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

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

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

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.

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 § 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 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 § 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 §§ 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 § 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 § 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 § 1521.7 includes a severability provision.

Proposed § 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.

Proposed § 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 § 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.

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.”

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

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.

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 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

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.

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?

Proposed § 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 §§ 1521.3 through 1521.6.

Question 7: What broad-based principles should be considered in determining whether a State-level 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?

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.

Accordingly, proposed § 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?

Proposed § 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 § 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 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

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

Accordingly, proposed § 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 § 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.

Proposed § 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 § 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)).

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 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?

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 § 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 § 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 § 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 § 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 § 1521.2(b)(3).

Section II.G below, which discusses proposed § 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 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?

Treasury believes that substantial similarity refers to the substantive standards that apply to permitted payment stablecoin issuers. Accordingly, proposed § 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?

Proposed § 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 § 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 § 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 § 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. 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

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?

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 § 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.

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)?

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 § 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 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?

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 § 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 § 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?

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 § 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 § 1521.4(c)(2) similarly provides that 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)) 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.

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?

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 § 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?

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 § 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 § 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.

Proposed § 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 § 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.

In § 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 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.

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 § 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 § 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?

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?

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?

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 to devise their liquidity standards, Treasury sets out a high-level requirement in proposed § 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.

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 § 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 § 1521.4(f)(2) provides that a State-level regulatory regime satisfies the requirement in proposed § 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 § 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 § 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

Proposed § 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.

Proposed § 1521.4(f)(5) operates similarly to the treatment of additional capital requirements under proposed § 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 § 1521.4(f)(1) through (f)(4).

Question 45: Should the specific quantitative requirements described in proposed §§ 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?

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 § 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 systems, an internal audit system, asset growth, earnings, insider and affiliate transactions, and service provider arrangements.

With respect to the requirement in proposed § 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 § 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.

Proposed § 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

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

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 § 1521.4(h)(1) provides that, subject to proposed § 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 § 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 § 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 § 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).

Proposed § 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?”

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

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 § 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.

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?

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.

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 § 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?

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.

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 § 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?

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. 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 § 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?

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 § 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?

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 § 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.

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 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?

Proposed § 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.

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 .

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.

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

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.

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.

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)).

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.

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 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.

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.

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.

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.

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 outcomes that are less burdensome than the otherwise applicable Federal regulatory framework.

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?

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.

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:

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments using a method listed under the ADDRESSES section. Include “Docket No. FAA-2026-3475; Project Identifier MCAI-2025-01561-T” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this proposal because of those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov , including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this NPRM.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Anthony DeCaro, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: (562) 627-5374; email: anthony.d.decaro@faa.gov.

Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2025-0209, dated September 24, 2025 (EASA AD 2025-0209) (also referred to as the MCAI), to correct an unsafe condition for certain Airbus SAS Model A350-941 airplanes. The MCAI states that during manufacturing investigation of an early production A350-941 airplane, it was found that improper application of the fastener retorque process at the CWB and BF junctions could lead to insufficient clamping. Fasteners with part number EN6115 code B were particularly susceptible to rotation, and if not torqued correctly, could potentially compromise structural integrity and compliance with the electromagnetic hazard requirements of the airplane. This condition, if not corrected, could, in the case of a fuel leak, create a source of ignition, possibly resulting in an uncontrolled fire.

The FAA is proposing this AD to address the unsafe condition of these products.

You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2026-3475.

EASA AD 2025-0209 specifies procedures for replacing affected fasteners installed on the left-hand (LH) and right-hand (RH) sides of the CWB and BF junctions and applying additional head nut cap protection. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

These products have been approved by the civil aviation authority of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, that authority has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This proposed AD would require accomplishing the actions specified in EASA AD 2025-0209 described previously, except for any differences identified as exceptions in the regulatory text of this proposed AD.

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with manufacturers and CAAs. As a result, the FAA proposes to incorporate EASA AD 2025-0209 by reference in the FAA final rule. This proposed AD would, therefore, require compliance with EASA AD 2025-0209 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Using common terms that are the same as the heading of a particular section in EASA AD 2025-0209 does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2025-0209. Material required by EASA AD 2025-0209 for compliance will be available at regulations.gov under Docket No. FAA-2026-3475 after the FAA final rule is published.

The FAA estimates that this AD, if adopted as proposed, would affect 2 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD:

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this proposed regulation:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Would not affect intrastate aviation in Alaska, and

(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments using a method listed under the ADDRESSES section. Include “Docket No. FAA-2026-3473; Project Identifier MCAI-2025-01221-T” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this proposal because of those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this NPRM.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Dan Rodina, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-3225; email: Dan.Rodina@faa.gov. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2025-0152, dated July 18, 2025 (EASA AD 2025-0152) (also referred to as the MCAI), to correct an unsafe condition for all Airbus SAS Model A350-941 and -1041 airplanes. The MCAI states that during production, certain primary flight control actuators (servo controls, electrical backup hydraulic actuators, and electro-hydrostatic actuators) have been exposed to mechanical overloads during the acceptance test procedure, leading to reduced fatigue life of the affected actuators. This condition, if not corrected, could potentially result in actuator failure, leading to loss of control of control surfaces or to hydraulic system loss, and consequently result in reduced control of the airplane.

The FAA is proposing this AD to address the unsafe condition on these products.

You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2026-3473.

EASA AD 2025-0152 specifies procedures for replacing affected parts with serviceable parts. EASA AD 2025-0152 also prohibits the installation of affected parts. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

These products have been approved by the civil aviation authority of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, that authority has notified the FAA of the unsafe condition described in the MCAI and material referenced above. The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This proposed AD would require accomplishing the actions specified in EASA AD 2025-0152 described previously, except for any differences identified as exceptions in the regulatory text of this proposed AD.

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with manufacturers and CAAs. As a result, the FAA proposes to incorporate EASA AD 2025-0152 by reference in the FAA final rule. This proposed AD would, therefore, require compliance with EASA AD 2025-0152 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Using common terms that are the same as the heading of a particular section in EASA AD 2025-0152 does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2025-0152. Material required by EASA AD 2025-0152 for compliance will be available at regulations.gov under Docket No. FAA-2026-3473 after the FAA final rule is published.

The FAA estimates that this AD, if adopted as proposed, would affect 38 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD:

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this proposed regulation:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Would not affect intrastate aviation in Alaska, and

(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

This is a synopsis of the Commission's Lifeline and Link Up Reform and Modernization et al., Notice of Proposed Rulemaking (NPRM) in WC Docket Nos. 11-41, 17-287, 09-197, 21-450, and 20-445; FCC No. 26-8; adopted February 18, 2026 and released February 23, 2026. The full text of this document is available for public inspection during regular business hours at Commission's headquarters 45 L Street NE, Washington, DC 20554 or at the following internet address: https://docs.fcc.gov/public/attachments/FCC-26-8A1.pdf.

In the NPRM, the Commission takes a comprehensive look at the Lifeline program and proposes reforms to enhance program integrity and combat waste, fraud, and abuse. First, the Commission seeks comments on changes to ensure that Lifeline support is used to benefit qualifying low-income Americans consistent with section 254 of the Telecommunications Act of 1996 (the Act), through enhanced requirements to ensure that program participants are legal beneficiaries of Lifeline discounts, improved verification of household eligibility, an improved enrollment and transfer experience for households, predictable minimum service standards, ending the voice support phase-down, and preventing duplicative support. Second, the Commission seeks comments on rule changes that would optimize Lifeline program processes for integrity and efficiency, including reforms applicable to the states that have been permitted to opt out of using the NLAD and reduced reporting burdens for ETCs. Third, the Commission seeks comments on changes that would promote more principled service provider conduct, thereby increasing program integrity protections and ensuring that ETCs that participate in the Lifeline program comply with all rules. Finally, the Commission seeks comments on changes to the Lifeline rules to streamline them and minimize stakeholder confusion.

The Lifeline program was established to help ensure that low-income Americans are able to receive affordable communications service. In this section, the Commission seeks comments on proposals to ensure that federal Lifeline benefits are only provided to the eligible recipients permitted by federal law, to improve verification of household eligibility, to ensure that consumers are enrolled with their preferred provider, and changes to minimum service standards and voice service phase-down. The Commission also seeks comments on additional program integrity improvements concerning duplicative support.

Today, all Lifeline program applicants must submit the last four digits of their SSNs to participate in the federal Lifeline program. This is a requirement designed to operate in a manner that limits the program to U.S. citizens and qualified aliens that have lawfully valid SSNs. However, there has been an increase in the number of SSNs illegally obtained or assigned in recent years, with more than 2 million non-citizens illegally assigned SSNs in 2024 alone.

Consistent with the goal of ensuring taxpayer-funded benefits are provided only to eligible recipients, the Commission seeks comments on several steps to safeguard the Lifeline program. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) is an important safeguard that protects federal funding by limiting support for federal programs to qualified aliens. The Commission tentatively concludes that Lifeline program support is a “federal public benefit” that is available only to U.S. citizens and immigrants with “qualified alien” status under the PRWORA, and the Commission seeks comments on this tentative conclusion. The Commission notes that the Lifeline benefit already is available only to citizens and qualified aliens, but the Commission seeks comments on other implications of a finding that Lifeline is a “federal public benefit,” including that “qualified aliens” would be subject to a five-year waiting period to participate in the Lifeline program if it is also determined to be a “means-tested public benefit.”

Section 401 of the PRWORA mandates that, “[n]otwithstanding any other provision of law,” outside certain narrow exceptions, “an alien who is not a qualified alien . . . is not eligible for any Federal public benefit.” “Qualified aliens” are subject to additional eligibility requirements before they may receive benefits. For example, they may not obtain “any Federal means-tested public benefit” until they have been in the United States for five years with a qualified status. The definition of “qualified alien” includes persons with a number of immigration statuses allowing them to reside in the United States legally; it does not include individuals who are here illegally. The term “financial means” includes the “income and resources” of an alien's spouse or sponsor in its calculation of the alien's total assets.

The PRWORA broadly defines a “Federal public benefit” to include: “(A) any grant, contract, loan, professional license, or commercial license provided by an agency of the United States or by appropriated funds of the United States; and (B) any retirement, welfare, health, disability, public or assisted housing, postsecondary education, food assistance, unemployment benefit, or any other similar benefit for which payments or assistance are provided to an individual, household, or family eligibility unit by an agency of the United States or by appropriated funds of the United States.” The United States Department of Justice, Office of Legal Counsel (OLC) has explained that this definition of “Federal public benefit” bars non-qualified aliens from receiving “[1] benefit[s] for which payments or assistance are provided to [2] an individual, household, or family eligibility unit by [3] an agency of the United States or by appropriated funds of the United States.”

The PRWORA does not define the term “Federal means-tested public benefit.” Nevertheless, OLC instructs the best reading of this term means any federal public benefit for which the eligibility of an individual, household, or family eligibility unit for benefits, or the amount of such benefits, or both, are determined on the basis of the income, resources, or financial need of the individual, household, or unit—regardless of the funding sources for that federal public benefit.

Applying OLC's guidance, the Commission tentatively concludes that Lifeline benefits constitute “Federal public benefits” and “Federal means-tested public benefits” for purposes of the PRWORA. As such, Lifeline is not available to non-qualified aliens and will only be available to qualified aliens on a means-tested basis. The Commission seeks comments on this assessment.

The Commission tentatively concludes that Lifeline program reimbursements paid to service providers are nonetheless “[1] benefit[s] for which payments or assistance are provided to [2] an individual, household, or family eligibility unit by [3] an agency of the United States or by appropriated funds of the United States.” The PRWORA provides that benefits may include “payments” or “assistance.” Thus, it is the Commission's current view that nothing in the PRWORA requires that payments be made directly to individuals for a program to qualify as a “federal public benefit.” In fact, some programs that have been determined to be “federal public benefits” under the PRWORA provide payments directly to third parties or other intermediaries on behalf of the beneficiary, including Section 8 housing assistance paid directly to property owners and federal student assistance paid directly to educational institutions. The Commission seeks comments on what effect, if any, the fact that Lifeline program reimbursements are paid to service providers has on the applicability of the PRWORA.

