption of outstanding payment stablecoins; (B) not charge customers
a fee to redeem their payment stablecoins; and (C) not issue any new
payment stablecoins going forward.\30\ Treasury believes that absent
the ability to enforce the relevant capital and operational backstop
requirements, a State-level regulatory regime's capital standards would
be significantly less meaningful than those in the Federal regulatory
framework.
---------------------------------------------------------------------------
\30\ 91 FR 10202, 10302 (March 2, 2026).
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Treasury acknowledges that States may seek to establish additional
capital thresholds or metrics beyond those in the Federal regulatory
framework, which may include additional types of capital or risk-based
requirements. Proposed Sec. 1521.4(e)(5) would allow States to do so,
but only if the State-level regulatory regimes also comply with the
requirements described in proposed Sec. 1521.4(e)(1) through (e)(4).
To comply with section 4(a)(4)(A)(i) of the Act (12 U.S.C.
5903(a)(4)(A)(i)), any such requirements must be tailored to the
business model and risk profile of State qualified payment stablecoin
issuers and not exceed requirements that are sufficient to ensure the
ongoing operations of such issuers.
Question 36: To the extent that the OCC adopts alternate capital
requirements, such as those described in Questions 177-190 of its
proposed rule (e.g., a minimal capital requirement based on a set
percentage of outstanding issuance value, a minimal operational risk
capital charge that scales with issuer size, or a charge for credit
risk such as a 2 percent capital charge for uninsured deposits),\31\ to
what extent should part 1521 incorporate or reflect those alternate
capital requirements for purposes of assessing the substantial
similarity of State-level regulatory regimes? Regardless of whether the
OCC adopts those alternate capital requirements as mandatory, should
part 1521 incorporate or reflect any of them as a safe harbor, for
instance such that their adoption in State-level regulatory regimes
will be deemed substantially similar to the Federal regulatory
framework?
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\31\ 91 FR 10202, 10265-66 (March 2, 2026).
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Question 37: Should States be required to adopt standards for
common equity tier 1 capital and additional tier 1 capital as defined
in the Federal regulatory framework? Are there issues that adopting
these definitions could create for States or State qualified payment
stablecoin issuers?
Question 38: Is it sufficiently clear how States may deviate from
the capital requirements in the Federal regulatory framework?
Question 39: Should State-level regulatory regimes be required to
mandate that State qualified payment stablecoin issuers have a process
for assessing their overall capital adequacy in relation to their
business model and risk profile? How should a State-level regulatory
regime be compared to the Federal regulatory framework on capital
sufficiency if the former permits permitted payment stablecoin issuers
to engage in a broader variety of activities than the latter?
Question 40: Should State-level regulatory regimes be required to
have an operational backstop? If yes, should they be required to adopt
the same or greater required operational backstop levels as the OCC? If
not, should there be any quantitative measures from the Federal
regulatory framework that a State-level regulatory regime should be
required to adopt? Is it sufficiently clear how a State would calculate
expenses under the operational backstop as proposed? If the OCC
determines that it will not adopt an operational backstop, should any
other capital standards from the Federal regulatory framework be
required to be adopted in State-level regulatory regimes?
Question 41: If the OCC adopts a capital framework that requires
minimum capital levels set using certain objective quantitative
requirements, should State-level regulatory regimes be required to
adopt the same quantitative requirements?
Question 42: If the Federal regulatory framework largely sets
capital requirements on an individualized, issuer-by-issuer basis,
rather than fixed standards, how should the State-level regulatory
regime be measured against the requirements and outcomes of the Federal
regulatory framework? What data or methodology should be used to make
these comparisons? For example, should a range or average of expected
capital amounts under a State-level regulatory regime be measured
against a range or average of expected or actual capital amounts
imposed by the OCC? \32\ What would be the positive and negative
effects of taking such an approach?
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\32\ See, e.g., 91 FR 10202, 10240 (``The OCC's experience with
chartering de novo national trust banks seeking to provide
stablecoin programs determined that minimum capital amounts ranging
from $6.05 million to $25 million would be necessary to establish a
viable business model.'').
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Question 43: Should part 1521 provide any safe harbors for being
substantially similar with respect to capital requirements? If so, what
should the safe harbors be? For example, should a State-level
regulatory regime be deemed substantially similar if it mirrors a
capital regime that has been promulgated by any primary Federal payment
stablecoin regulator?
Question 44: If a State-level regulatory regime adopts capital
requirements that the State has applied to other State-regulated
institutions (such as State banks), how should the substantial
similarity assessment consider the actual historical capital levels of
those State-regulated institutions?
6. Liquidity, Reserve Asset Diversification, and Interest Rate Risk
Management
Under section 4(a)(4)(A)(ii) of the Act (12 U.S.C.
5903(a)(4)(A)(ii)), the primary Federal payment stablecoin regulators
and State payment stablecoin regulators are required to issue
regulations implementing liquidity standards applicable to permitted
payment stablecoin issuers. Additionally, section 4(a)(4)(A)(iii) of
the Act (12 U.S.C. 5903(a)(4)(A)(iii)) requires those Federal and State
regulators to issue regulations implementing ``reserve asset
diversification, including deposit concentration at banking
institutions, and interest rate risk management standards applicable to
permitted payment stablecoin issuers.'' Just as the Act provides States
with discretion to develop capital rules, the Act also provides the
States with discretion to develop liquidity, reserve asset
diversification, and interest rate risk management standards. For the
reasons described above, Treasury believes that a State-level
regulatory regime must meet or exceed these aspects of the Federal
regulatory framework, including the OCC's liquidity and interest rate
risk management framework, to be considered substantially similar to
the Federal regulatory framework.
In its proposed rule, the OCC proposed two options for its
liquidity requirements: Option A includes a principles-based general
requirement with an optional safe harbor containing quantitative
requirements, and Option B would make those quantitative requirements
mandatory for all issuers.\33\ Because States have discretion
[[Page 16856]]
to devise their liquidity standards, Treasury sets out a high-level
requirement in proposed Sec. 1521.4(f)(1) that would mirror the OCC's
proposed 12 CFR 15.11(c)(1) and mandate that the State-level regulatory
regime must require, in accordance with section 4(a)(4)(A)(ii) of the
Act (12 U.S.C. 5903(a)(4)(A)(ii)), a State qualified payment stablecoin
issuer to maintain its reserve assets in a way that is sufficiently
diverse to manage potential credit, liquidity, interest rate, and price
risks.
---------------------------------------------------------------------------
\33\ 91 FR 10202, 10216 (March 2, 2026).
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To provide additional clarity to States on how their liquidity
frameworks can be substantially similar to the Federal regulatory
framework, Treasury proposes that a State-level regulatory regime would
satisfy proposed Sec. 1521.4(f)(1) if the regime requires State
qualified payment stablecoin issuers to follow the quantitative
requirements from the OCC's regulations. Specifically, proposed Sec.
1521.4(f)(2) provides that a State-level regulatory regime satisfies
the requirement in proposed Sec. 1521.4(f)(1) if the State qualified
payment stablecoin issuer is required to (i) maintain the same or
greater percentage of its reserve assets for each minimum threshold in
the Federal regulatory framework; (ii) maintain the same or lower
percentage of its reserve assets for each maximum threshold in the
Federal regulatory framework; and (iii) maintain reserve assets with a
weighted average maturity equal to or lower than the threshold in the
Federal regulatory framework. While States may adopt liquidity
frameworks consistent with proposed Sec. 1521.4(f)(1) that do not
incorporate the OCC's quantitative requirements, such frameworks will
only be substantially similar to the Federal regulatory framework if
they result in outcomes that are at least as stringent and protective
as (i.e., meet or exceed) the regulatory outcomes under the OCC's
regulations.
Proposed Sec. 1521.4(f)(3) provides that a State-level regulatory
regime, in accordance with section 4(a)(4)(A)(iii) of the Act (12
U.S.C. 5903(a)(4)(A)(iii)), must require that a State qualified payment
stablecoin issuer has standards for interest rate risk management that
are consistent with the Federal regulatory framework. Accordingly,
consistent with the OCC's proposal, the State-level regulatory regime
must require that a State qualified payment stablecoin issuer (i)
manage interest rate risk in a manner that is appropriate to the size
and complexity of the permitted payment stablecoin issuer and the
complexity of its assets and liabilities and (ii) provide for periodic
reporting to management and the board of directors regarding interest
rate risk with adequate information for management and the board of
directors to assess the level of risk.\34\
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\34\ 91 FR 10202, 10222 (March 2, 2026).
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Proposed Sec. 1521.4(f)(4) requires that the State-level
regulatory regime must establish consequences for State qualified
payment stablecoin issuers that fail to meet the reserve asset
requirements, which meet or exceed the standard in the Federal
regulatory framework. For example, the OCC's proposed 12 CFR 15.11(g)
provides various consequences for when a permitted payment stablecoin
issuer fails to meet the minimum reserve asset requirements, including
that the issuer is prohibited from issuing any new payment stablecoins,
except in limited circumstances and that the issuer may not resume
issuance until it satisfies the reserve requirements.\35\ The OCC also
addresses consequences for permitted payment stablecoin issuers that
fail to satisfy the minimum reserve asset requirements for 15
consecutive business days and includes a provision by which the OCC may
request the permitted payment stablecoin issuer to submit a plan
describing how the issuer will attain compliance with certain
liquidity-related requirements.\36\ To be considered substantially
similar to the Federal regulatory framework, a State-level regulatory
regime would be required to establish consequences for State qualified
payment stablecoin issuers that fail to meet the reserve requirements,
which meet or exceed those in the OCC's regulations.
---------------------------------------------------------------------------
\35\ Id. at 10290.
\36\ Id.
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Proposed Sec. 1521.4(f)(5) operates similarly to the treatment of
additional capital requirements under proposed Sec. 1521.4(e)(5). As
with capital requirements, States may elect to establish other
liquidity, diversification, or interest rate risk thresholds or
metrics, but such requirements are permissible only if the State-level
regulatory framework also complies with the requirements in proposed
Sec. 1521.4(f)(1) through (f)(4).
Question 45: Should the specific quantitative requirements
described in proposed Sec. Sec. 1521.4(f)(2)(i)-(iii) be strict
requirements for substantial similarity or instead a safe harbor? If
the latter, should the metrics function as a safe harbor for
substantial similarity (i) if the State-level regulatory regime offers
those metrics as a safe harbor to State qualified payment stablecoin
issuers or (ii) only if the State-level regulatory regime mandates the
metrics for all State qualified payment stablecoin issuers?
Question 46: To the extent that some of the OCC's metrics (e.g.,
requirements to maintain certain amounts in insured deposits) apply
only to issuers with outstanding issuances greater than $10 billion,
should State regulatory frameworks reflect such metrics, to account for
possible waivers of larger State qualified payment stablecoin issuers?
Or should the State regulatory framework be permitted not to address
those elements while remaining substantially similar?
Question 47: Should the States be able to devise their own
liquidity, reserve asset diversification, and interest rate risk
management standards that are not tied to the OCC's rules for these
provisions?
Question 48: To the extent that the FDIC or NCUA establish
limitations on demand deposits or insured shares at an insured
depository institution pursuant to section 4(a)(1)(A)(ii) of the Act
(12 U.S.C. 5903(a)(1)(A)(ii)), should these limitations be considered
part of the Federal regulatory framework, such that States would need
to include these limitations in their State-level regulatory regimes?
7. Operational, Compliance, and Information Technology Risk Management
Under section 4(a)(4)(A)(iv) of the Act (12 U.S.C.
5903(a)(4)(A)(iv)), Federal and State regulators are required to issue
regulations implementing ``appropriate operational, compliance, and
information technology risk management principles-based requirements
and standards, including Bank Secrecy Act and sanctions compliance
standards.'' This requirement contemplates that States would have
discretion to design their own such standards. Proposed Sec. 1521.4(g)
requires that a State-level regulatory regime must, in accordance with
section 4(a)(4)(A)(iv) of the Act (12 U.S.C. 5903(a)(4)(A)(iv)),
include appropriate operational, compliance, and information technology
risk management principles-based requirements and standards, including
BSA and sanctions compliance standards that (i) lead to regulatory
outcomes that are at least as stringent and protective as the
principles-based requirements and standards in the Federal regulatory
framework; (ii) are tailored to the business model and risk profile of
State qualified payment stablecoin issuers; (iii) are consistent with
applicable law; and (iv) address, at a minimum, internal controls,
information security, information
[[Page 16857]]
systems, an internal audit system, asset growth, earnings, insider and
affiliate transactions, and service provider arrangements.
With respect to the requirement in proposed Sec. 1521.4(g)(1) that
the State-level regulatory regime have principles-based requirements
and standards that lead to regulatory outcomes that are at least as
stringent and protective as the principles-based requirements and
standards in the Federal regulatory framework, Treasury expects that
States will look to the Federal regulatory framework, including the
OCC's rules, for determining the level of prescriptiveness of their
requirements and standards. The OCC states that its proposed standards
are designed to be flexible based on the nature, scope, and risk of a
permitted payment stablecoin issuer's activities.\37\ Accordingly,
States should have discretion to develop principles-based requirements
and standards that apply to State qualified payment stablecoin issuers.
However, for BSA and sanctions compliance standards, given the evolving
nature of these Federal requirements (e.g., the designation of new
sanctioned entities or changes to sanction programs), Treasury again
generally expects that States would cross-reference Treasury's rules
regarding BSA and sanctions program requirements. Proposed Sec.
1521.4(g)(2) and (3) merely restate the requirement from sections
4(a)(4)(A)(iv)(I) and (II) of the Act (12 U.S.C. 5903(a)(4)(A)(iv)(I)
and (II)) that any such standards are tailored to the business model
and risk profile of the State qualified payment stablecoin issuers and
are consistent with applicable law. As it relates to BSA and sanctions
standards, the regulations issued by Treasury through the Financial
Crimes Enforcement Network and the Office of Foreign Assets Control are
also required to be tailored to the size and complexity of permitted
payment stablecoin issuers under the GENIUS Act. Accordingly, beyond
cross-referencing Treasury's rules, no further tailoring by States
would be required.
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\37\ 91 FR 10202, 10222 (March 2, 2026).
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Proposed Sec. 1521.4(g)(4) provides the topics (other than BSA and
sanctions standards) that States must address through principles-based
requirements and standards, while preserving discretion for States to
develop additional standards that are tailored to the business model
and risk profile of State qualified payment stablecoin issuers.
Specifically, the State-level regulatory regime must have standards
that cover, at a minimum, internal controls, information security,
information systems, internal audit, asset growth, earnings, insider
and affiliate transactions, and service provider arrangements. The
categories of requirements and standards align with those required by
the OCC under its proposed rule, ensuring that at a high level, the
State-level regulatory regime and Federal regulatory framework are
substantially similar because they address the same categories of
risk.\38\
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\38\ 91 FR 10202, 10221 (March 2, 2026).
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8. Activities
Section 4(a)(7)(A) of the Act (12 U.S.C. 5903(a)(7)(A)) sets out
permissible activities for permitted payment stablecoin issuers,
including issuing and redeeming payment stablecoins, and managing
related reserves. Further, section 4(a)(7)(B) of the Act (12 U.S.C.
5903(a)(7)(B)) provides, ``Nothing in subparagraph (A) shall limit a
permitted payment stablecoin issuer from engaging in payment stablecoin
activities or digital asset service provider activities specified by
this Act, and activities incidental thereto, that are authorized by the
primary Federal payment stablecoin regulator or the State payment
stablecoin regulator, as applicable, consistent with all other Federal
and State laws, provided that the claims of payment stablecoin holders
rank senior to any potential claims of non-stablecoin creditors with
respect to the reserve assets, consistent with section 11.''
This provision of the Act provides Federal and State regulators
with independent discretion to approve (or disapprove) the activities
of their State qualified payment stablecoin issuers. Importantly,
however, Treasury concurs with the interpretation in the OCC's proposed
rule that section 4(a)(7)(B) of the Act (12 U.S.C. 5903(a)(7)(B)) does
not by itself authorize permitted payment stablecoin issuers to engage
in digital asset service provider activities; it is merely a savings
clause that permits such activities to the extent that they are
authorized under other applicable law.\39\
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\39\ See 90 FR 10202, 10211 (March 2, 2026).
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Further, there are limitations on the scope of activities that
States may authorize. Treasury interprets the reference in section
4(a)(7)(B) of the Act (12 U.S.C. 5903(a)(7)(B)) to ``payment stablecoin
activities or digital asset service provider activities specified by
this Act'' to refer only to the activities listed in the preceding
paragraph, section 4(a)(7)(A) of the Act (12 U.S.C. 5903(a)(7)(A)), as
well as the activities listed in the definition of digital asset
service provider in section 2(7) of the Act (12 U.S.C. 5901(7)). Those
two provisions list the activities that permitted payment stablecoin
issuers and digital asset service providers may engage in. Under
section 4(a)(7)(B) of the Act (12 U.S.C. 5903(a)(7)(B)), permissibly
authorized activities also include activities that are ``incidental''
to those enumerated activities although certain activities may fall so
clearly beyond the scope of the Act that they cannot be reasonably
considered to be incidental thereto.
Sections 16(a) and 16(d) of the Act (12 U.S.C. 5915(a), (d))
provide that nothing in the Act may be construed to limit the authority
of certain institutions to engage in certain enumerated activities.
Thus, Treasury believes that it is permissible for State-level
regulatory regimes to permit those institutions to engage in those
activities even if they are licensed as State qualified payment
stablecoin issuers. However, Treasury believes that the same
limitations in section 4(a)(7)(B) of the Act (12 U.S.C. 5903(a)(7)(B))
apply to such activities, namely that they must be authorized by
another State or Federal law.
Accordingly, proposed Sec. 1521.4(h)(1) provides that, subject to
proposed Sec. 1521.4(h)(2), a State-level regulatory regime may not
authorize a State qualified payment stablecoin issuer to engage in any
activities that are not specified under section 4(a)(7)(A) of the Act
(12 U.S.C. 5903(a)(7)(A)). Furthermore, proposed Sec. 1521.4(h)(2)(i)
provides that a State-level regulatory regime may authorize State
qualified payment stablecoin issuers to engage in activities not
specified in Section 4(a)(7)(A) of the Act (12 U.S.C. 5903(a)(7)(A)),
only to the extent that: (i) such activities are: (A) incidental to the
activities specified in section 4(a)(7)(A) of the Act (12 U.S.C.