Does the fact that Lifeline benefits are already limited to citizens and qualified aliens affect the PRWORA analysis? Would a specific finding that Lifeline program support is a “federal public benefit” under the PRWORA further protect the program against the possibility of improper payments? If the Commission concludes that Lifeline program support is a “federal public benefit” under the PRWORA, would additional verifications beyond collection of the SSN be necessary to ensure compliance with the PRWORA? If so, what verifications would be needed?

The Commission also seeks comments on its tentative conclusion that the Lifeline benefit qualifies as a “means-tested public benefit” under the PRWORA. As noted, the PRWORA does not define “means-tested public benefit,” so the Commission applies the guidance from OLC that a means-tested public benefit “is best understood as any federal public benefit for which the eligibility of an individual, household, or family eligibility unit for benefits, or the amount of such benefits, or both, are determined on the basis of the income, resources, or financial need of the individual, household, or unit.” The Lifeline program readily satisfies the plain meaning of this definition. Tentatively concluding that the program is a federal public benefit and eligibility plainly is determined based on, among other things, income, resources, and financial need, the Commission seeks comments on this analysis and whether there are other factors to be considered. Are there reasons not to consider OLC's interpretation of the term “Federal means-tested public benefit” controlling here and, if not, what standard should be applied? Under this definition or others, does the Lifeline program qualify as a means-tested public benefit? Does the Lifeline program fall within any of the “Federal means-tested public benefits” to which exemptions from the five-year waiting period apply? If the program is determined to be a “Federal means-tested public benefit,” should there be a transition period before the de-enrollment of subscribers who have not completed the five-year waiting period? If so, what would that transition period be?

If the Lifeline benefit is a “means-tested public benefit” under the PRWORA, then with certain exceptions, qualified aliens would not be eligible for Lifeline program benefits until five years after entry in the United States as a qualified alien. The Commission seeks comments on the best way to determine whether five years have passed since a qualified alien's entry into the United States. Would resources from the Systematic Alien Verification for Entitlements (SAVE) program assist with these verifications? Are there other methods that could be used to confirm whether five years have passed since entry as a qualified alien into the United States?

The Commission also seeks comments on whether its tentative conclusion that the Lifeline benefit is a Federal public benefit under the PRWORA implicates other existing statutory or regulatory obligations. For example, would such a holding suggest other statutory or regulatory obligations rest with the Commission, program providers, or Lifeline beneficiaries once Lifeline is determined to be a Federal public benefit? Similarly, the Commission asks the same question to the extent that it determines the Lifeline benefit is a “means-tested public benefit” under the PRWORA. Do Lifeline program eligibility requirements sufficiently account for spouse or immigration sponsor income and resources as required for “means-tested public benefits” for qualified aliens under the PRWORA? Would restrictions under the PRWORA apply only to the Lifeline applicant, or would they also apply to a benefit qualifying person, that is, a dependent whose enrollment in a government assistance program makes the applicant's household eligible for the Lifeline program, associated with the applicant?

Finally, the Commission seeks comments on other potential changes regarding who should be eligible for Lifeline program support. Should eligibility for the Lifeline program be otherwise changed? Should the Commission adopt eligibility requirements in line with the Working Families Tax Cut Act's Medicaid eligibility requirements for non-citizens, under which the only non-citizens eligible were certain lawfully admitted permanent residents, certain Cuban and Haitian entrants, or individuals lawfully residing in the U.S. in accordance with the Compact of Free Association? Are there other standards for Lifeline eligibility that the Commission should consider applying?

The Commission seeks comments on additional measures that can be taken to enhance protections to ensure that program participants are qualified to receive Lifeline program discounts, including whether there are resources that can be used to combat waste, fraud and abuse.

The Commission seeks comments on ways to enhance the integrity of the identity verification process for Lifeline program applicants, including potentially collecting the full nine-digit SSN from applicants and ensuring that the Commission takes advantage of all available resources to verify the identity and lawful status of Lifeline program applicants. Verifying an applicant's identity is an integral step to confirming eligibility.

Full Social Security Number Verification. Currently, Lifeline applicants must provide the last four digits of their SSN (or Tribal Identification number, for those who lack a SSN and are a member of a Tribal nation) along with their full name, address, and date of birth for identity verification. The Commission seeks comments on whether to change the verification process to require the full nine digits of applicants' SSNs, rather than only the last four digits. What impact would this change have on the Lifeline program's goals of reducing waste, fraud, and abuse? Is collecting the full SSN necessary for identity verifications? What should be considered when balancing such potential reductions in waste, fraud, and abuse against the increased privacy and security considerations (including any increased security costs) of collecting and protecting full SSNs? Would this change bring Lifeline into greater or lesser alignment with similar programs, including those that can form the basis for eligibility for Lifeline, and what impact would the change have on administrative efficiencies and cross-agency data matching? What other programs require the full SSN? Are there deficiencies in verifying identity based on name, address, date of birth, and last four digits of the SSN that would be cured by collecting the full SSN; are there alternatives to collecting the full SSN that would address those deficiencies that present fewer privacy concerns? For example, should a four digit SSN be collected from all subscribers and a full SSN only be collected if USAC is unable to confirm the applicant's identity with the four digit SSN? Have any other such programs undergone a change from requiring four to nine digits of applicant SSNs, and what lessons can be learned from those transitions? What legal considerations would impact this potential collection of full SSNs? The Federal Information Security Modernization Act (coupled with the specific requirements of NIST 800-53), the E-Government Act of 2002, and related OMB guidance and Executive Orders related to those two acts address processes for protecting highly-sensitive, personally identifiable information such as full SSNs; are there other federal laws or guidance that should be considered in collecting full SSNs? As these laws already apply to the collection and use of partial SSNs, what impact would they have on the collection of a full SSN?

The Commission also seeks comments from Lifeline providers on compliance with this potential collection and enhanced security measures needed to safeguard consumer data. How much time should be provided to carriers to come into compliance with the changed requirement? Would carriers need to collect and store SSNs and if so, why? Should carriers be allowed to enroll subscribers using enrollment representatives' devices? What information or documents are retained by the representative or the marketing company if that means that these entities and persons (who may be unknown to the government) may be left with even more personally identifiable information (PII) of the enrollees? What can the Commission do so that providers and their agents do not retain and illegally use applicants' PII? Are there other ways that full SSNs could be used or checked that would not require carriers to collect and store that information, including some form of a verifier program? What security standards, if any, should the Commission impose on carriers or others collecting full SSNs to ensure SSNs are appropriately protected? In addition, the Commission seeks comments on the impact of this potential change on Lifeline applicants, including whether there are any groups that may be disproportionately affected. What are the costs in terms of applicant privacy and security considerations compared to the current practice of requiring the last four digits of the applicant's SSN? Are there special privacy concerns unique to Lifeline applicants that need to be considered? What might be the impact on customer enrollment in Lifeline due to potential applicant reluctance to provide full SSNs? Are there any additional costs, benefits, or legal issues the Commission should consider before also applying the full SSN requirement, as described, to individuals applying for Tribal Link Up or Lifeline emergency support for survivors of domestic violence? How are these potential concerns weighed against the potential benefits to program integrity and safeguarding public funds?

Resources for Verification of Identity and Lawful Status. To ensure that identity verifications are as thorough as possible, and to ensure that applicants satisfy the FCC's eligibility criteria, the Commission proposes requiring USAC to use the SAVE program to conduct sufficiently thorough identity verifications to ensure that the Lifeline program has the most up to date and valid information on the identity of potential Lifeline subscribers and seeks comment on this approach.

The Commission also seeks comments on other resources available to conduct identity verifications of Lifeline program applicants, including the U.S. Department of Treasury's Do Not Pay system and other available federal government resources. How does the accuracy of identity verifications under federal government resources compare to identity verifications using commercial databases? The Commission seeks comments on the cost-effectiveness of these resources and whether benefits of using them outweigh the potential costs to USF. How would administrative costs to implement these programs compare with costs to use commercial services?

Are there data points other than the applicant's name, address, date of birth and SSN (or Tribal identification number for Tribal applicants that lack an SSN) that should be collected to facilitate identity verifications? Could collecting the alien registration number, arrival/departure record number, or naturalization/citizenship certificate number facilitate identity verifications for certain immigrants?

The Commission proposes changes to enhance the Lifeline program's requirements regarding consumer consent for enrollment and transfers to a different service provider and seeks comment on other ways to protect consumers and prevent fraud during the transfer process.

Consent requirements. The Commission proposes to require secondary verification of a consumer's consent to enroll in the Lifeline program or transfer to a new service provider and seeks comment on other ways that the Commission can protect consumers in the enrollment and transfer processes, such as specifying the methods by which consumers can provide consent. In the Lifeline program, providers are required to obtain consumer consent prior to submitting a subscriber's personal information to the NLAD when enrolling or transferring the subscriber. When enrolling a prospective subscriber, ETCs must provide prospective subscribers with an eligibility certification form that, in part, requires each prospective subscriber to initial his or her acknowledgement of certain certifications. For example, prospective subscribers must certify that they meet the income-based or program-based eligibility criteria for receiving Lifeline, that the subscriber will notify the carrier if for any reason he or she no longer satisfies the criteria for receiving Lifeline, and the subscriber acknowledges that providing false or fraudulent information to receive Lifeline benefits is punishable by law.

The Commission proposes to require a secondary verification of consent, that is, confirmation of consent via a method separate from the application or transfer request, from a consumer before an enrollment or transfer is effectuated. Current rules for enrollment require providers to obtain completed application certification forms from subscribers. Current procedures for benefit transfers require providers to obtain a new, completed application form; review proof of eligibility; and send the subscriber either a paper or electronic consent request. The FCC OIG recommended that the Commission require households to independently verify their new enrollment or transfer requests through an affirmative response to a text or email in the FCC's temporary Affordable Connectivity Program (ACP) and Emergency Broadband Benefit (EBB) program. FCC OIG investigations have shown that too many consumers were enrolled in the Commission's affordability programs without their knowledge or consent and without receiving service. The enrollment of consumers who do not actually receive services wastes limited universal service funds, and a transfer to a new ETC without the consumer's consent violates principles of consumer choice.

The Commission seeks comments on whether the Commission should require households to independently verify their new enrollment and transfer requests through an affirmative response to a text or email. Would secondary verification of consent better protect consumers against enrollments or transfers against their will? What privacy considerations would be germane to requiring secondary verifications of consent?

The Commission also seeks comments on processes for secondary verifications of consent. Should USAC contact the consumer to confirm that the consumer consented to the enrollment or transfer before an enrollment or transfer is effectuated in the NLAD? In the alternative, should the ETC contact the consumer and maintain records of the secondary verification? What safeguards should be established to prevent excessive outreach to consumers about enrollments and transfers? What method(s) should be used for such a verification—text message, email, physical address or another method? What effect would requiring a form of secondary verification have on providers and consumers, including the effect, if any, on survivors of domestic abuse seeking to switch between participating providers? How would a secondary verification requirement impact subscribers who do not yet have a device or stable connection to respond to verification texts or emails? Should such applicants be permitted to provide a secondary verification after their service has been activated?

As to initial consent to enroll or transfer, the Commission seeks comments on whether Commission rules should specify the method by which consumers convey their initial consent to enroll or transfer a consumer. ETCs are currently responsible for obtaining consent for an enrollment or transfer and providing USAC with evidence of the consent upon request. When enrolling a prospective subscriber, ETCs must provide prospective subscribers with an eligibility certification form that, in part, requires each prospective subscriber to initial his or her acknowledgement of certain certifications. For example, prospective subscribers must certify that they meet the income-based or program-based eligibility criteria for receiving Lifeline, that the subscriber will notify the carrier if for any reason he or she no longer satisfies the criteria for receiving Lifeline, and the subscriber acknowledges that providing false or fraudulent information to receive Lifeline benefits is punishable by law. Should the Commission require providers to submit evidence of consumer consent for each transfer transaction to USAC? If so, what evidence would ensure or demonstrate consensual enrollments and transfers? If providers are required to submit evidence of consumer consent for each transfer transaction, what burdens and administrative costs would this present? Is there a way to minimize such burdens— e.g., have providers submit consumer consent data in the NLAD to be reviewed on a sample basis according to certain criteria? How should such submission of evidence take place?