5903(a)(7)(A)); (B) digital asset service provider activities specified
in section 2(7) of the Act (12 U.S.C. 5901(7)) or activities incidental
thereto; or (C) activities specified in sections 16(a) or 16(d) of the
Act (12 U.S.C. 5915(a), (d)). Additionally, proposed Sec.
1521.4(h)(2)(ii) through (iii) requires that such activities must be
authorized by Federal or State law other than the Act and that they be
consistent with all other Federal and State law. Proposed Sec.
1521.4(h)(2)(iv) restates the requirement in section 4(a)(7)(B) of the
Act (12 U.S.C. 5903(a)(7)(B)) that the claims of payment stablecoin
holders rank senior to any potential claims of non-stablecoin creditors
with respect to reserve assets, consistent with section 11 of the Act
(12 U.S.C. 5910 and 5911).
[[Page 16858]]
Proposed Sec. 1521.4(h)(3) provides that for the avoidance of
doubt, a State-level regulatory regime must prohibit State qualified
payment stablecoin issuers from engaging in any activities prohibited
under the Act, including the prohibition on rehypothecation in section
4(a)(2) of the Act (12 U.S.C. 5903(a)(2)), the prohibition on the use
of deceptive names in section 4(a)(9) of the Act (12 U.S.C.
5903(a)(9)), the prohibition against misrepresenting insured status in
section 4(e) of the Act (12 U.S.C. 5903(e)), and the prohibition on
paying interest or yield in section 4(a)(11) of the Act (12 U.S.C.
5903(a)(11)).
Question 49: Are ``payment stablecoin activities or digital asset
service provider activities specified by this Act'' correctly scoped?
Are all of the activities listed in section 2(7) (12 U.S.C. 5901(7)) of
the Act permissible for State qualified payment stablecoin issuers or
only a subset (e.g., only the activities listed in section 2(7)(A) but
not 2(7)(B))? Should the activities in section 16(a) or 16(d) of the
Act (12 U.S.C. 5915(a) or (d)) be further qualified for State qualified
payment stablecoin issuers? Should the principles reference section 10
of the Act (12 U.S.C. 5909)?
Question 50: Should there be additional limitations on the
activities that a State-level regulatory regime can authorize beyond
what is proposed herein? For example, should there be additional
limitations or guidance on what constitutes incidental activities?
Should the activities in the State-level regulatory regime be limited
to activities authorized by the OCC or the other primary Federal
payment stablecoin regulators?
Question 51: Is there a point at which a State qualified payment
stablecoin issuer could engage in permissible digital asset service
provider activities or incidental activities that, while legally
permissible in the abstract, are done in combination or at such scale
that they functionally defeat the Act's protective provisions relating
to reserves and insolvency and would expose payment stablecoin holders
to an unintended degree of risk? For example, what if 99% of a State
qualified payment stablecoin issuer's business was exchanging digital
assets for other digital assets, and only 1% was related to issuing
payment stablecoins? Should part 1521 reserve the possibility of State-
authorized activities that, when considered in context, render the
State-level regulatory regime no longer substantially similar to the
Federal regulatory framework?
Question 52: Should Treasury include a provision that provides that
State qualified payment stablecoin issuers can engage in the activities
under section 16(b) of the Act (12 U.S.C. 5915(b)) (e.g., acting as
principal or agent with respect to any payment stablecoin and payment
of fees to facilitate customer transactions)? Should State qualified
payment stablecoin issuers not be able to engage in such activities
because section 16(b) (12 U.S.C. 5915(b)) applies to ``entities
regulated by the primary Federal payment stablecoin regulators?''
G. Other Provisions of the GENIUS Act (Proposed Sec. 1521.5)
1. Transition to Federal Oversight
Section 4(d) of the Act (12 U.S.C. 5903(d)) provides that State
qualified payment stablecoin issuers (other than State chartered
depository institutions) that reach an outstanding issuance of more
than $10 billion shall either (i) transition to the Federal regulatory
framework administered by the relevant State payment stablecoin
regulator and the OCC, acting in coordination,\40\ or (ii) cease
issuing new payment stablecoins until they fall below the $10 billion
threshold.\41\
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\40\ If the State qualified payment stablecoin issuer is a State
chartered depository institution, it shall either (i) transition to
the Federal regulatory framework of the primary Federal payment
stablecoin regulator of the depository institution, administered by
the State payment stablecoin regulator and the primary Federal
payment stablecoin regulator acting jointly, or (ii) cease issuing
new payment stablecoins until it falls below the $10 billion
threshold. See section 4(d)(1) of the Act (12 U.S.C. 5903(d)(1)).
\41\ These requirements can be waived by the relevant primary
Federal payment stablecoin regulator if certain conditions are met
as set out in section 4(d)(3) of the Act (12 U.S.C. 5903(d)(3)).
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At a minimum, Treasury expects that a substantially similar State-
level regulatory regime would need to address the transition to Federal
oversight contemplated by section 4(d) of the Act (12 U.S.C. 5903(d)),
in order to notify State qualified stablecoin issuers of the relevant
threshold and the existence of Federal requirements. However, because
Treasury expects that the Federal regulatory framework would generally
provide for direct engagement between the relevant State qualified
payment stablecoin issuer and the primary Federal payment stablecoin
regulator,\42\ the State-level regulatory regime need not either
provide for the State payment stablecoin regulator to intermediate
between them or reproduce the Federal regulatory framework's procedures
or requirements. Each State therefore has flexibility on the extent to
which it wishes to reproduce the Federal regulatory framework's
procedure or requirements in its State-level regulatory regime, and the
extent to which it will impose parallel requirements that do not impede
the Federal regulatory framework's requirements, such as advance or
parallel notifications to the State payment stablecoin regulator.
Proposed Sec. 1521.5(a) provides simply that to be substantially
similar to the Federal regulatory framework in this regard, any
portions of the State-level regulatory regime that address the
transition to Federal oversight must be consistent with the Federal
regulatory framework.
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\42\ See 91 FR 10202, 10227 (March 2, 2026).
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For the transition to Federal oversight to function effectively,
the State-level regulatory regime must not impede the operation of the
Federal regulatory framework and the transition of State qualified
payment stablecoin issuers to Federal oversight. A State-level
regulatory regime that, for example, could delay or condition the
submission by the State qualified payment stablecoin issuer of
information required by the Federal regulatory framework would not be
consistent with, and therefore not substantially similar to, the
Federal regulatory framework. Similarly, a State-level regulatory
regime that precluded or limited the ability of a State qualified
payment stablecoin issuer to comply with capital requirements imposed
by the Federal regulatory framework would not be substantially similar.
Question 53: Should a State-level regulatory regime be required to
reproduce some or all of the portions of the Federal regulatory
framework, such as the OCC's regulations in its proposed 12 CFR 15.15,
relating to the transition to Federal oversight?
Question 54: For depository institutions, should part 1521
reference regulations promulgated by primary Federal payment stablecoin
regulators other than the OCC? For example, should the Federal
regulatory framework include regulations of other primary Federal
payment stablecoin regulators for purposes of section 4(d) of the Act
(12 U.S.C. 5903(d))?
Question 55: Should a State-level regulatory regime be required to
address procedures for joint or coordinated supervision of State
qualified payment stablecoin issuers that transition to Federal
oversight?
Question 56: To what extent, if at all, should a State-level
regulatory regime be able to impose requirements on State qualified
payment stablecoin issuers that have transitioned to Federal oversight,
beyond what is contained in the primary Federal payment stablecoin
regulator's regulatory framework?
[[Page 16859]]
2. Applications and Licensing
Section 5 of the Act (12 U.S.C. 5904) addresses applications and
licensing of subsidiaries of insured depository institutions and
Federal qualified payment stablecoin issuers, but does not address
applications and licensing of State qualified payment stablecoin
issuers. Instead, Treasury believes that the Act intended to leave
applications and licensing of State qualified payment stablecoin
issuers largely in the discretion of State payment stablecoin
regulators, recognizing the long history of States in chartering and
licensing financial institutions.\43\ Therefore, Treasury believes that
it would be inappropriate and inconsistent with the Act to require
States to mirror the specific practices, timeframes, procedures, or
forms in the Federal regulatory framework.
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\43\ See generally sections 7(a), (d) of the Act (12 U.S.C.
5906(a), (d)).
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At the same time, Treasury believes that to be substantially
similar to the Federal regulatory framework, a State-level regulatory
regime must generally provide prospective State qualified payment
stablecoin issuers with a pathway to licensure that is similarly fair,
transparent, and viable to the Federal regulatory framework. To that
end, proposed Sec. 1521.5(b) states that the State-level regulatory
regime must provide a framework for accepting applications from
potential State qualified payment stablecoin issuers that addresses, at
a minimum, the content required in an application and the factors upon
which the State payment stablecoin regulator will render a decision on
the application. Similar to the process under the Federal regulatory
framework, providing applicants with clear rules of the road in advance
on what is required in an application and how the application will be
evaluated promotes a fair, transparent, and viable pathway to licensure
for State qualified payment stablecoin issuers. In contrast, if a
State-level regulatory regime left applicants uncertain of the
information they will be required to submit, or enabled the State
payment stablecoin regulator to reject the application on unclear or
unknown grounds, the regime would not enable a viable path for
licensure and therefore would not be substantially similar to the
Federal regulatory framework.