There is currently no standard language used to obtain consent for transfers to a new ETC from a consumer. How can the Commission ensure that it is the enrolled subscribers who provide consent? With the emergence of Artificial Intelligence (AI), how can the Commission better protect the program from new types of identity theft and identity fraud? Would a standardized language requirement better enable the Commission to enforce the consent rules? What are some best practices from other types of federal benefit programs that could be utilized in the Lifeline program to obtain enrollment or transfer consent? Should specific consent be required for changes to devices, telephone numbers, email and residential addresses or other items? Finally, the Commission seeks comments on whether to implement requirements that providers input a consent timestamp in the NLAD when enrolling or transferring a subscriber. Would this enhancement prevent improper consumer transfers by ensuring the most recent consent from the consumer was properly documented? The Commission also seeks comments on best practices for encouraging providers to properly notify consumers of their privacy policies and on how best to handle personal information.

National Verifier eligibility verification expiration. Currently, an applicant that is qualified as eligible by the National Verifier will have 90 days from when they are qualified to enroll with an ETC. The Commission seeks comments on whether to shorten the period for which the qualified eligibility result can be used to enroll with an ETC. Will shortening the period from 90 days help to guard against waste, fraud, and abuse? Are 30 days or 60 days from a qualified result sufficient time for an applicant to enroll with an ETC?

Transfer Prohibitions. The Commission seeks comments on how significant of an issue unwanted transfers are for Lifeline consumers today and whether it is necessary to impose additional restrictions on transfers in the Lifeline program. Currently, under the Commission's Lifeline rules, subscribers are able to transfer their Lifeline-supported service from one ETC to another with few restrictions. To accomplish a benefit transfer, the initiating ETC must obtain the affirmative consent of the subscriber to transfer the Lifeline benefit prior to the initiation of the transfer in the NLAD. When an ETC initiates a transfer in the NLAD, the system automatically transfers the subscriber out of the old ETC's database and into the new ETC's database.

In the event additional restrictions on transfers are warranted, the Commission seeks comments on applying the one transfer per calendar month limitation adopted for the ACP to the Lifeline program. Should the limitation be modified, and if so, what modifications should be made? How would freezing the ability to transfer for a specified period, such as 60 or 90 days after enrollment, limit consumer choice? Are there lessons from the Commission's codification and subsequent elimination of port freezes in Lifeline to be considered? Would eliminating the transfer framework altogether and instead requiring a subscriber who wants to change ETCs to de-enroll and re-apply reduce incidents of transfer issues and/or produce other benefits? The Commission seeks comments on whether transfer-related rules should be applied differently to fixed providers versus mobile providers, and if so, how.

Finally, the Commission seeks comments on number portability issues arising from the benefit transfer process in Lifeline. Are there currently concerns associated with benefit transfers where service providers fail to port subscriber phone numbers to newly identified service providers in a manner consistent with the Commission's rules? Should there be additional requirements or certain penalties for providers that fail to port consumers' numbers in connection with Lifeline service?

Disclosure language. The Commission seeks comments on whether to require ETCs to make additional disclosures to consumers before enrolling or transferring them. Although the Lifeline program does not have extensive disclosure requirements, all materials describing the service must clarify, in easily understood language, that it is a Lifeline service, that Lifeline is a federal assistance program, that the benefits are non-transferable to another individual, that only eligible consumers may enroll, and that the program benefit is limited to one discount per household. The Commission seeks comments on the value of providing new or adjusted disclosures to consumers at the time of enrollment or transfer, as well as the burden, if any, on providers.

The Commission next inquires whether any changes are needed to ensure a workable framework for minimum service standards in the Lifeline program. In the 2016 Lifeline Report and Order (FCC 16-38) published at 81 FR 33026, May 24, 2016, the Commission established Lifeline minimum service standards with the goal of ensuring that the service available to Lifeline subscribers was adequate to meet modern needs. The Commission concluded that creating minimum service standards furthered the Commission's statutory principle of ensuring that low-income Americans have access to quality services, particularly those “subscribed to by a substantial majority of residential customers,” at “just, reasonable, and affordable rates.” The Commission further determined that “[b]ecause technology develops at a rapid pace, any minimum standards [the Commission] set[s] would quickly become outdated without a timely updating mechanism,” and thus established formulas to update these standards on an annual basis. The Commission established minimum service standards and update mechanisms for fixed broadband data usage allowance, fixed broadband speed, mobile broadband data usage allowance, mobile broadband speed, and mobile voice minutes allowance in the 2016 Lifeline Report and Order and instructed WCB to annually publish updated standards on or before July 31, becoming effective on December 1 of that year. The Commission now seeks comments on the minimum service standards and any update mechanisms.

To better inform decisions in this area, the Commission seeks comment on the low-income communications market more broadly and how increased minimum service standards would alter it. Do any existing Lifeline providers offer free-to-the-subscriber service that is more robust than the minimum service standards? Do any existing Lifeline providers offer any other benefits beyond talk, text, and data that meet the minimum service standards? If providers offer additional benefits, are they able to do so on the current subsidy level? What effect could increase minimum service standards have on the market for low-income communications service and on the number of providers who offer Lifeline? What would be the effect if the Commission raised minimum service standards to the point that providers are no longer able to provide service without requiring a payment from customers? How would this affect existing Lifeline subscribers or eligible households who are not enrolled but are considering participating in the program? Should minimum service standards be static or adjusted periodically? Have service providers explored options to support the need for increased usage allowances for Lifeline subscribers who are deaf, hard of hearing, or have a speech disability and rely on video connection for Video Relay Services and point-to-point calls and other bandwidth-intensive accessibility functions? What role, if any, could AI tools play in establishing minimum service standards?

Mobile broadband data capacity. The current mobile broadband usage allowance minimum service standard is 4.5 GB per month. In the 2016 Lifeline Report and Order, the Commission established an initial minimum service standard schedule, setting a 500 MB per month standard beginning on December 1, 2016 that ramped up to 2 GB per month on December 1, 2018 before switching to annual updates determined by formulas and communications market data on December 1, 2019. The rules provided that one formula should be used if broadband data was published in the past 18 months, and another should be used if it was not.

However, minimum service standards based on either of the 2016 Lifeline Report and Order' s annual mobile broadband data usage allowance formulas have never been implemented. Instead, the Commission or WCB issued partial waivers of the Commission's rules on updating the mobile broadband data usage minimum service standard in 2019, 2020, 2021, 2022, 2023, 2024, and 2025 concluding that strict application of the Commission's rules would not have been consistent with the public interest. In each waiver order, it was noted that the automatic formula, if not waived, would produce minimum mobile broadband data capacity amounts larger than the amounts likely contemplated when the 2016 Lifeline Report and Order was adopted and could result in price increases that make Lifeline service unaffordable, even after factoring in Lifeline support, or could otherwise disrupt the low-income broadband market. Using the formula prescribed by the Commission's rules would have “risk[ed] upsetting the careful balance [of service quality and affordability] the Commission struck when establishing the Lifeline minimum service standards in the 2016 Order.” The mobile broadband data capacity standard was increased in 2019 and 2020, at pre-set, more modest amounts than the default level the formula would have set, increasing it to 3 GB rather than 8.75 GB in 2019 and 4.5 GB rather than 11.75 GB in 2020. WCB paused the most recent scheduled mobile data usage allowance update, which would have increased the standard more than sixfold to 29 GB on December 1, 2025, nearly double the average monthly consumption amount of all smartphone users.

The Commission tentatively concludes to revise or eliminate the existing mobile broadband usage allowance update rule. The Delete, Delete, Delete Public Notice (DA 25-219 released March 12, 2025) suggests that rules that have been repeatedly waived or that generate unexpected or highly varied benefit and burden outcomes are rules likely to be ill-suited to their purpose and therefore in need of revision or deletion. The mobile broadband usage allowance update rule meets this standard. Why has the existing mechanism produced results that are so far out of step with actual data usage? How should the Commission update this standard moving forward? How should a new update mechanism operate? Assuming the 4.5 GB minimum service standard for data allowance should be adjusted, what would the ideal standard be when a new formula goes into effect? Should minimum service standards reflect the broadband needs of an individual or the needs of a household, assuming that the household would share the device for mobile broadband use?

The Commission requests comment on a new approach that could be used to adjust the minimum service standard. What formula should the Commission or WCB use to determine the minimum service standards? Should minimum service standards be a static amount or updated at a regular cadence? If the minimum service standards increase, should the standard increase by a set amount or a variable amount based on marketplace and demographic data? For example, should minimum service standards be tied to a measure of mobile data usage like average mobile data usage in the U.S. or should it be tied to some other measure like the federal poverty level or an inflation measure? How are the costs of increased minimum service standards actually borne by providers—do providers actually purchase the capacity necessary to support the maximum allowance for each subscriber, or do they purchase the actual capacity or the estimated capacity needed understanding that some subscribers do not approach the maximum data capacity their plan allows?

The Commission also seeks comments on the data sources to be used to support any updated formula that is used to determine mobile broadband minimum service standards. Should the Commission continue to exclusively rely on the same data sources ( i.e., the U.S. Census and Communications Marketplace Report ) but alter the formulas? What are the third-party data sources that can be used to support a formula for updated minimum service standards? If the Commission chooses to adopt a new formula for predictable increases, how would the timing of publications data sources be considered? Should the Commission use onetime snapshots of the marketplace or data usage to inform minimum service standards? Is there information available on mobile phone plan offerings that the Commission can use? Can commenters provide information on mobile phone plan offerings? How should the Commission utilize any data about available plan offerings to inform its decision on minimum service standards? If the Commission were to use this data in an analysis, how should staff account for differences between plan features like hotspot data, speeds, data thresholds, and congestion throttling? Should the Commission rely on the data it collected on usage and costs from the 2021 Lifeline Marketplace Report, published June 2021 ( https://docs.fcc.gov/public/attachments/DOC-373779A1.pdf ) even though the data collection was limited to nine providers? Should the Commission use data from the Urban Rate Survey or other sources?

The Commission seeks to understand how changes in the minimum service standards may impact the Lifeline marketplace and whether changes in minimum service standards would impact provider participation. How would minimum service standard changes impact provider ability to offer no cost to the consumer plans and at what data usage allowance? If providers that currently offer service at no cost to the consumer were to increase prices, at what price point do low-income Americans choose not to subscribe to Lifeline service?

Mobile broadband speeds. Updates to the mobile broadband speed minimum service standard are subject to WCB discretion, with instructions to alter it only “if the [WCB] determines that it ought to be adjusted after determining that, based on Form 477 data or other relevant sources, the `substantial majority' principle is best satisfied by an adjusted speed standard.” The Commission reasoned in the 2016 Lifeline Report and Order that “the minimum service standards for mobile broadband speeds may not need to be updated as frequently as the mobile data usage allowance standard given the pace at which new mobile technology generations are deployed.” WCB has never updated the standard. The current minimum service standard for mobile services speed is 3G.

The Commission seeks comments on the existing mobile broadband speed minimum service standard and whether it should be revised and whether WCB should retain discretion to increase mobile broadband speed minimum service standards. One argument against making changes at this stage is that current market conditions do not necessarily indicate a need to increase the standard. It is the Commission's understanding that mobile broadband Lifeline subscribers often receive 4G LTE or 5G service and that some providers have phased out providing 3G service entirely, but in some areas, particularly rural ones, 3G remains the fastest mobile service available at any price point. Does this meet the Commission's obligation under section 254(b)(1) and (3) of the Act, which requires the Commission to base policies on ensuring affordable rates and the availability of reasonably comparable services? The Commission seeks comments on these conclusions.