For the avoidance of doubt, the proposal reiterates that the State-
level regulatory regime must also require the post-application and
annual certifications required under section 5(i) of the Act (12 U.S.C.
5904(i)).
Question 57: Is it appropriate to measure substantial similarity of
a State-level regulatory regime by focusing on the transparency,
fairness, and viability of the application process, as opposed to the
content of the application or evaluation factors, or other aspects of
the State-level regulatory regime? Should the State-level regulatory
regime instead be required to adopt some or all of the factors set out
in Section 5(c) of the Act (12 U.S.C. 5904(c))?
Question 58: How, if at all, should substantial similarity consider
the resources, capacity to evaluate applications, or past practices of
a State payment stablecoin regulator? How, if at all, should part 1521
address a State where licenses are routinely denied or delayed, or
conversely, routinely approved as a matter of course without
appropriate review?
3. Supervision and Enforcement
Section 7 of the Act (12 U.S.C. 5906) provides that State payment
stablecoin regulators (i) shall have supervisory, examination, and
enforcement authority over all State qualified payment stablecoin
issuers of such State, and (ii) may issue orders and rules under
section 4 of the Act (12 U.S.C. 5903) applicable to State qualified
payment stablecoin issuers to the same extent as the primary Federal
payment stablecoin regulators do for permitted payment stablecoin
issuers under their jurisdiction.\44\ Treasury interprets the Act to
provide State payment stablecoin regulators with substantial latitude
in the supervision and enforcement of State qualified payment
stablecoin issuers, consistent with their important co-equal role as
payment stablecoin regulators in the dual Federal-State regime
established by the Act and their long history of regulating State-
chartered financial institutions. Treasury believes it would be
inappropriate and inconsistent with the Act to narrowly limit the
discretion of State payment stablecoin regulators in engaging in their
supervision and regulation activities or require them to mirror the
supervisory or enforcement practices, timeframes, procedures, or
reporting in the Federal regulatory framework.
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\44\ See sections 7(a), (d) of the Act (12 U.S.C. 5906(a), (d)).
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At the same time, Treasury believes that to be substantially
similar to the Federal regulatory framework, the State-level regulatory
regime must empower their State regulators with sufficient tools and
ability to supervise and examine State qualified payment stablecoin
issuers. Therefore, proposed Sec. 1521.5(c) provides that a State-
level regulatory regime must appropriately provide the State payment
stablecoin regulator with similar authority over State qualified
payment stablecoin issuers as provided over Federal qualified payment
stablecoin issuers under the Federal regulatory framework, consistent
with section 6 of the Act (12 U.S.C. 5905), to license, supervise,
examine, obtain reports, impose conditions, and take enforcement
actions. In general, we would expect a substantially similar State-
level regulatory regime to provide a State payment stablecoin regulator
with sufficient authority to take any of the actions contemplated by
section 6 of the Act (12 U.S.C. 5905). The proposal further provides
that except as provided in the Act or elsewhere in part 1521, the
State-level regulatory regime and State payment stablecoin regulators
do not need to mirror the specific timeframes, procedures, or reporting
in the Federal regulatory framework.
Question 59: Should the substantial similarity of a State-level
regulatory regime be assessed by focusing on the authority it grants to
a State payment stablecoin regulator, or instead on practices,
procedures, or other aspects of the State-level regulatory regime or
State payment stablecoin regulators?
Question 60: How, if at all, should substantial similarity take
into account the resources, capacity to supervise, or past practices of
the State payment stablecoin regulators? How, if at all, should part
1521 address a State where supervision and enforcement are not robust
in practice?
Question 61: How, if at all, should a State-level regulatory regime
address the enforcement authority of the FRB or the OCC provided in
section 7(e) of the Act (12 U.S.C. 5906(e))?
Question 62: Are there timeframes, procedures, or reporting in the
Federal regulatory framework related to supervision and enforcement
that State-level regulatory regimes should be required to implement to
be considered substantially similar to the Federal regulatory
framework? For example, should a State-level regulatory regime be
required to examine State qualified payment stablecoin issuers at the
same intervals as in the OCC's rule?
4. Custody
Section 10 of the Act (12 U.S.C. 5909) imposes certain requirements
on any person seeking to provide custodial or safekeeping services for
payment stablecoin reserves, payment stablecoins used as collateral, or
the private keys used to issue payment stablecoins.
[[Page 16860]]
Among other things, section 10 (12 U.S.C. 5909) requires such
custodians to be subject to the supervision or regulation of a Federal
or State supervisor, to treat certain assets as customer property, to
separately account for and not commingle certain assets unless
permitted under a listed exception, and to provide certain regulatory
information as determined by their supervisor. Proposed Sec. 1521.5(d)
provides that the State-level regulatory regime must place conditions
on custody that are consistent with section 10 of the Act (12 U.S.C.
5909). While States have discretion to impose restrictions on
custodians, such restrictions should not weaken the requirements of the
Act, for example, by expanding the pool of potential custodians or
narrowing the categories of property that custodians must treat as
customer property.
Question 63: Should these principles require closer alignment
between the custody requirements in a State-level regulatory regime and
the Federal regulatory framework, such as by requiring the former to
incorporate certain provisions of Federal rules on custody?
Question 64: Should part 1521 only require that a State-level
regulatory regime mandate that State qualified payment stablecoin
issuers use custodians that are allowed under the Act?
Question 65: Are there protections that will be instituted under
the Federal regulatory framework for custody that States will be unable
to replicate in a substantially similar manner?
Question 66: Should the requirement regarding making certain
information available to the FRB in section 10(a)(1)(B) of the Act (12
U.S.C. 5909(a)(1)(B)) be explicitly included as a requirement for the
State-level regulatory regime?
5. Insolvency
Section 11 of the Act (12 U.S.C. 5910 and 5911) sets forth certain
requirements for the treatment of payment stablecoin issuers in
insolvency proceedings. For example, section 11(a)(1) of the Act (12
U.S.C. 5910(a)(1)) provides that subject to the Act's amendments to the
U.S. Bankruptcy Code, in any insolvency proceeding of a permitted
payment stablecoin issuer under Federal or State law, including in any
proceeding under the Bankruptcy Code and in any insolvency proceeding
administered by a State payment stablecoin regulator with respect to a
permitted payment stablecoin issuer, ``the claim of a person holding
payment stablecoins issued by the permitted payment stablecoin issuer
shall have priority, on a ratable basis with the claims of other
persons holding such payment stablecoins, over the claims of the
permitted payment stablecoin issuer and any other holder of claims
against the permitted payment stablecoin issuer, with respect to
required payment stablecoin reserves.''
In proposed Sec. 1521.5(e), Treasury provides that to the extent
that State qualified payment stablecoin issuers may be subject to State
insolvency proceedings, a State-level regulatory regime must be
consistent with section 11 of the Act (12 U.S.C. 5910 and 5911).
Accordingly, in addition to being consistent with the rest of section
11 (12 U.S.C. 5910 and 5911), a State-level regulatory regime would be
required to ensure that the claim of a person holding payment
stablecoins issued by a permitted payment stablecoin issuer has
priority in an insolvency proceeding consistent with the priority
outlined in the Act.
Question 67: Should these principles require closer alignment
between the insolvency requirements in a State-level regulatory regime
and the Federal regulatory framework, such as by requiring the former
to incorporate certain provisions of Federal rules on insolvency?
Question 68: Are there protections under the Federal regulatory
framework for insolvency that States will be unable to replicate in a
substantially similar manner?
Question 69: Are there issues that States will face related to
incorporating the Act's insolvency provisions?
H. Additional State Requirements (Proposed Sec. 1521.6)
States may choose to add certain additional restrictions or
requirements to their State-level regulatory regimes beyond those
included in the Federal regulatory framework. Section 4(a)(14) of the
Act (12 U.S.C. 5903(a)(14)) provides that compliance with section 4 (12
U.S.C. 5903) ``does not alter or affect any additional requirement of a
State payment stablecoin regulator that may apply relating to the
offering of payment stablecoins.'' \45\ In addition, the requirement
that a State-level regulatory regime ``meet or exceed'' the standards
and requirements described in section 4(a) of the Act (12 U.S.C.
5903(a)) inherently contemplates that States may exceed the
requirements of the Federal regulatory framework. Therefore, proposed
Sec. 1521.6 provides that States may impose additional restrictions or
requirements on State qualified payment stablecoin issuers, so long as
(i) such restrictions or requirements do not conflict with any
provision of the GENIUS Act, part 1521, or other applicable Federal
law, and (ii) the restrictions or requirements do not modify the State-
level regulatory regime such that it can no longer be reasonably viewed
as substantially similar to the Federal regulatory framework. Treasury
believes that the limitation on direct conflicts with Federal law is
appropriate because (i) State qualified payment stablecoin issuers
remain permitted payment stablecoin issuers subject to the Act, as
described above; (ii) the State-level regulatory regime must remain
substantially similar to the Federal regulatory framework in accordance
with this part; and (iii) State law yielding to Federal law in the case
of direct conflicts is a longstanding principle of law.
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\45\ In addition, section 7(f)(4) of the Act (12 U.S.C.
5906(f)(4)) provides, ``Except for State laws relating to the
chartering, licensure, or other authorization to do business as a
permitted payment stablecoin issuer, nothing in this Act shall
preempt State consumer protection laws, including common law, and
the remedies available thereunder.''
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Question 70: What, if any, limitations should be placed on the
ability of States to impose restrictions or requirements on State
qualified payment stablecoin issuers in addition to those in the
Federal regulatory framework? Should there be limitations on aspects of
State-level regulatory regimes other than the restrictions or
requirements that govern State qualified payment stablecoin issuers?
Question 71: Is conflict with Federal law the appropriate standard
for when a State may not impose additional restrictions or
requirements? Is the appropriate scope of such potentially conflicting
Federal law the Act and part 1521, or should the standard encompass
potential conflicts with other Federal statutes or rules? Should the
standard expressly provide further guidance on preemption of State law
or the application of State consumer protection laws, in particular
given section 7(f)(4) of the Act (12 U.S.C. 5906(f)(4))?
Question 72: When, if at all, may additional restrictions imposed
by a State on State qualified payment stablecoin issuers cause the
State-level regulatory regime to differ so much from the Federal
regulatory framework that the former could no longer be considered
substantially similar to the latter? What standards should be used to
judge whether that limit has been reached? Should the limit differ
based on whether the additional restrictions are issues covered by the
Federal regulatory framework (e.g., reserve requirements) or instead
are not
[[Page 16861]]
addressed by the Federal regulatory framework?
Question 73: Is the ``reasonably viewed'' standard appropriate and
sufficiently clear? If not, how should it be changed or clarified?
I. Severability (Proposed Sec. 1521.7)
Proposed Sec. 1521.7 provides that the provisions of part 1521 are
separate and severable from one another. If any provision, clause, or
phrase of part 1521, or the application thereof to any person, entity,
or circumstance, is stayed or deemed to be invalid, unlawful, or
unenforceable by a court of competent jurisdiction, such determination
shall not affect the validity, lawfulness, or enforceability of the
remaining provisions or applications of this regulation, which shall
remain in full force and effect to the maximum extent permitted by law.
Treasury is proposing to include a severability clause so that in
the event any particular provision of the proposed rule is held to be
invalid, the remainder of the rule would remain in effect, providing
clarity for State payment stablecoin regulators and State qualified
payment stablecoin issuers. This regulation would have been proposed
independently of any provision or application that may be declared
invalid.
III. Regulatory Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) \46\ requires an agency to
consider the impact of its proposed rules on small entities. In
connection with a proposed rule, the RFA generally requires an agency
to prepare an Initial Regulatory Flexibility Analysis (IRFA) describing
the impact of the rule on small entities, unless the head of the agency
certifies that the proposed rule will not have a significant economic
impact on a substantial number of small entities and publishes such
certification along with a statement providing the factual basis for
such certification in the Federal Register.
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\46\ 5 U.S.C. 601 et seq.
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As described throughout this proposal, this proposed rule does not
directly regulate any small entities, including permitted payment
stablecoin issuers that may be small entities. While States may choose
to regulate such small entities in accordance with the principles set
out in this proposed rule, it is difficult to know at this time how
many States will opt to regulate such entities, or how many entities
may be affected. Further, the effects on small entities will depend on
the details of each State-level regulatory regime, which may vary
widely, given the discretion provided to States under the Act and this
proposal. Therefore, at this time, Treasury does not expect that part
1521 would have a significant impact on a substantial number of small
entities under the RFA. However, Treasury invites comment on any
effects on small entities.
B. Unfunded Mandates Reform Act
Treasury has analyzed the proposed rule under the factors in the
Unfunded Mandates Reform Act of 1995 (UMRA).\47\ Under this analysis,
Treasury considered whether the proposed rule includes a Federal
mandate that may result in the expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year (adjusted annually for inflation).
Pursuant to section 202 of the UMRA,\48\ if a proposed rule meets this
UMRA threshold, Treasury would need to prepare a written statement that
includes, among other things, a cost-benefit analysis of the proposal.
This requirement does not apply to regulations to the extent they
incorporate requirements specifically set forth in law.\49\
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\47\ 2 U.S.C. 1531 et seq.
\48\ 2 U.S.C. 1532.
\49\ 2 U.S.C. 1532.
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Treasury has determined that the proposed rule would not result in
a covered unfunded mandate within the meaning of UMRA. As described
throughout this proposal, the Act and this proposal provide States the
option to administer a State-level regulatory regime that complies with
the principles set out in this proposal. However, if a State chooses
not to administer such a regime, States need not comply with any
portion of this proposal. In addition, as described throughout this
proposal, this proposal is generally based directly on standards set
forth in the Act. To the extent that States must expend resources to
meet the standards set out in these principles, such costs are
generally attributable to the Act itself.
C. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023, 5
U.S.C. 553(b)(4), requires that a notice of proposed rulemaking include
the internet address of a summary of not more than 100 words in length
of a proposed rule, in plain language, that shall be posted on the
website www.regulations.gov.
Treasury is proposing to issue broad-based principles to implement
section 4(c) of the Act (12 U.S.C. 5903(c)) regarding substantial
similarity between State-level regulatory regimes and the Federal
regulatory framework for permitted payment stablecoin issuers. The
proposal and the required summary can be found at https://www.regulations.gov.
D. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) states
that no agency may conduct or sponsor, nor is the respondent required
to respond to, an information collection unless it displays a currently
valid OMB control number. This proposed rule does not contain any
information collections within the meaning of the Paperwork Reduction
Act. While this proposed rule provides broad-based principles for
States to use to certify substantial similarity to the Stablecoin
Certification Review Committee, this rule does not prescribe the form
of such certifications, which will be prescribed separately by the
Stablecoin Certification Review Committee pursuant to section 4(c)(4)
of the Act (12 U.S.C. 5903(c)(4)).
E. Regulatory Planning and Review
OIRA has determined that this proposed rule is a significant
regulatory action under Executive Order 12866 and, therefore, is
subject to review under Executive Order 12866. Treasury's analysis
conducted in connection with Executive Order 12866 is set forth below.
This proposed rule is not anticipated to be an E.O. 14192 regulatory
action.
Given the relative novelty of the payment stablecoin ecosystem, it
is challenging to precisely quantify the costs and benefits of this
proposal. In addition, Treasury's proposal seeks to apply the best
interpretations of the statutory text, which limits the range of
potential implementing approaches. Treasury believes that the costs of
the proposal are outweighed by the benefits, as described further
below, but invites comments that would help quantitatively or
qualitatively analyze costs and benefits of the proposal, as well as
any alternatives and their associated costs and benefits.
1. Affected Parties
Parties directly affected by this proposal are States seeking to
regulate State qualified stablecoin issuers under State-level
regulatory regimes. For the limited purpose of this analysis of costs
and benefits, Treasury assumes that all
[[Page 16862]]
States will seek to implement State-level regulatory regimes, though
some States may choose not to do so.
This proposal does not directly affect entities other than States.
Entities indirectly affected by the application of this proposal's
broad-based principles include State qualified payment stablecoin
issuers, parties that seek to become State qualified payment stablecoin
issuers, and individuals or entities that acquire payment stablecoins
issued by State qualified payment stablecoin issuers. It is difficult
to know at this time how many State qualified payment stablecoin
issuers may be affected. Further, the effects of these proposed broad-
based principles will depend on the details of each State-level
regulatory regime, which may vary widely, given the discretion provided
to States under the Act and this proposal.
2. Baseline
Treasury has assessed the benefits and costs of the proposed
regulations relative to a no-action baseline reflecting anticipated
behavior in the absence of the proposed regulations. Once the Act
becomes effective, persons will not be able to issue payment
stablecoins in the United States without becoming permitted payment
stablecoin issuers. The offer and sale of unlicensed stablecoins to
persons located in the United States by digital asset service providers
will also be unlawful starting July 18, 2028. To provide a State-level
license and regulation option for payment stablecoin issuers with a
consolidated total outstanding issuance of not more than $10 billion, a
State must certify that its State-level regulatory regime is
substantially similar to the Federal regulatory framework and must be
approved by the Stablecoin Certification Review Committee on the basis
that the State's regime ``meets or exceeds the standards and
requirements described in [section 4(a) of the Act].''
If a State is unable to certify to substantial similarity, or
unable to achieve Stablecoin Certification Review Committee approval,
all payment stablecoin issuers in the State will be required either to
(i) cease issuing payment stablecoins, or (ii) obtain a Federal license
and comply with regulation and supervision by the primary Federal
payment stablecoin regulators.
In the absence of these proposed principles, Treasury expects that
States and market participants would face significant uncertainty over
whether a State-level regulatory regime is substantially similar to the
Federal regulatory framework. States would potentially expend
significant costs through trial and error in designing regimes intended
to achieve Stablecoin Certification Review Committee approval. Issuers
that have, or would otherwise desire, a State license may instead
expend considerable resources to obtain a Federal license. Treasury
expects that the attendant uncertainty would likely significantly
stifle payment stablecoin markets and innovation in the States.
3. Costs
Some States may choose not to implement State-level regulatory
regimes, and this proposal will not impose any direct costs on those
States.\50\ States that choose to implement State-level regulatory
regimes will face implementation costs including staff time to analyze
the Act, the Federal regulatory framework, and part 1521 in order to
understand their requirements, and regulatory and/or legislative time
to write statutes, regulations, or enforceable guidance to conform to
the Act, the Federal regulatory framework, and part 1521.