Fixed broadband data. Section 54.408(c)(1)(ii) of the Commission's rules states that the fixed broadband usage allowance minimum service standard shall be the greater of “[a]n amount the Wireline Competition Bureau deems appropriate, based on what a substantial majority of American consumers already subscribe to” or “[t]he minimum standard for data usage allowance for rate-of-return fixed broadband providers set in the Connect America Fund.” The Commission expressed the “belie[f] that 70 percent of consumers constitutes a “substantial majority” in the context of fixed broadband speeds.” WCB has used this appropriateness standard every year this increase mechanism has been in effect and has never waived the increase or used the alternate Connect America Fund standard. This resulted in a 1280 GB per month standard in the most recent adjustment.

In 2016, the year the fixed broadband data usage allowance standard was enacted, 52% of fixed broadband plans allowed for unlimited data. This figure rose to 75% in 2024. While WCB has considerable latitude under the appropriateness standard to set the fixed broadband data usage allowance, it is difficult to argue that the “substantial majority” of consumers does not already or will not soon subscribe to an unlimited data offering. For this reason, the Commission tentatively concludes that it should provide additional clarification regarding revisions to the fixed broadband data usage allowance minimum service standard. While it is not fiscally responsible to have an unlimited fixed broadband usage allowance minimum service standard, are ETCs amenable to providing unlimited fixed broadband data to Lifeline subscribers at an affordable price? What would the price of unlimited fixed broadband data be after the Lifeline benefit is applied? Should an appropriateness standard be retained if it is no longer based on what a “substantial majority” of consumers subscribe to? Would an appropriateness standard that excludes unlimited data from the substantial majority consideration sufficiently improve the formula? If not, what alternate formula should be used to adjust the fixed broadband data allowance minimum service standard? Is the current 1280 GB standard sufficient? Note that even after the Lifeline benefit is applied, many fixed broadband plans require a substantial monthly fee.

Fixed broadband speed. Per Commission rules, WCB sets the fixed broadband speed minimum service standard at the 30th percentile of subscribed broadband speeds. However, if WCB does not publish the minimum service standard on or before July 31, the minimum service standard for the upcoming year will be the greater of the current minimum service standard or the Connect America Fund speed standard for rate-of-return fixed broadband providers (WCB has used the Connect America Fund Broadband Loop Support speed, which is currently 25/3 Mbps). To maintain the minimum service standard at its current level, 25/3 Mbps, after increasing it in 2020, 2019, 2018, and 2017 from the initial 10/1 Mbps standard, WCB has not published a new calculated fixed broadband speed minimum service standard since 2020, instead relying on its ability to rely on the greater of the current standard or the Connect America Fund standard.

The Commission is not inclined to alter the fixed broadband speed minimum service standard or its update mechanism. Fixed broadband subscriptions make up a small percentage of the Lifeline program and already tend to require an end-user fee. Fixed broadband speeds at or above 25/3 Mbps may be unavailable from Lifeline ETCs in some rural areas. The current mechanism allows for flexibility in whether to increase it in light of these factors, while retaining a floor preventing the minimum service standard from falling below the Connect America Fund standard, an important baseline for rural service performance. Raising the standard higher and regularly increasing it could leave large portions of the country without Lifeline service that meets this standard and increase prices to prohibitive rates in areas where qualifying service is available, thus effectively leaving many Lifeline consumers without a viable option for fixed broadband. The Commission seeks comments on these conclusions. The Commission's rules contemplate an exception from the minimum service standards for certain fixed service providers who do not offer any service in an area that meets the Commission's minimum service standards. Should this exception be changed or eliminated, and if so, why and how? Are there ways that the Commission can better understand consumer usage of fixed services supported by the Lifeline program and how these differ from mobile uses? Are there existing resources documenting such usage, or can service providers readily share that information with the Commission?

The Commission seeks comments on whether to maintain support for voice-only services in the Lifeline program and whether changes to the ongoing phase-down of support for voice service are necessary. In the 2016 Lifeline Report and Order, the Commission enacted a rule to gradually phase out Lifeline support for voice-only service. The Commission reasoned that focusing Lifeline on broadband service, which has become more vital to current communications needs than voice service, best fulfills its section 254 “responsibility to be a prudent guardian of the public's resources,” under the Act. The Commission noted, however, that “consumer migration to new technologies is not always uniform, and certain measures to continue addressing the affordability of voice service may be appropriate.”

In accordance with the 2016 Lifeline Report and Order, WCB carried out the first step of the phase-down in Lifeline support for voice-only services on December 1, 2019, when it allowed support to reduce from $9.25 to $7.25. The second step occurred on December 1, 2020, from $7.25 to $5.25. The 2016 Report and Order scheduled a complete phase-out of Lifeline support for voice-only services on December 1, 2021, when support for such services was to be eliminated in most areas. WCB, however, has issued one-year waiver extensions every year since to pause the phase-out of voice-only service. The most recent temporary waiver is currently in effect and ends on December 1, 2026. Reasons for the waivers have included the minority of Lifeline subscribers that continue to subscribe to voice-only services, the heightened reliance on voice service during the COVID-19 pandemic, the existence of alternative low-income broadband benefit programs, the potential harm from subscribers' lack of access to emergency services hotlines, the fact that bundled services may not be fully utilized, and maintaining service until the Commission determines whether to implement Commission report recommendations and deregulatory Commission priorities.

The Commission seeks comments on whether to maintain support for voice-only service at the current $5.25 amount. There are still more than 160,000 subscribers to Lifeline voice-only or bundled plans that do not meet the broadband minimum service standards, though this figure is slowly but regularly decreasing. How vital is voice service to consumers' ability to access public safety resources or to participate in today's society? Does broadband service fulfill all the needs that voice service does? How would ending support for voice-only services affect accessibility for certain individuals with disabilities? Should the Commission continue on the path toward ending Lifeline support for voice-only service, but at a later date? Should the Commission establish a metric that would trigger the phaseout of voice-only support, such as when under a certain percentage of Lifeline subscribers apply their benefit to voice-only service? If so, which metric would be the most reliable method of assessing the need for voice-only services? Can voice-only Lifeline subscribers find alternative, affordable voice-only service? Will these subscribers transition to qualifying bundled plans or stop subscribing to communications service altogether? Would subscribers that switch to bundled plans use their broadband component? How does offering a cheaper alternative to the $9.25 standard broadband support amount affect the contribution factor?

Finally, the Commission seeks comments on ancillary rule or guidance changes to support changes to the existing minimum service standards and their adjustment mechanisms proposed here and by commenters.

The Commission seeks comments on whether changes to the one-per-household rule are necessary or warranted to achieve program goals and minimize waste, fraud, and abuse. Currently the Commission's rules limit Lifeline service to one Lifeline discount per household. However, based on the definition of household, there can be multiple households within a single residence or address if they do not share income and expenses, such as at group living facilities. A household already receiving a Lifeline discount is therefore ineligible to receive an additional Lifeline discount and ETCs must not seek reimbursement for such duplicative discounts. In order to better enforce the one-per-household rule and help prevent duplicative support, the Commission established the National Verifier and the NLAD, which were fully launched and implemented by 2020. In addition, in February 2018, the Commission announced the availability of the Independent Economic Household Worksheet, which subscribers were required to complete beginning on July 1, 2018, certifying compliance with the one-per-household rule in the event a subscriber shared an address with one or more additional Lifeline subscribers. Although these mechanisms help facilitate eligibility determinations in accordance with the one-per-household rule, the ultimate responsibility to ensure compliance with the rule remains with ETCs. In December 2019, the Enforcement Bureau emphasized that “[n]either the NLAD nor the National Verifier creates a `safe harbor' that relieves ETCs of their responsibility for only claiming Lifeline consumers who are actually eligible for the program under the Commission's rules.” Instead, ETCs “remain fully liable if they provide false, misleading, or fraudulent information” and if they provide duplicate Lifeline discounts.

Recently, a commenter noted that ETCs are unable to see how many households are enrolled in Lifeline with other ETCs at a single address. Lifeline rules require ETCs to query the NLAD to determine whether a household is already receiving a Lifeline service. However, the NLAD does not identify for ETCs the number of discounts provided by other ETCs at an address. This shortcoming may, in some instances, make it so an ETC cannot implement a reasonable system for preventing duplicate discounts. The Commission seeks comments on whether USAC should change the functionality of the NLAD to allow any ETC to see the total number of discounts provided (across all ETCs) at a single address. How could USAC prevent providers from using this information inappropriately? Should USAC update this information in real time, each month, at annual recertification, or at some other interval? Should ETCs be required to check for this information only at initial enrollment, each month, at annual recertification, or at some other interval? Should USAC treat addresses it identifies as non-residential differently? If so, how? What, if any, additional information is needed for ETCs to implement a reasonable system for preventing duplicate discounts? What are the costs and benefits of making this information available and requiring ETCs to query the database for it? Would the changes described to the NLAD also require changes to Lifeline rules? What other internal controls could the Commission or USAC adopt to prevent duplicative support? Could AI tools help USAC identity instances of duplicative support?

The Commission also seeks comments on whether to revisit the one-per-household rule. Should the Commission revise its rule to make it a one-per- residence rule? If the Commission moved to a one-per-residence rule, how should instances be handled where more than one household receiving Lifeline benefits currently resides at the same address—for example, should such current Lifeline beneficiaries be allowed to keep their discount, despite the rule change? For new applicants, how should multiple households applying for Lifeline at the same residence be handled—for example, should the Commission provide benefits to the first applicant to enter an approved application into the NLAD? What dispute resolution processes does the Commission need to have in place if such a rule change were made?

Alternatively, should the Commission adopt a cap on the number of households who receive discounts at a particular address (and if so, should this cap differ for non-residential addresses)? Should the Commission make any one-per-residence limit or larger cap on the number of households at an address a rebuttable presumption, and if so, what types of evidence should be considered to rebut that presumption? Should the Commission redefine an independent economic household, and if so, how should it be redefined? Have circumstances changed since the Commission last considered whether to keep the one-per-household rule in 2012? What would be the likely effect of different approaches on the cost of the Lifeline program, its ability to serve low-income individuals and households, and the Universal Service Fund contribution factor? How often have commenters found that subscribers were wrongfully rejected as receiving duplicate discounts? How often do commenters estimate that duplicate Lifeline support has been improperly granted under the current system? Would program integrity and low-income household needs be better served by focusing on tracking usage requirements rather than duplicates? If so, why?

In addition, the Commission proposes to codify the rule, established over a decade ago, that in addition to querying the NLAD for duplicate discounts at a single residence an “ETC must also search its own internal records to ensure that it does not already provide Lifeline-supported service to someone at that residential address.” The Commission proposes codifying the rule in § 54.410(a) of the Commission's rules, because this internal check is one example of a policy and procedure ETCs must implement “for ensuring that their Lifeline subscribers are eligible to receive Lifeline services.” Commission codification of the rule is not intended to suggest that this requirement was not already in force. Nor is the codification intended to suggest that every specific policy and procedure required by Commission rule § 54.410(a) must be explicitly cited in that rule in order to apply to ETCs. The standard for such internal policies and procedures is that they must at least encompass a “reasonable system for preventing duplicates” or other violations of Lifeline rules, under the totality of the circumstances.

The Commission seeks comments on whether to undertake additional changes to optimize Lifeline program processes, including whether the Lifeline program should continue to permit different eligibility verification processes for NLAD opt-out states and whether to streamline the annual reporting forms for ETCs.