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\50\ Any costs associated with the inability of States to
regulate permitted payment stablecoin issuers if they choose not to
implement a substantially similar State-level regulatory regime are
generally attributable to the Act and the State's choice not to
implement a State-level regulatory regime, rather than to these
proposed principles.
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For a limited number of States that already have State-level
regulatory regimes for payment stablecoins, the States may incur these
costs to revise their State-level regulatory regimes to better align
with the Act, the Federal regulatory framework, and part 1521. Most
States do not currently have a State-level regulatory regime for
payment stablecoins, and if these States choose to regulate payment
stablecoins, they would need to incur costs in designing and
implementing their State-level regulatory regime to comply with the
Act, regardless of the principles set forth in proposed part 1521.
For many of these States, Treasury believes that part 1521 will
alter the substance of the State-level regulatory regime but not
materially increase the implementation costs, because the States would
need to pass legislation and issue rules and guidance independent of
these proposed principles. For example, in the absence of these
principles, States seeking to regulate payment stablecoin issuers would
still need to issue rules to implement capital requirements on State
qualified payment stablecoin issuers, and incur the associated policy
formulation and drafting costs, such as staff time and potentially
expenditures to outside counsel or consultants. Treasury expects that
its proposed principles will help narrow the issues under review and
the range of options available to the State when designing a
substantially similar State-level regulatory regime. For example,
States will not need to expend significant time drafting regulations on
reserve assets, because these principles provide that reserve
requirements are a uniform requirement that must be consistent with the
Federal regulatory framework in all substantive respects. More
generally, the table included in Appendix A to proposed Part 1521
provides a roadmap that is expected to aid States in organizing their
State-level regulatory regimes and determining which areas will require
more substantive State policymaking and drafting. In this way, this
proposal may result in a modest cost savings for these States, as the
staff, counsel, or consultant time may be reduced.
4. Benefits
A key benefit of part 1521 is the transparency it provides
regarding whether a State-level regulatory regime is substantially
similar to the Federal regulatory framework. Treasury expects that this
will reduce potential frictions and concerns that could otherwise
impede market activity by payment stablecoin issuers and third parties
offering services to payment stablecoin providers. Therefore, Treasury
expects that part 1521 will create a more favorable environment for
digital asset innovation in many States, with potential economic
benefits from increased innovation and payment stablecoin commercial
activity. Consumers and institutions engaging with payment stablecoins
may view State qualified payment stablecoin issuers operating under a
``substantially similar'' State-level regulatory regime more favorably
than the status quo. In turn, those States may attract payment
stablecoin issuers, which may contribute to more investment, jobs, and
innovation.
In addition, Treasury expects that this proposal would provide
benefits to both States and State qualified payment stablecoin issuers
through deregulation. With the exception of certain uniform
requirements under the Act, this proposal provides States with
significant discretion to design their regimes in ways that are
appropriately tailored for issuers in their State, including to account
for the business models and size of State issuers, which may differ
materially from those of Federal qualified payment stablecoin issuers.
This may result in regulatory
[[Page 16863]]
outcomes that are less burdensome than the otherwise applicable Federal
regulatory framework.
5. Discretion and Alternatives
Treasury expects that the proposal's inclusion of certain
regulations and interpretations in the definition of ``Federal
regulatory framework'' will increase compliance costs for States
relative to a definition that relied solely on the text of the Act.
Similarly, the level of similarity required for the uniform provisions
might increase costs for the States relative to providing more
flexibility with respect to those provisions. However, as noted above,
the Act effectively requires States to meet or exceed the requirements
described in section 4(a) of the Act, and Treasury believes that the
best interpretation of the Act is that the Federal regulatory framework
extends beyond the statutory text of the Act itself.
Even if alternative statutory interpretations were available,
Treasury believes, including based on information provided in certain
comments to the ANPRM, that harmonization of the prudential elements
most correlated with run risk and consumer harm will produce benefits
in terms of market integrity, financial stability, and consumer
protection. Treasury further agrees with one commenter on the ANPRM
that relying on a more permissible ``substantially similar'' standard
would invite interpretive drift and regulatory arbitrage that at a
national and global level could produce significant flight-to-safety
dynamics and price dislocations during stress periods and also
complicate the U.S. government's ability to advocate for a single
global standard.
Treasury does believe that the Act provides discretion on the
extent to which subregulatory documents are included in the Federal
regulatory framework, and Treasury believes that the costs of requiring
States to monitor for and harmonize with a wide array of subregulatory
guidance documents issued by the primary Federal stablecoin regulators
(but not published in the Federal Register) would exceed any benefits
from marginally increased harmonization. Treasury believes that
including in the definition of ``Federal regulatory framework'' only
those documents from the primary Federal stablecoin regulators that are
published in the Federal Register strikes an appropriate middle ground.
Question 74: What are the potential costs and benefits, if any, of
the implementation of section 4(c) (12 U.S.C. 5903(c)) as proposed in
part 1521, beyond costs and benefits imposed by the Act itself? To what
extent does Treasury have discretion within the boundaries of the Act
to further reduce costs or increase benefits?
Question 75: What are the potential advantages or disadvantages of
registering under State regimes compared to Federal regimes,
particularly in terms of administrative efficiency and support for
innovation?
Question 76: The Act establishes federal safeguards to protect
consumers. How should the economic benefits of consumer protection be
measured quantitatively and qualitatively?
Question 77: What are the benefits and costs, including for
implementation, compliance efficiency, and payment stablecoin market
participation, from the proposed broad-based principles providing
relatively clear guidance for States?
Question 78: What is the projected impact of regulatory clarity for
payment stablecoins on startup formation, market investment, and
product innovation?
F. Executive Order 13132
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial, direct compliance costs on State, local,
and Tribal governments, and is not required by statute, or preempts
State law, unless the agency meets the consultation and funding
requirements of section 6 of the Executive Order. This proposed rule
does not have federalism implications within the meaning of the
Executive Order, including for the reasons described above.
Notwithstanding the above, Treasury has engaged in efforts to consult
with affected State government officials and associations in the
process of developing this proposed rule. Pursuant to the requirements
set forth in section 8(a) of Executive Order 13132, Treasury certifies
that it has complied with the requirements of Executive Order 13132.
List of Subjects
12 CFR Part 1520
Banks, Banking, Consumer protection, Digital assets, Non-bank
entity, Payment stablecoins, Permitted payment stablecoin issuer, State
and local governments, State qualified payment stablecoin issuer.
12 CFR Part 1521
Banks, Banking, Consumer protection, Digital assets, Non-bank
entity, Payment stablecoins, Permitted payment stablecoin issuer, State
and local governments, State qualified payment stablecoin issuer.
For the reasons stated in the preamble, the Department of the
Treasury proposes to amend 12 CFR chapter XV by adding subchapter C,
consisting of parts 1520 and 1521 to read as follows:
SUBCHAPTER C--REGULATION OF PAYMENT STABLECOINS
PART 1520--GENERAL PROVISIONS
Sec.
1520.1 Authority, purpose, and scope.
Authority: 12 U.S.C. 5901 et seq.
Sec. 1520.1 Authority, purpose, and scope.
(a) Authority. This subchapter is issued by the U.S. Department of
the Treasury (Treasury) pursuant to various sections of the Guiding and
Establishing National Innovation for U.S. Stablecoins (GENIUS) Act,
including section 4(c) and section 13, 12 U.S.C. 5903(c) and 5913.
(b) Purpose and scope. The GENIUS Act tasks Treasury with issuing
regulations concerning payment stablecoins. This subchapter contains
Treasury's rules implementing certain provisions of the Act.
PART 1521--BROAD-BASED PRINCIPLES FOR STATE SIMILARITY
Sec.
1521.1 Scope, Applicability, and Definitions.
1521.2 Overall Broad-Based Principles.
1521.3 Broad-Based Principles for Uniform Requirements under Section
4(a) of the Act.
1521.4 Broad-Based Principles for State-Calibrated Requirements
under Section 4(a) of the Act.
1521.5 Broad-Based Principles for Other Provisions of the Act.
1521.6 Broad-Based Principles for Additional State Requirements.
1521.7 Severability.
Authority: 12 U.S.C. 5901 et seq.
Sec. 1521.1 Scope, Applicability, and Definitions.
(a) This part is issued by the U.S. Department of the Treasury to
implement section 4(c) of the Guiding and Establishing National
Innovation for U.S. Stablecoins (GENIUS) Act (12 U.S.C. 5903(c)),
establishing broad-based principles for determining whether a State-
level regulatory regime is substantially similar to the Federal
regulatory framework.
(b) Unless otherwise defined in this part, the terms used in this
part have the same meaning as in section 2 of the GENIUS Act (12 U.S.C.
5901).
[[Page 16864]]
(c) For purposes of this part, the following definitions apply:
Act or GENIUS Act means the Guiding and Establishing National
Innovation for U.S. Stablecoins Act (12 U.S.C. 5901 et seq.).
Federal regulatory framework means, for purposes of evaluating a
State-level regulatory regime under section 4(c) of the Act (12 U.S.C.
5903(c)):
(i) The text of all relevant provisions of the Act;
(ii) Any interpretations thereof, or regulations thereunder, issued
by the Office of the Comptroller of the Currency and published in the
Federal Register;
(iii) With respect to sections 4(a)(5) and 4(a)(6) of the Act (12
U.S.C. 5903(a)(5) and (6)), any interpretations thereof, regulations
thereunder, or orders issued by the Department of the Treasury; and
(iv) With respect to section 4(a)(8) of the Act (12 U.S.C.
5903(a)(8)), any interpretations thereof, regulations thereunder, or
orders issued by the Board of Governors of the Federal Reserve System;
State-calibrated requirement means a requirement under section 4(a)
of the Act (12 U.S.C. 5903(a)) that is applicable to a State qualified
payment stablecoin issuer and for which the Act grants substantive
discretion to a State payment stablecoin regulator to develop the
State-level regulatory regime, as listed in Appendix A to this part.
State-level regulatory regime means, with respect to a particular
State:
(i) All statutes enacted by the State regarding payment
stablecoins;
(ii) Any regulations regarding payment stablecoins or that apply to
a State qualified payment stablecoin issuer issued by a State payment
stablecoin regulator of the State or another regulator of the State;
and
(iii) Any interpretations thereof or guidance thereunder, only to
the extent they are enforceable against State qualified payment
stablecoin issuers.
Uniform requirement means a requirement under section 4(a) of the
Act (12 U.S.C. 5903(a)) that is applicable to a State qualified payment
stablecoin issuer and for which the Act does not grant substantive
discretion to a State payment stablecoin regulator, as listed in
Appendix A to this part.
Sec. 1521.2 Overall Broad-Based Principles.
(a) Except as otherwise provided in this part or the Act, a State
qualified payment stablecoin issuer is subject to all requirements
under Federal statutes, including the Act, applicable to permitted
payment stablecoin issuers.
(b) To be considered substantially similar to the Federal
regulatory framework, a State-level regulatory regime must:
(1) Meet or exceed the standards and requirements described in
section 4(a) of the Act (12 U.S.C. 5903(a)) such that:
(i) Implementation of each of the uniform requirements in the
State-level regulatory regime is consistent with the Federal regulatory
framework in all substantive respects, in accordance with the
requirements of this part; and
(ii) Implementation of each of the State-calibrated requirements is
consistent with the applicable provisions of the Act and leads to
regulatory outcomes that are at least as stringent and protective as
the Federal regulatory framework;
(2) Include frameworks for transition to Federal oversight,
applications and approval, and supervision and enforcement, in each
case that:
(i) Are consistent with sections 4(d), 5, and 6 of the Act (12
U.S.C. 5903(d), 5904, and 5905); and
(ii) Provide for similar levels of authority and oversight over
payment stablecoin issuers as provided under the Federal regulatory
framework; and
(3) Include frameworks for custody and insolvency that:
(i) Are consistent with sections 10 and 11 of the Act (12 U.S.C.
5909, 5910, and 5911); and
(ii) Provide substantially similar protections for payment
stablecoin holders as the Federal regulatory framework.
(c) Except as provided in the Act, a State-level regulatory regime
may deviate from the Federal regulatory framework with respect to
nonsubstantive matters of form or procedure while remaining
substantially similar to the Federal regulatory framework.
Sec. 1521.3 Broad-Based Principles for Uniform Requirements under
Section 4(a) of the Act.
Following are broad-based principles for determining whether a
State-level regulatory regime is substantially similar to the Federal
regulatory framework with respect to the uniform requirements under
section 4(a) of the Act (12 U.S.C. 5903(a)).
(a) Each of the uniform requirements listed in Appendix A to this
part must be fully enforceable by the State payment stablecoin
regulator against State qualified payment stablecoin issuers; and
(b) Implementation of each of the uniform requirements in the
State-level regulatory regime must be consistent with the Federal
regulatory framework in all substantive respects, including that:
(1) There are no material deviations in definitions or
interpretations of statutory terms between the Federal regulatory
framework and the State-level regulatory regime; and
(2) Each of the uniform requirements is applied and construed in
the State-level regulatory regime in a manner that does not materially
narrow, condition, or limit its scope compared to the Federal
regulatory framework.
Sec. 1521.4 Broad-Based Principles for State-Calibrated Requirements
under Section 4(a) of the Act.
Following are broad-based principles for determining whether a
State-level regulatory regime is substantially similar to the Federal
regulatory framework with respect to the State-calibrated requirements
under Section 4(a) of the Act (12 U.S.C. 5903(a)).
(a) Reserve Assets. The State-level regulatory regime may allow, or
may permit the State payment stablecoin regulator to allow, reserve
assets not listed in section 4(a)(1)(A) of the Act (12 U.S.C.
5903(a)(1)(A)) only if such assets have been approved by the OCC as
similarly liquid Federal Government-issued assets in accordance with
section 4(a)(1)(A)(vii) of the Act (12 U.S.C. 5903(a)(1)(A)(vii)).
(b) Redemption. (1) The State-level regulatory regime may set, or
may permit the State payment stablecoin regulator to set, discretionary
limitations on timely redemption in accordance with section
4(a)(1)(B)(i) of the Act (12 U.S.C. 5903(a)(1)(B)(i)) only so long as
those limitations are:
(i) Appropriately disclosed by the State qualified payment
stablecoin issuer; and
(ii) Consistent with section 7 of the Act (12 U.S.C. 5906).
(c) Rehypothecation. (1) The State-level regulatory regime must
prohibit rehypothecation in accordance with section 4(a)(2) of the Act
(12 U.S.C. 5903(a)(2)) and consistent with the Federal regulatory
framework.
(2) The State-level regulatory regime may pre-approve, or may
permit a State payment stablecoin regulator to pre-approve, the use of
repurchase agreements under section 4(a)(2)(C)(ii) of the Act (12
U.S.C. 5903(a)(2)(C)(ii)).
(d) Certifications Related to Monthly Report. The State-level
regulatory regime must require and accept monthly certifications from
State qualified payment stablecoin issuers in accordance with section
4(a)(3) of the Act (12 U.S.C. 5903(a)(3)) as to the accuracy of the
monthly report required under section 4(a)(1)(C) of the Act (12 U.S.C.
5903(a)(1)(C)), but the form of those certifications may deviate from
[[Page 16865]]
those promulgated by the primary Federal payment stablecoin regulators.
(e) Capital. (1) The State-level regulatory regime must require, in
accordance with section 4(a)(4)(A)(i) of the Act (12 U.S.C.
5903(a)(4)(A)(i)), that a State qualified payment stablecoin issuer
maintain common equity tier 1 capital and additional tier 1 capital, as
each is defined in the Federal regulatory framework, commensurate with
the level and nature of all risks to which the issuer is exposed,
including risks for off-balance sheet activities, provided that any
such requirement must be tailored to the business model and risk
profile of a State qualified payment stablecoin issuer and must not
exceed requirements that are sufficient to ensure the ongoing
operations of a State qualified payment stablecoin issuer.
(2) The State-level regulatory regime must require State qualified
payment stablecoin issuers to have a process for assessing their
overall capital adequacy in relation to their business model and risk
profile and a comprehensive strategy for maintaining an appropriate
level of capital to maintain operations.
(3) The State-level regulatory regime must require that a State
qualified payment stablecoin issuer maintain an operational backstop to
help ensure that during a business disruption that impacts operations,
a liquid pool of identifiable assets exists to allow the issuer to meet
short-term liquidity needs, stabilize the issuer after the disruption,
and continue or resume normal operations. The operational backstop must
require assets equal to or greater than the amount required under the
Federal regulatory framework.
(4) The State-level regulatory regime must include provisions that
establish consequences for issuers failing to meet the minimum capital
or operational backstop requirements that meet or exceed the standard
in the Federal regulatory framework.
(5) The State-level regulatory regime may establish other required
capital thresholds or metrics, including additional types of capital or
risk-based capital requirements, provided that it also complies with
the capital requirements described in paragraphs (e)(1) through (4) of
this section.
(f) Liquidity, reserve asset diversification, and interest rate
risk management. (1) The State-level regulatory regime must require, in
accordance with section 4(a)(4)(A)(ii) of the Act (12 U.S.C.
5903(a)(4)(A)(ii)), a State qualified payment stablecoin issuer to
maintain its reserve assets in a way that is sufficiently diverse to
manage potential credit, liquidity, interest rate, and price risks.
(2) The State-level regulatory regime will be deemed to satisfy the
reserve asset diversification requirement provided in paragraph (f)(1)
of this section if the State qualified payment stablecoin issuer is
required to:
(i) Maintain the same or greater percentage of its reserve assets
for each minimum threshold in the Federal regulatory framework;
(ii) Maintain the same or lower percentage of its reserve assets
for each maximum threshold in the Federal regulatory framework; and
(iii) Maintain reserve assets with a weighted average maturity
equal to or lower than the threshold in the Federal regulatory
framework.
(3) The State-level regulatory regime must require, in accordance
with section 4(a)(4)(A)(iii) of the Act (12 U.S.C. 5903(a)(4)(A)(iii)),
that a State qualified payment stablecoin issuer has standards for
interest rate risk management that are consistent with the Federal
regulatory framework.
(4) The State-level regulatory regime must include provisions that
establish consequences for State qualified payment stablecoin issuers
that fail to meet the reserve asset requirements that meet or exceed
the standard in the Federal regulatory framework.
(5) The State-level regulatory regime may establish other required
liquidity, diversification, or interest rate risk thresholds or
metrics, provided that it also complies with the requirements described
in paragraphs (f)(1) through (4) of this section.