The Commission seeks comments on whether to continue to permit the Lifeline program “opt-out” states to utilize their own program integrity processes different from federal processes. When the Commission implemented the NLAD to help prevent consumers from receiving duplicative Lifeline support, it allowed states to opt out of using the NLAD if they had their own systems to check for duplicative Lifeline support that were at least as robust as the NLAD and covered all ETCs operating in the state and their subscribers. After the launch of the National Verifier, WCB elected to allow the National Verifier to rely on state processes to facilitate eligibility determinations in NLAD opt-out states. Although the National Verifier has been deployed in all states and territories, in Lifeline it operates differently in Texas and Oregon, which are “NLAD opt-out” states. In those states, the state public utility commissions, or their administrators, facilitate verification of a consumer's eligibility to participate in Lifeline. With respect to the opt-out states, USAC uses state Lifeline subscriber files to populate the NLAD. In partnership with these states, USAC also samples state eligibility information and documentation to assess whether that state eligibility determinations are made in accordance with Commission rules. In contrast, under the ACP, the Commission did not permit states to opt out of the NLAD or take a modified approach to use of the National Verifier.

The Commission has concerns that the current approach, which allows opt-out states to conduct their own verification processes, creates greater opportunities for waste, fraud, and abuse in the Lifeline program. For example, WCB recently revoked California's opt-out status because, among other things, recent changes to California state law no longer requiring applicants to submit SSNs for verification purposes impaired the efficacy of California's eligibility verification, duplicate detection, and identify theft prevention procedures. More broadly, FCC OIG recently found that providers across opt-out states received nearly $5 million in Lifeline reimbursements for deceased individuals across five years. The Commission seeks comments on whether the Lifeline program should continue to permit different eligibility verification processes for NLAD opt-out states and whether the experience in opt-out states has demonstrated that allowing for alternative systems provides net benefits to states, providers, consumers, and the Lifeline program in general.

The Commission seeks comments on whether states and ETCs have found that state alternatives were more or less efficient or confusing than the federal system. What are some examples or insights that demonstrate the efficiency or inefficiency of state-specific Lifeline verification processes compared to the federal system? In particular, have ETCs working in both NLAD states and opt-out states found it difficult to navigate the different systems or receive accurate and timely reimbursements? Are there benefits to having uniform Lifeline eligibility verification and duplicate checking processes nationwide? Are there any differences in eligibility verification accuracy between the processes in NLAD opt-out states and the typical National Verifier eligibility verification process? Do NLAD opt-out states and states with a modified National Verifier approach that relies on state eligibility determinations adhere to requirements that their processes be as robust as federal processes and that state eligibility determinations meet the objectives of the National Verifier? Would moving to a single administrator system that covers all states address the concerns underlying FCC OIG recommendations for greater coordination between USAC and opt-out states and for opt-out states to maintain databases similar to the Representative Accountability Database? What are the benefits of utilizing state-specific processes for Lifeline eligibility verification compared to the federal National Verifier system? Could those be adopted by the National Verifier? Is the additional administrative complexity associated with coordinating eligibility verification with NLAD opt-out states justified by commensurate benefits, such as streamlining the process of applying for both federal and state benefits in one application? Would moving all processes to the standardized process allow the Commission to make any needed changes to processes on a quicker timeline? If the Commission were to require NLAD opt-out states to use the National Verifier for eligibility checks for Lifeline in the same manner as in other states, how would this affect those opt-out states and how much time should be afforded for the transition? Have there been any lessons learned from the California transition?

How does the consumer experience with the Lifeline application and recertification differ in NLAD opt-out states versus other states? Do commenters have specific consumer feedback or complaints that highlight these differences? If the Commission requires a single federal Lifeline verification system across all states, would service providers be able to integrate federal Lifeline applications with state Lifeline applications to minimize administrative burdens on consumers? What changes would help service providers with this integration? Are there different state documentation practices that benefit consumers while protecting program integrity that should be adopted by the National Verifier, if the Commission were to consider mandating nationwide reliance on the National Verifier for Lifeline? What are other potential impacts on consumers to consider?

The Commission seeks comments on ways to improve program efficiency while also reducing regulatory reporting burdens on ETCs participating in Lifeline, particularly small businesses, while ensuring that the integrity of the program is protected. Several commenters in the Delete, Delete, Delete proceeding have suggested various ways of streamlining FCC Form 481 and FCC Form 555, the two Lifeline program forms that ETCs are required to file annually, including combining the forms, having those (and other) forms' filing deadlines set for the same date, limiting the number of entities to which the forms must be submitted, removing certain filing requirements from the forms, or eliminating the forms outright. ETCs report financial and operations data on the FCC Form 481 and recertification results on the FCC Form 555.

Some commenters raised the possibility of combining all or parts of FCC Form 481 and FCC Form 555, and possibly other FCC forms. The Commission notes that these forms differ (at least currently) in various ways, including who must submit the form (all ETCs or Lifeline-only ETCs), when and to what entities they must be submitted, and what the specific consequences are for failing to submit the form. The Commission seeks comments on whether combining these forms would reduce reporting burdens, how best to combine these forms, whether combining them would create more or less confusion for ETCs, what rules would need to be amended to combine the forms, and a reasonable deadline for combining these forms.

Alternatively, the Commission seeks comments on the costs and benefits of synchronizing the filing deadlines for the FCC Form 481 (currently due annually on July 1) and FCC Form 555 (currently due annually on January 31). Would it be preferable to synchronize filing dates for those two forms (or even additional FCC forms)? Would it be more or less burdensome on ETCs to file many separate (or combined) forms all at once, particularly for those ETCs that are small businesses?

As to commenters' request that the Commission limits the entities to which these forms must be submitted or create a coordinated portal where the FCC, USAC, and other relevant entities can access the filings, the Commission seeks comments on the costs and benefits, including the effect on ease of access to the information and any concerns regarding privacy or confidential information, including how such concerns could be mitigated. In addition, the Commission seeks comments on experiences with One Portal, where some carriers can submit certain portions of FCC Form 481 (which states and other entities cannot access directly) and FCC Form 555 (which states and other entities can access directly).

Commenters in the Delete, Delete, Delete proceeding have suggested revising or eliminating certain reporting requirements. The Commission seeks comments on what, if any, specific reporting requirements should be eliminated in connection with FCC Form 481 and FCC Form 555. For example, the same or similar reporting requirements in FCC Form 481's High-Cost portion were previously eliminated: (1) network outage reporting, (2) complaint reporting, and (3) certification of compliance with service quality standards and consumer protection rules. The Commission seeks comments on whether to eliminate these and other requirements in the Lifeline portion of FCC Form 481, including: (1) certification of compliance with Lifeline rules regarding applicable minimum service standards, (2) certification that the carrier is able to function in emergency situations in compliance with Lifeline rules, and (3) descriptions of the terms and conditions of voice telephony service plans offered to Lifeline subscribers. Similarly, the Commission seeks comments on whether to amend or eliminate any of the recertification-related data captured on FCC Form 555 and whether certifications should continue to be made by a corporate officer of the ETC.

For each of these requirements, the Commission seeks comments on the costs and benefits of requiring such information be reported on the annual forms, especially for information that may be collected elsewhere ( e.g., the Commission's consumer complaint system and outage reporting system). If commenters believe this information should still be collected from ETCs, the Commission request specific recommendations on how to revise the requirements to make the data more useful for individual and aggregate analysis. The Commission also seeks comments on whether commenters have specific revisions to the questions, as they exist on the current forms, to make them clearer or less burdensome.

Finally, the Commission seeks comments on other ways to amend forms or USAC practices to improve processes or promote integrity. For example, should corporate officers submitting reimbursement requests be required to certify compliance with specific key program rules, rather than with all rules? With respect to non-compliance in Lifeline generally and the changes proposed in the NPRM, what additional information, if any, should USAC or the Commission provide in its notices of non-compliance or debt demand letters to carriers? Are there changes the Commission can make to further ensure that Lifeline carriers are notified of the basis for recovery, and are able to respond appropriately?

The Commission examines whether changes are needed to the conditions placed on non-facilities-based ETCs to participate in the Lifeline program under the Commission's grant of forbearance from the statute's “own facilities” requirement. The Commission also seeks comments on how to improve program integrity related to non-facilities-based ETCs and inquire about potential amendments to the standards and processes for compliance plans that are needed for an ETC to receive forbearance from the Act.

The “own facilities” requirement of section 214(e)(1)(A) of the Act mandates that ETCs receiving USF support must provide the supported services, e.g., voice or broadband, either wholly or partly through use of their own facilities, and not be a pure reseller of another carrier's services. In the 2012 Lifeline Report and Order (FCC 12-11) published at 77 FR 12952, March 2, 2012, the Commission granted blanket forbearance from the own facilities requirement subject to certain conditions, finding that the use of the ETC's own facilities in providing Lifeline-supported service was not necessary to ensure just and reasonable rates or to protect the public interest, and that forbearance was in the public interest as long as certain conditions were met. Carriers were required to comply with all 911 and enhanced 911 service obligations. They also were required to submit and receive approval from WCB for a compliance plan including certain required information concerning how the carrier will comply with all Lifeline program service requirements and program integrity obligations.

Some program integrity concerns that have plagued the Lifeline program in recent years disproportionately involve certain non-facilities-based ETCs that operate under the Commission's grant of forbearance, including Q Link Wireless, American Broadband, TracFone Wireless, and Total Call Mobile, to name several examples. Of the examples listed, Q Link Wireless committed the most egregious program integrity violations. Q Link and its owner, Issa Asad, were charged with conspiring to knowingly submit and causing to be submitted false and fraudulent claims to the Lifeline program for customers who were not using Lifeline-supported services consistent with FCC usage regulations, including customers who never activated their supported services. On October 15, 2024, Q Link and Issa Asad pled guilty to several offenses involving their Lifeline misconduct including theft of government funds and defrauding the United States. Q Link and Issa Asad agreed to pay more than $110 million to resolve criminal charges and civil claims arising under the False Claims Act related to these violations. On July 24, 2025, Asad received a sentence of 60 months' imprisonment. In light of this history, the Commission seeks comments on changes to the conditions placed on non-facilities-based ETCs subject to forbearance that would promote Lifeline program integrity.

Compliance Plan Requirements. The Commission seeks comments on what, if any, changes to current compliance plan requirements may be necessary. At a minimum, Lifeline compliance plans currently must include: (1) information about the carrier and the Lifeline plans it intends to offer, including detailed information demonstrating that the carrier is financially and technically capable of providing the supported Lifeline service in compliance with the Commission's rules; (2) detailed information, including geographic locations, of the carrier's current service offerings, the terms and conditions of each Lifeline service plan offering, and all other certifications required under § 54.202 of the Commission's rules; (3) a detailed explanation of how the carrier will comply with the Commission's rules relating to the determination of subscriber eligibility for Lifeline services; (4) a detailed explanation of how the carrier will comply with the forbearance conditions relating to public safety and 911/E-911 access; (5) a detailed explanation of how the carrier will comply with the Commission's marketing and disclosure requirements for participation in Lifeline; and (6) a detailed explanation of the carrier's procedures and efforts to prevent program integrity issues in connection with Lifeline funds.

Are there additional data points, fields or explanations that compliance plans should capture? Should compliance plans include descriptions of the company's corporate structure? If so, should the structure also identify and describe any parent companies, affiliates, or subsidiaries? If an applicant is a subsidiary of a parent company, should the applicant include information about how resources, operating infrastructure, and other support may be shared with the parent company to support providing service to Lifeline recipients? How should this information be included in an application without disclosing unnecessary confidential information of the parent company? Should compliance plans identify any unaffiliated third-party companies that will be used to assist the Lifeline program applicant with providing Lifeline program services to consumers and provide an explanation of the third-party's role in those efforts? Should compliance plans identify any resale wholesalers the ETC will use to obtain facilities-based services? Should the compliance plan include copies of such contracts? Should Lifeline-only ETCs be required to update any changes to those arrangements? Are there restrictions that should be placed on such arrangements? Should compliance plan corporate structure descriptions report ownership by any foreign persons or foreign entities? Should corporate ownership by a foreign person or entity seeking approval of a new compliance plan require separate review by U.S. national security agencies before approval can be granted? Should review of compliance plans include assessing whether the entities or their equipment are included on the list of communications equipment and services (“covered list”) that are deemed to pose an unacceptable risk to United States national security or the security and safety of United States persons? Should compliance plans identify corporate officers and their relevant experience? Should compliance plans identify top level management and explain their experience in providing telecommunications or related services to consumers? Should companies be required to have compliance officers, and if so, should compliance officers be required to certify that the company complies with its Lifeline program obligations? Should providers be required to identify the procedures they will use to prepare and certify claims for reimbursement? If not, why? Should they require disclosure of all instances in which the company or its senior officers have been (1) involved or charged with criminal wrongdoing, or actions giving rise to criminal wrongdoing, (2) subject to investigations into possible violations of the False Claims Act or other similar laws, and debt collection efforts by state or federal agencies, or (3) engaged in waste, fraud, or abuse of federal funding? Should compliance plans explain how ETCs will monitor their agents who enroll subscribers on their behalf? Should compliance plans require ETCs to explain the steps they will take to ensure that agents hired by contractors to enroll subscribers on their behalf will be trained and their activities be monitored? Should marketing companies be required to report to the ETCs they work for when an agent they employ is barred from RAD? Audits and program integrity reviews conducted by USAC have revealed many compliance problems in the Lifeline program. Should Lifeline program rules or compliance plans require an annual audit to evaluate rule compliance? Should Lifeline compliance plans require that ETCs disclose allegations or evidence of waste, fraud, and abuse?

For a compliance plan to be approved, the ETC must demonstrate that it is financially and technically capable of operating in the Lifeline program. Among the relevant financial and technical capability considerations are whether the applicant previously offered “services to non-Lifeline consumers, how long it has been in business, whether the applicant intends to rely exclusively on USF disbursements to operate, whether the applicant receives or will receive revenue from other sources, and whether it has been subject to enforcement actions or ETC revocation proceedings in any state.” What other information should be required to demonstrate the provider is a bona fide telecommunications provider? Should Lifeline compliance plans include audited, or if not available, unaudited financial statements, and if so, how many years of past financial statements should be included? Should applicants be required to provide information about other significant financial resources or transactions that the companies would use to support, or are material to, their participation in the Lifeline program? What is the appropriate scope of financial resource information that should be reported? For example, should this include advertisement revenue, revenue generated from selling customer information, etc., or should the required information be limited to financial ownership? Should compliance plans include information about any non-Lifeline communications service revenue that could be used to support operations for the services provided to Lifeline subscribers, and should this information include data about other revenue sources not tied to providing communications services but that might support the Lifeline ETC in its overall operations? Financial ratios are commonly used to measure a company's financial health. For example, the times interest earned (TIE) ratio measures a company's ability to meet its interest obligations using its operating earnings. The TIE ratio is calculated by dividing earnings before interest and taxes (or EBIT) by total interest expense. Should the Commission require the ETC to demonstrate financial health using the TIE ratio and/or other financial ratios? If so, what ratio or ratios should be required and what is an acceptable value for each such ratio? Should the Lifeline-only ETC and the Lifeline compliance plan requirement be formally incorporated into the codified rules? Should a providers' manuals and processes of policies and procedures that they provide to their employees and agents be attached as appendices to the compliance plan? Should compliance plans include subscriber counts, and if so, how many years of past data should be submitted? If an approved ETC is submitting an amendment of its compliance plan for approval, should the amended compliance plan contain recent or current subscriber counts, and if so, should it include a breakdown of the number of Lifeline subscribers and non-Lifeline program subscribers? Should compliance plans include a discussion of the databases and transactional processing systems that applicants will use, for example, for enrolling or billing Lifeline consumers? Should compliance plans include measures the service provider is taking and will take to comply with Lifeline program rules, including how it will track usage and other program requirements? Should a discussion of such databases and transactional processing systems discuss how fraud by agents, third party companies involved in assisting customers, and others with access to the systems will be prevented with respect to enrollment and transfers-in? Should this requested information be required for all third-party activities or limited to specific activities such as customer outreach services? Should compliance plans include a detailed explanation of the company's Lifeline program compliance training and other internal controls? Should ETCs be mandated to provide employees with compliance training on Lifeline program rules and other internal controls? Should there be certain minimum training requirements, and if so, what should those minimum requirements be? Should compliance plans include consumer protection plans such as a porting guidance script to be used for consumers in the event that an ETC fails to respond? What other financial and technical capability information should be included in compliance plans?

The Commission seeks comments on what changes, if any, should be made to the Lifeline compliance plan requirements beyond those discussed above. Are there changes to the requirements that should be made that will result in consistency and efficiencies in WCB's review and processing of compliance plans? Are there current regulatory processes at the Commission that WCB should leverage to assist in such reviews such as seeking public comment on submitted compliance plans?

Are there certain conditions that should be attached to compliance plans, once approved, that would result in automatic termination of the compliance plan if the condition is violated? The Commission seeks comments on what the conditions should be for terminating a Lifeline compliance plan. Should Lifeline compliance plans terminate when ETCs are found guilty of committing fraud or other misconduct in the Lifeline program? Should compliance plans terminate when ETCs change corporate ownership or control without notifying the Commission and receiving approval of an updated compliance plan? Or should ETCs be permitted to restart participation in the Lifeline program and continue under their previously approved compliance plan if they establish to the Commission's satisfaction that they have returned to their prior corporate structure and control? Under what circumstances should Lifeline compliance plans terminate? Should compliance plans have an expiration date at which time they must be re-submitted and re-approved? If so, how long should that period be? How often should WCB review approved compliance plans? Should all compliance plan amendments require WCB approval? Which compliance plans amendments should require WCB approval? Should providers be required to submit compliance plans annually or at some other interval? Or alternatively, should providers be required to update their compliance plans as circumstances change, e.g., if they offer a new Lifeline plan or if they have an inordinate number of non-usage de-enrollments? How would re-approval work logistically? Should the frequency of compliance plan submissions be based on the number of subscribers that a provider has? The Commission seeks comments on the cost and benefits of more frequent compliance plan submission for providers, USAC, and the Commission. Are there ways that the reporting burden can be reduced while still collecting the necessary information? Finally, how often should the Commission require providers to submit updated compliance plans? Should a provider be allowed time to revise and resubmit a compliance plan if updates are required and the resubmitted compliance plan was deficient?

Letters of Credit. The Commission seeks comments on whether requiring non-facilities-based ETCs to obtain letters of credit as required by carriers in the Commission's USF High Cost programs would promote program integrity and ensure continuity of service for subscribers in the event their ETC faces significant recoveries due to violations of program rules. Since 2011, the Commission has required recipients of High Cost program support authorized through a competitive process to obtain letters of credit as a financial guarantee that the service provider has access to the necessary funds to complete the network buildout as committed in their winning bid. Non-facilities-based ETCs face minimal capital expenditures because they do not deploy their own networks, but many may be paying more in operating expenses than facilities-based carriers because they lease network capacity. Adopting a letter of credit requirement for the Lifeline program would ensure that ETCs can reimburse the USF for recovered funds or pay fines due to program rule violations, and allow the ETC to use ongoing USF support to continue paying network leases to wholesalers to maintain continuity of service for subscribers. Would requiring letters of credit from non-facilities based providers seeking to enter the Lifeline program ensure continuity of service in these circumstances? What would be the advantages and disadvantages of requiring non-facilities-based ETCs to obtain letters of credit? If the Commission adopts a letter of credit requirement, should it apply to all non-facilities-based ETCs currently operating under approved compliance plans, or just those whose compliance plans will be granted in the future? If the Commission were to require letters of credit, under what circumstances should the Commission draw on the letters of credit ( e.g., compliance plan violations, findings of improper payments, unpaid notices of apparent liability or forfeiture orders)? Relatedly, what documentation should be required for the Commission to draw on the letters of credit?

The Commission also seeks comments on the standards for letters of credit, including the value of the letter of credit and standards for the issuing bank the Commission should adopt if it requires letters of credit for non-facilities-based ETCs. High Cost support recipients, for example, in the Rural Digital Opportunity Fund (RDOF), are required to maintain letters of credit that increase in value on an annual basis, but may reduce the value of their letters of credit upon certification that they have met certain deployment obligations. How should the Commission determine the value of a letter of credit in the Lifeline program? Should it be based on subscriber count, or other factors? Should the value be higher than the proceeds the carrier would receive from the expected number of Lifeline subscribers that the carrier plans to serve plus an additional percentage? Most relevant to the Commission's inquiry concerning potential changes to Lifeline program requirements, the current standards for High Cost mechanisms that require letters of credit require that the entity issuing the letter must be a United States bank insured by the Federal Deposit Insurance Corporation (FDIC) that meets the criteria to be considered “well capitalized” as determined by the FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency (OCC). Each agency has codified nearly identical criteria to determine a bank's capitalization status and whether it is “well capitalized.” For a bank to be well capitalized, the regulations also require a confirmation from the bank that it is not subject to certain regulatory actions from its supervising agency. What should the standards for the bank issuing the letter of credit be? Should the Commission adopt the letter of credit standards noted in this paragraph for use by the Lifeline program? Should the Commission permit only U.S. banks to issue letters of credit? Should the Commission require that the issuing bank be insured by the FDIC? Should the Commission require the issuing bank to have at least a certain credit rating? What should the Commission require the issuing bank's credit rating to be? Would alternative financial instruments such as a surety bond or performance bond achieve the same goals to ensure program integrity?

Revocation of Compliance Plans. The Commission seeks comments on the instances in which a compliance plan should be revoked. If an approved entity receives an unfavorable outcome in an enforcement action, e.g., a forfeiture order, should that result in revocation of WCB's approval of the entity's Lifeline compliance plan? What other situations should result in the revocation of a non-facilities-based ETC's Lifeline program compliance plan? Would material deviation from an approved compliance plan merit revocation? Should such consequences be determined on a case-by-case basis, as the particular violation warrants? For an ETC that has already received approval of its compliance plan, but a change in circumstances warrants submission and approval of an updated compliance plan, e.g., due to a change in corporate ownership or control, should the provider's participation in the Lifeline program be immediately revoked if it fails to submit an updated compliance plan or an updated compliance plan is not approved? Is revocation of a compliance plan subject to the Administrative Procedure Act's (APA) notice requirements for revocation of a license? Noting that the APA notice requirements are subject to exceptions “in cases of willfulness or those in which public health, interest, or safety requires otherwise,” if those requirements apply, in what circumstances would those exceptions apply? In the event that WCB revokes a non-facilities-based ETC's compliance plan, the Commission would want to ensure the continuity of service for Lifeline subscribers served by that carrier. Should the Commission develop rules or processes for moving subscribers of an ETC with a revoked compliance plan to another ETC? How should the Commission determine which ETC should serve those subscribers or otherwise determine the best way for those subscribers to continue to receive service through the provider of their choosing? In these circumstances, how could the Commission ensure that the ETC whose compliance plan has been revoked complies with the Commission's number portability requirements?

ETCs are permitted to offer Lifeline service without assessing and collecting a monthly fee, but must adhere to certain specified usage requirements. ETCs that offer Lifeline services where they assess and collect a monthly fee currently are not required to monitor usage for subscribers on such plans. However, the Commission has identified several instances in which ETCs may be attempting to evade the usage requirement by offering plans with billing arrangements structured to appear compliant with § 54.407(c) of the Commission's rules, but that may not be. To prevent attempts to evade usage requirements and to minimize waste, fraud, and abuse in the program, the Commission proposes to amend its rules to require usage tracking and non-usage de-enrollment for all Lifeline service plans regardless of whether a monthly fee is assessed and collected. The Commission anticipates that this action would further encourage ETCs to stop offering existing plans structured to circumvent the Commission's usage rule from the market, eliminate future attempts to create novel, but ultimately non-compliant billing arrangements, and require more transparency and accountability from those ETCs that use plans currently meeting the “assess and collect” standard.