(g) Operational, compliance, information technology risk
management. The State-level regulatory regime must, in accordance with
section 4(a)(4)(A)(iv) of the Act (12 U.S.C. 5903(a)(4)(A)(iv)),
establish appropriate operational, compliance, and information
technology risk management principles-based requirements and standards,
including Bank Secrecy Act and sanctions compliance standards, that:
(1) Lead to regulatory outcomes that are at least as stringent and
protective as the principles-based requirements and standards in the
Federal regulatory framework;
(2) Are tailored to the business model and risk profile of State
qualified payment stablecoin issuers;
(3) Are consistent with applicable law; and
(4) Address, at a minimum, internal controls, information security,
information systems, an internal audit system, asset growth, earnings,
insider and affiliate transactions, and service provider arrangements.
(h) Activities. (1) Subject to paragraph (h)(2) of this section, a
State-level regulatory regime may not authorize State qualified payment
stablecoin issuers to engage in any activities that are not specified
in section 4(a)(7)(A) of the Act (12 U.S.C. 5903(a)(7)(A)).
(2) A State-level regulatory regime may authorize State qualified
payment stablecoin issuers to engage in activities not specified in
section 4(a)(7)(A) of the Act (12 U.S.C. 5903(a)(7)(A)), only to the
extent that:
(i) Such activities are:
(A) Incidental to the activities specified in section 4(a)(7)(A) of
the Act (12 U.S.C. 5903(a)(7)(A));
(B) Digital asset service provider activities specified in section
2(7) of the Act (12 U.S.C. 5901(7)) or activities incidental thereto;
or
(C) Activities specified in sections 16(a) or 16(d) of the Act (12
U.S.C. 5915(a), (d));
(ii) Such activities are authorized by Federal or State law other
than the Act;
(iii) Such activities are consistent with all other Federal and
State law; and
(iv) The claims of payment stablecoin holders rank senior to any
potential claims of non-stablecoin creditors with respect to the
reserve assets, consistent with section 11 of the Act (12 U.S.C. 5910
and 5911).
(3) For the avoidance of doubt, a State-level regulatory regime
must prohibit State qualified payment stablecoin issuers from engaging
in any activities prohibited under the Act, including the prohibition
on rehypothecation in section 4(a)(2) of the Act (12 U.S.C.
5903(a)(2)), the prohibition on the use of deceptive names in section
4(a)(9) of the Act (12 U.S.C. 5903(a)(9)), the prohibition against
misrepresenting insured status in section 4(e) of the Act (12 U.S.C.
5903(e)), and the prohibition on paying interest or yield in section
4(a)(11) of the Act (12 U.S.C. 5903(a)(11)).
Sec. 1521.5 Broad-Based Principles for Other Provisions of the
GENIUS Act.
Following are broad-based principles for determining whether a
State-level regulatory regime is substantially similar to the Federal
regulatory framework with respect to sections 4(d), 5, 6, 10, and 11 of
the Act (12 U.S.C. 5903(d), 5904, 5905, 5909, 5910, and 5911).
(a) Transition to Federal Oversight. The State-level regulatory
regime must include provisions regarding the transition by State
qualified payment stablecoin issuers to Federal oversight contemplated
by section 4(d) of the Act
[[Page 16866]]
(12 U.S.C. 5903(d)) that are consistent with the Federal regulatory
framework.
(b) Applications and licensing. The State-level regulatory regime
must establish a framework similar to section 5 of the Act (12 U.S.C.
5904) for accepting applications from potential State qualified payment
stablecoin issuers that addresses, at a minimum, the content required
in an application and the factors upon which the State payment
stablecoin regulator will render a decision on the application. Except
as provided in the Act or elsewhere in this part, the State-level
regulatory regime for applications and licensing may deviate from the
timeframes, forms, reporting requirements, and other procedures in the
Federal regulatory framework. The State-level regulatory regime must
also require the post-application and annual certifications required
under section 5(i) of the Act (12 U.S.C. 5904(i)).
(c) Supervision and enforcement. The State-level regulatory regime
must appropriately provide the State payment stablecoin regulator with
similar authority over State qualified payment stablecoin issuers as
the Federal regulatory framework provides over Federal qualified
payment stablecoin issuers, consistent with section 6 of the Act (12
U.S.C. 5905), to license, supervise, examine, obtain reports, impose
conditions, and take enforcement actions. Except as provided in the Act
or elsewhere in this part, the State-level regulatory regime for
supervision and enforcement may deviate from the timeframes, forms,
reporting requirements, and other procedures in the Federal regulatory
framework.
(d) Custody. The State-level regulatory regime must establish
conditions on custody that are consistent with section 10 of the Act
(12 U.S.C. 5909).
(e) Insolvency. To the extent that State qualified payment
stablecoin issuers may be subject to insolvency proceedings under State
law, the State-level regulatory regime must be consistent with section
11 of the Act (12 U.S.C. 5910 and 5911).
Sec. 1521.6 Broad-Based Principles for Additional State
Requirements.
Following are broad-based principles for determining whether a
State-level regulatory regime is substantially similar to the Federal
regulatory framework to the extent that the State-level regulatory
regime imposes additional requirements on State qualified payment
stablecoin issuers beyond those in the Federal regulatory framework.
(a) Additional State Requirements. The State-level regulatory
regime may impose additional restrictions or requirements on State
qualified payment stablecoin issuers, so long as:
(1) such restrictions or requirements do not conflict with any
provision of the GENIUS Act, this part, or other applicable Federal
law;
(2) the restrictions or requirements do not modify the State-level
regulatory regime such that it can no longer be reasonably viewed as
substantially similar to the Federal regulatory framework.
(b) [Reserved]
Sec. 1521.7 Severability.
The provisions of this part are separate and severable from one
another. If any provision, clause, or phrase of this part, or the
application thereof to any person, entity, or circumstance, is stayed
or determined to be invalid, unlawful, or unenforceable by a court of
competent jurisdiction, such determination shall not affect the
validity, lawfulness, or enforceability of the remaining provisions or
applications of this regulation, which shall remain in full force and
effect to the maximum extent permitted by law.
Appendix A to Part 1521--Mapping of GENIUS Act Sections to Part 1521
Principles
----------------------------------------------------------------------------------------------------------------
Uniform or State-calibrated Corresponding part 1521
GENIUS Act section Topic requirement principles
----------------------------------------------------------------------------------------------------------------
4(a)(1)(A), except as noted Reserve assets..... Uniform...................... Sec. 1521.3
below.
4(a)(1)(A)(vii)................. Additional reserve State-calibrated............. Sec. 1521.4(a)
assets.
4(a)(1)(B), except as noted Redemption......... Uniform...................... Sec. 1521.3
below.
4(a)(1)(B)(i)................... Discretionary State-calibrated............. Sec. 1521.4(b)
limitations on
timely redemptions.
4(a)(1)(C)...................... Monthly publication Uniform...................... Sec. 1521.3
of reserves.
4(a)(2), except as noted below.. Prohibition on Uniform...................... Sec. 1521.3
rehypothecation of
reserves.
4(a)(2)(C)(ii).................. Approval for State-calibrated............. Sec. 1521.4(c)
rehypothecation of
reserves.
4(a)(3)(A), (C)................. Independent Uniform...................... Sec. 1521.3
accountant
examination of
reports.
4(a)(3)(B)...................... Monthly CEO/CFO State-calibrated............. Sec. 1521.4(d)
certification of
accuracy of
reserve report.
4(a)(4)......................... Capital, liquidity, State-calibrated............. Sec. 1521.4(e)-(g)
reserve asset
diversification,
and risk-
management
standards.
4(a)(5)......................... Bank Secrecy Act/ Uniform...................... Sec. 1521.3
sanctions
compliance program
requirements.
4(a)(6)(B)...................... Technological Uniform...................... Sec. 1521.3
capability to
comply with, and
obligation to
comply with, terms
of lawful orders.
4(a)(7)(A)...................... Limitation on Uniform...................... Sec. 1521.3
permitted payment
stablecoin
activities.
4(a)(7)(B)...................... Additional State-calibrated............. Sec. 1521.4(h)
permitted payment
stablecoin
activities.
4(a)(8)......................... Prohibition on Uniform...................... Sec. 1521.3
tying.
4(a)(9)......................... Prohibition on Uniform...................... Sec. 1521.3
deceptive names.
4(a)(10)........................ Audits and reports. Uniform...................... Sec. 1521.3
4(a)(11)........................ Prohibition on Uniform...................... Sec. 1521.3
paying interest/
yield on
stablecoins.
4(a)(12)........................ Limits on non- Uniform...................... Sec. 1521.3
financial public
companies (and
certain foreign
companies) issuing
stablecoins.
4(d)............................ Transition to N/A.......................... Sec. 1521.5(a)
Federal oversight.
5............................... Application and N/A.......................... Sec. 1521.5(b)
approval.
6............................... Supervision and N/A.......................... Sec. 1521.5(c)
enforcement.
10.............................. Custody............ N/A.......................... Sec. 1521.5(d)
11.............................. Insolvency......... N/A.......................... Sec. 1521.5(e)
----------------------------------------------------------------------------------------------------------------
[[Page 16867]]
Rachel Miller,
Executive Secretary.
[FR Doc. 2026-06489 Filed 4-2-26; 8:45 am]
BILLING CODE 4810-AK-P