Section 54.407(c) of the Commission's rules requires ETCs that do not “assess and collect a monthly fee from [their] subscribers” to de-enroll subscribers that have not used their Lifeline service within the last 30 days, plus a 15-day cure period. Lifeline subscribers are deemed to have “used” their service if they have completed an outbound call; used data; purchased minutes or data from their participating provider; answered an incoming call from anyone who is not their provider or provider's representative; responded to direct contact from their provider confirming intent to receive Lifeline service; or sent a text message. Providers are responsible for tracking subscriber usage and retaining appropriate usage documentation to demonstrate compliance with the usage requirements. ETCs that do assess and collect monthly fees from their subscribers are not currently required to track usage or de-enroll their subscribers for non-usage.

The Commission established this Lifeline usage rule in the 2012 Lifeline Report and Order. The purpose of the rule was to “reduce waste and inefficiencies in the Lifeline program by eliminating support for subscribers who are not using the service and reducing any incentives ETCs may have to continue to report line counts for subscribers that have discontinued their service.” The Commission stated that the usage rule applies only to “services for which subscribers do not receive monthly bills and do not have any regular billing relationship with the ETC” and thus “do not have regular contact with the ETC that would provide a reasonable opportunity to ascertain a continued desire to continue to receive Lifeline benefits.” The Commission in its 2016 Lifeline Report and Order “emphasize[d] that only if a carrier bills on a monthly basis and collects or makes a good faith effort to collect any money owned within a reasonable amount of time will the carrier not be subject to the non-usage requirements.” The Commission in 2012 declined to extend the usage rule to plans that meet the rule's assess and collect standard, stating that plans subject to monthly assessment and collection “do not present the same risk of inactivity as subscribers of pre-paid services” because there is financial incentive for the consumer not to continue subscribing to Lifeline service it does not use or intend to use.

As mentioned, some Lifeline providers offered paid plans that appear structured to conceal the fact they lacked a regular billing relationship between ETC and subscriber and monthly assessment and collection. One type of plan required subscribers to pay an upfront annual fee. The ETC would then decrement one-twelfth of this lump sum monthly to provide the appearance of a monthly assessment and collection and avoid the need to comply with usage requirements. Under such plans, subscribers are not regularly billed and collection of a fee occurs annually, with the only monthly accounting activity being a funding transfer between the ETC's own accounts. In a recent response to this activity, WCB released a Public Notice in 2024 clarifying that “[i]f an ETC assesses and collects an end-user fee but does not do so on a monthly basis, the usage requirement applies to that subscriber. A one-time fee or a fee collected from the subscriber annually and decremented on a monthly basis does not satisfy the rule's requirement to assess and collect a monthly fee.”

A few other ETCs have begun offering consumer payment plans using accounts held by the provider, sometimes known as “digital wallets.” Under these plans, upon enrollment, subscribers are required to deposit funds into a refundable digital wallet account that is largely controlled by the ETC, with some or limited engagement by the subscriber.

The Commission tentatively concludes that the usage tracking requirements currently codified in § 54.407 (c)(1) through (2) of the Commission's rules should apply to all Lifeline service plans, rather than only those that do not require the assessment and collection of a monthly fee. Despite a rule, implementing order, and follow-on guidance requiring usage tracking and de-enrollment on plans for which ETC and subscriber do not have a regular billing relationship that includes the ETC both assessing and collecting a fee from the subscriber on a monthly basis, some ETCs remain non-compliant and have even adopted more complex plans that purport to, but do not actually, satisfy the Commission's billing standard. This effort seems to be in furtherance of avoiding the Lifeline program requirement to track usage and de-enroll for non-usage. The Commission believes that applying a blanket standard is necessary to ensure program integrity and will discourage ETCs from creating new plans that attempt to evade usage requirements, the terms of which may be inscrutable to consumers. Requiring ETCs to preserve usage data in all circumstances will provide transparency into Lifeline subscriber usage overall and enhance the ability of the Commission and USAC to recover for non-usage. In addition, even with plans where a monthly fee is assessed and collected, a basic showing of usage will ensure that scarce USF dollars are going where they are truly needed. The Commission seeks comments on this tentative conclusion.

The Commission seeks comments on any alternative method of ensuring that ETCs properly comply with the Commission's usage requirements and any other ways to further the underlying policy goal of preventing disbursement of USF support to Lifeline services that go unused? Would requiring ETCs to seek Commission approval of each new service plan, including billing and collection processes, before they can offer it to Lifeline subscribers prevent usage rule non-compliance? Would there be any burdens or barriers that the Commission and USAC would encounter in administering these types of approvals? What would the scope of such review be? Would it implicate privacy or confidential business practice considerations? How much would it delay new offerings from coming to market? Would it inhibit novel, compliant offerings? Are there conditions under which a prepayment-based plan is equivalent to debiting a customer's credit card on file? What level of customer engagement is sufficient to meet the “assess and collect” standard ( e.g., monthly opt-in versus opt-out)? What changes to the Commission's rules would establish clear parameters for such plans and ensure support is not wasted on service not needed by a qualifying low-income household?

The Commission also tentatively concludes that applying the usage rule to all Lifeline plans would reduce inactivity, and help to curtail waste of limited USF dollars. In the 2012 Lifeline Report and Order, the Commission stated that due to the lessened risk of inactivity regularly billed plans pose, applying usage tracking to them would not be worth the corresponding administrative burdens, though it recognized that this policy may result in the Lifeline program subsidizing some service plans that are not being used. The Commission now wishes to reexamine this calculus. The Commission is currently engaging with stakeholders on its wide-ranging Delete, Delete, Delete proceeding, which aims to overhaul Commission rules to spur communications investment, expansion, and innovation. The Public Notice launching the proceeding explains that the Commission has “ `a correlative duty to evaluate its policies over time to ascertain whether they work—that is, whether they actually produce the benefits the Commission originally predicted they would.' ” Has applying the usage rule only to plans that do not require the assessment and collection of a monthly fee adequately eliminated waste in the Lifeline program? Should subscribers be permitted to receive monthly Lifeline support if they do not use their service just because they pay for a portion of it? How prevalent are these situations? What benefits, if any, do subscribers of subsidized, infrequently used or unused service see? How does subsidizing infrequently used or unused service benefit American society? How could funds that currently support underutilized service be better spent? How burdensome would requiring usage tracking and de-enrollment for non-usage on all Lifeline plans be on USAC, the Commission, and providers? Would requiring usage tracking and non-usage de-enrollment for all plans result in fewer new ETC designation requests or increase ETC designation relinquishment? How would extending the usage rule to all Lifeline plans affect service offerings or participation in Lifeline? Would more providers offer free-to-the-subscriber service if they were required to monitor usage for all plans? One commenter in the Delete, Delete, Delete proceeding advocated for the elimination of the usage rule on the ground of consumer choice because it requires low-income consumers to “face the difficult choice” between no-cost services subject to usage requirements and services not subject to usage requirements that require payment to the ETC. Does the Commission's proposal eliminate these concerns?

The Commission requires all Lifeline providers to comply with the usage rules by certifying their adherence to the usage requirements, under penalty of perjury, when submitting claims. The Commission seeks comments on whether, in addition to certification requirements, the Commission should require providers to demonstrate usage of supported service along with reimbursement claims. What are the benefits and burdens associated with this approach? Should each individual claim include proof of usage or would a sample be sufficient? What are different ways for providers to demonstrate subscriber usage consistent with the rules? What sort of proof should the Commission require if adopting this approach? Would requiring the submission of proof of usage further protect program integrity and help ensure that providers are tracking and monitoring usage by subscribers? Is it practicable for the Commission to rely on usage data submitted as part of the claims to help inform or set the minimum service standards for the program each year? Should providers be required to identify how they monitor compliance with program usage rules? Should providers be required to identify any third-parties that provide information related to their compliance with program usage rules? The Commission seeks comments on the privacy concerns associated with requiring submission of detailed usage data along with claim submission. What specific data would be necessary to collect, and how could any submission process be designed to address and mitigate privacy concerns? Are there other methods of ensuring usage the Commission could employ to ensure that limited USF resources are going toward service that is being used by subscribers? What capabilities does the Commission have to enforce compliance?

Commission rules require that providers retain documentation that demonstrates compliance with program requirements. The Commission seeks comments on whether these rules should be modified to identify the methods of tracking usage and the documentation that providers must maintain to comply with its usage rules. While the definitions as to what constitutes usage are simple and uniform, providers use many formats. Can carriers provide recommendations for best-practice processes for usage reporting that should be recommended for mobile broadband providers? Fixed service? For example, should the Commission require providers to maintain original call detail records for calls, text, and data, which are logs that contain records of many events that qualify as usage activity. What are the benefits and burdens associated with such an approach? What other documents could providers retain to prove compliance with the Commission's usage rules? Would defining it as a “formatted collection of information about a chargeable event for use in billing and accounting” be appropriate? What alternative forms of proof should the Commission consider? What records demonstrate the purchase of minutes or data? What records should be sufficient to establish that a subscriber is responding to direct contact from the carrier and confirming that he or she wants to continue receiving Lifeline service? How can the Commission ensure that the records retained are authentic and generated through the subscriber's bona fide activity, and not through automatic data usage by an application?

The Commission tentatively concludes that providers should not track usage through a Commission, USAC, or provider-sponsored phone application due to privacy and practical download concerns. Should the Commission put specifications or restrictions on how the provider collects usage data of Lifeline participants? Should the Commission require the ETCs to submit any usage data to the Commission? And if so, what data would be collected? How could the Commission design such a data collection so that it adhered to the Electronic Communications Privacy Act of 1996? Who would have access to this data? Would location data be collected? Would it collect any communications content, media consumption information, or browsing history? How would the data be protected from unauthorized access and use? What notice would subscribers be provided about the collection and use of their usage data? How could the Commission ensure that the monitoring activity of the app itself would not register as qualifying use? How can ETCs ensure that existing subscribers with currently in use devices download the app? The Commission tentatively concludes to continue to collect certification information about usage data, but invite comment on this proposal.

What corresponding changes, if any, to the usage rules should the Commission make if it applies usage tracking and non-usage de-enrollment to all Lifeline plans? Should the 30-day usage period or 15-day cure period be extended? Would a 30-day opportunity to cure make sense, given the typical length of billing cycles? Why might consumers fail to use their service for 30 days or more? How long would ETCs need to come into compliance with the Commission's proposed change requiring usage tracking on all service plans, regardless of whether a monthly fee is assessed and collected?

What changes should be made to the current activation standard? Should the Commission modify or eliminate the Lifeline service activation requirement in § 54.407(c)(1) of the Commission's rules? Is the current definition of the Lifeline service activation requirement as “whatever means specified by the carrier” so vague as to undermine its ability to combat the waste of claiming service inaccessible or unused by the subscriber? Is the purpose of the Lifeline service activation requirement largely duplicative to the requirement in § 54.401(a) of the Commission's rules that Lifeline must be a service that “provides qualifying low-income consumers with voice telephony service or broadband internet access?” Should the activation requirement be changed to “An eligible telecommunications carrier shall not receive universal service support for a subscriber to such Lifeline service until the subscriber can demonstrate, through action that they undertake, that they have been provided with voice telephony service or broadband internet access though completion of an outbound call, sending a text message or usage of date”? Is there a better approach for establishing activation?

The Commission next seeks comments on whether additional rules or enforcement mechanisms are necessary to ensure that the Lifeline program provides reimbursements only to ETCs that “directly” serve their Lifeline program subscribers. Under section 254(e) of the Act, only carriers designated as ETCs may receive reimbursement for providing Lifeline service. The Commission's rules specify that reimbursement is only made available to an ETC for the “number of actual qualifying low-income customers . . . that the eligible telecommunications carrier serves directly as of the first of the month.” Under the Lifeline rules, direct service is defined as “the provision of service directly to the qualifying low-income consumer,” and Lifeline service is a “non-transferable retail service offering provided directly to qualifying low-income consumers.”

Recently, the Commission has been made aware of certain situations where ETCs have entered into agreements with non-ETCs whereby the ETC allows the non-ETC to offer Lifeline service using the ETC's name. The ETC obtains reimbursement from the Commission for the customers that the non-ETC reports to the ETC, and ultimately the ETC transfers the majority of the reimbursement to the non-ETC. These situations raise questions about whether the ETC is receiving reimbursement despite not directly providing service to the customer, and the non-ETC is providing Lifeline service despite not being an approved Lifeline ETC. The Commission is aware of several such cases occurring as the ACP ended.

Such arrangements may be distinguished from permissible marketing agreements that an ETC may enter into to bring in more customers that the ETC directly serves, or other arrangements to provide services to ETCs such as customer call centers and collection agents. As noted in the 2019 Lifeline Report and Order (FCC 19-11) published at 84 FR 71308, December 27, 2019, date ETCs have entered into marketing agreements with enrollment representatives or sales agents to help ETCs market to and enroll consumers. While there are no prohibitions against ETCs using enrollment representatives, the Commission has placed certain restrictions on such activity, including the establishment of the Representative Accountability Database and prohibitions against commissions, to protect against waste, fraud, and abuse. Should ETCs be required to notify the Commission in advance of entering into agreements with third-parties to market Lifeline services?

The Commission also seeks comments on whether to broaden the definition of “enrollment representative” for Lifeline as done with ACP or go further to address any agents of an ETC, and whether to place additional restrictions on such agents and non-ETCs in their Lifeline related activities and compensation. The Commission seeks comments on whether to adopt any additional rules or other mechanisms to address arrangements in which an ETC receives reimbursement for service it does not directly provide and passes on some of the money to non-ETCs who are impermissibly providing Lifeline service. Currently, if an ETC is found to have violated an applicable Commission rule or order, then the ETC may be subject to recovery of funds and penalties authorized by the Communications Act, including, but not limited to monetary forfeitures. Typically, investigation and sanctions efforts are undertaken by the Enforcement Bureau. Additionally, such individuals may be subject to investigation by FCC OIG and further sanctions from state regulatory entities and the U.S. Department of Justice. And when the violations implicate improper Lifeline disbursements, the Commission seeks recovery of associated funds. Recoveries for violations of Lifeline program rules as well as forfeitures, come from ETCs. Is there also a basis for seeking recovery directly from the non-ETC involved in these relationships?

Should the Commission track every layer of provider marketing from the enrollment representative to the provider? Should the Commission require that every enrollment representative provide their photo along with their ID? Should Commission rules require criminal background checks before an RAD ID is issued? If so, what crimes should disqualify an applicant from the RAD? Should ETCs or USAC be responsible for criminal background checks? How else can the Commission ensure that the agent information in RAD reflects accurate information? RAD currently only requires an email address to register in RAD. Similarly, how can the Commission ensure that an agent listed in NLAD as being linked to an enrollment or transfer is in fact an individual that is interacting with the enrollee? Should the Commission require the geolocation of the agent at the time of enrollment or transfer or subscribers he or she is ostensibly assisting? How should the Commission penalize providers and their enrollment representatives that submit false or non-bona fide information to USAC's information systems including the National Verifier, NLAD and RAD? Should the Commission suspend or debar such providers and their enrollment representatives? Should carriers be continued to allowed API access to the Administrator's databases? Is there an alternative to an API that will continue to allow consumers to enroll while better protecting the program from potential waste, fraud and abuse?

The Commission seeks comments on whether to streamline the existing program rules in light of the establishment of the National Verifier and the sunset of the EBB program and ACP.

National Verifier Updates. The Commission makes several proposals to streamline Lifeline program rules to reflect the functionality of the National Verifier. There are portions of the Commission's rules that pre-date the establishment of the National Verifier and continue to contemplate Lifeline ETCs completing certain activities that USAC, the National Verifier, the NLAD, or state administrators perform. First, the Lifeline rules contemplate that ETCs will contact Lifeline subscribers as part of the annual recertification process and give subscribers 60 days to complete the recertification process. Such outreach now can be done by the National Verifier or state administrators, although providers may voluntarily also encourage their subscribers to respond to recertification efforts. Second, the Lifeline rules currently discuss pathways for eligibility determinations that are no longer available with the full launch of the National Verifier. The Commission seeks comments on updating Lifeline program rules to reflect these improved eligibility determination processes now that the National Verifier has fully launched.

Third, the Commission proposes to revise the rule for de-enrollment under § 54.405(e)(4) of the Commission's rules given that the National Verifier can notify and de-enroll subscribers who fail to recertify their continued eligibility or fail to submit one-per-household recertifications. Fourth, the Commission proposes to update and consolidate § 54.410(b) through (d), (f), (h), and (i) of the Commission's rules, to reflect that the National Verifier and state administrators (rather than ETCs) make the initial determinations of eligibility and annual recertifications, and to update § 54.410(d) of the Commission's rules to reflect the creation of FCC Form 5629, a program application form. Fifth, the Commission proposes to edit § 54.417 of the Commission's rules to reflect that the effective date of the rule was set at February 17, 2016. The Commission seeks comments on whether there are any concerns about updating the language of each of these rules and how to amend that language while avoiding confusion regarding ETCs' continuing compliance obligations.

The Commission seeks comments on whether and how to change additional portions of the rules to reflect streamlined practices. Would the possible confusion and costs of updating rule identifiers ( e.g., eliminating § 54.410(h) of the Commission's rules, which addresses the National Verifier transition, and recodifying the following subsection) outweigh the benefits of having the rules more accurately reflect the current state of the program? Are there any technical changes needed to program rules to correct typographical errors?

Deleting EBB and ACP Rules. As previously noted, the ACP (which succeeded the EBB program) effectively ended June 1, 2024, because funding for the program had been exhausted. As a result, there are no longer subscribers in these programs or a basis to enroll new subscribers. Therefore, the Commission tentatively concludes to delete the EBB program and ACP rules from the Code of Federal Regulations, including rules regarding the Affordable Connectivity Outreach Grant Program. This conclusion is consistent with the Delete, Delete, Delete proceeding's goal to “review [the FCC's] rules to identify and eliminate those that are unnecessary in light of current circumstances.” The Commission's proposal to delete the EBB program and ACP rules is not intended to have any substantive impact on the interpretation and implementation of the rules in the few instances where they serve some on-going function. Specifically, the Commission intends that providers must continue to retain documentation in accordance with the rules, even after they are deleted. Requiring providers to continue complying with the documentation retention rules in place when the program was still operating does not create a burden on providers because it does not force new requirements upon them. Furthermore, deletion of the rules will not result in unfair surprise, as there will be no new providers, applicants, or subscribers in the programs. To help avoid misunderstandings regarding the continued document retention requirements, the Commission proposed an amendment to Lifeline § 54.417 of the Commission's rules to make clear that the EBB program's, ACP's, and Affordable Connectivity Outreach Grant Program's recordkeeping requirements remain in effect even after their deletion. The Commission seeks comments on whether there are any concerns with deleting these rules in their entirety, including any basis for concluding record retention or audit requirements would be undermined by this deletion or that enforcement or recovery actions related to these programs would be affected. How can the Commission ensure that providers to EBB and ACP continue to be able to make downward revisions for the program if they identify past issues with their filings that resulted in improper claims? Is the Commission's proposed amendment to the Lifeline rules sufficient to maintain enforcement of the recordkeeping and audit rules and does the rule's placement in Lifeline create confusion? Are any additional changes to the Commission's rules needed to ensure that ACP providers that only held authorizations to participate in ACP and no other Commission licenses needed in order to pursue recovery, enforcement, or other actions for violations those providers may have committee under the ACP? If commenters raise any such concerns, the Commission asks that they include specific legal support for their conclusions, if any, and any recommendations for how to amend the rules without impacting retention requirements, recovery actions, and enforcement. The Commission also seeks comments on whether there are any other EBB program or ACP rules beyond document retention that continue to serve a purpose and would be undermined by being deleted.

In addition, the Commission seeks comments on deleting the portion of § 54.400(s)(3) of the Commission's rules that allows domestic violence survivors seeking to obtain an emergency Lifeline benefit to prove they are suffering “financial hardship” by using the ACP's alternative verification process under § 54.1806(a)(2) of the Commission's rules to verify a member of the survivor's household received a Federal Pell Grant. The Commission tentatively concludes that this portion of the rule is no longer necessary, because survivors will still be able to show financial hardship through the National Verifier. Moreover, the alternative verification process was a specific approach allowed under the Consolidated Appropriations Act and its unique circumstances amid the COVID-19 pandemic, rather than a process required under the Safe Connections Act, which is the focus of § 54.400(s)(3) of the Commission's rules. The Commission believes it would be unnecessary and administratively burdensome to continue to allow alternative verification processes, or approve new ones, for verifying only one form of eligibility criteria ( i.e., Federal Pell Grants) for only a narrow sub-category of a low-income benefit program ( i.e., survivor Lifeline emergency support). The Commission believes this is particularly true here, because the Lifeline emergency benefit for survivors is time-limited and the eligibility determination for that emergency benefit does not necessarily qualify a subscriber for continued support under Lifeline.

The Commission seeks comments on the benefits and costs of these proposed rule changes. The Commission expects its proposed reforms will affect both low-income consumers and service providers. The Commission seeks comments on both the benefits and costs of each proposed rule change and also the totality of the rule changes proposed. Will the proposed changes lead to more competition and/or better service offerings for consumers? Will consumers face any increased costs or nonmonetary burdens as a result of the proposed rule changes? What are the benefits to service providers of minimizing reporting burdens? How will service providers overall benefit from improved service provider conduct? Will there be any costs to service providers to implement the improved program processes? Will any costs to service providers result in costs to the consumer? To what extent will the proposed rule changes impact USF expenditures?

This document contains proposed new or modified information collection requirements. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and the Office of Management and Budget (OMB) to comment on the information collection requirements contained in this document, as required by the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the Commission seeks specific comments on how to further reduce the information collection burden for small business concerns with fewer than 25 employees.

The Regulatory Flexibility Act of 1980, as amended (RFA), requires that an agency prepare a regulatory flexibility analysis for notice-and-comment rulemaking proceedings, unless the agency certifies that “the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.” Accordingly, the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) concerning the possible impact of potential rule and/or policy changes contained in the NPRM on small entities. The Commission invites the general public, in particular small businesses, to comment on the IRFA. Comments must be filed by the deadlines for comments on the NPRM indicated in the DATES section of this document and must have a separate and distinct heading designating them as responses to the IRFA.

Ex Parte Rules. This proceeding shall be treated as a “permit-but-disclose” proceeding in accordance with the Commission's ex parte rules. Persons making ex parte presentations must file a copy of any written presentation or a memorandum summarizing any oral presentation within two business days after the presentation (unless a different deadline applicable to the Sunshine period applies). Persons making oral ex parte presentations are reminded that memoranda summarizing the presentation must (1) list all persons attending or otherwise participating in the meeting at which the ex parte presentation was made, and (2) summarize all data presented and arguments made during the presentation. If the presentation consisted in whole or in part of the presentation of data or arguments already reflected in the presenter's written comments, memoranda, or other filings in the proceeding, the presenter may provide citations to such data or arguments in his or her prior comments, memoranda, or other filings (specifying the relevant page and/or paragraph numbers where such data or arguments can be found) in lieu of summarizing them in the memorandum. Documents shown or given to Commission staff during ex parte meetings are deemed to be written ex parte presentations and must be filed consistent with Commission rule § 1.1206(b), 47 CFR 1.1206(b). In proceedings governed by Commission rule § 1.49(f) or for which the Commission has made available a method of electronic filing, written ex parte presentations and memoranda summarizing oral ex parte presentations, and all attachments thereto, must be filed through the electronic comment filing system available for that proceeding, and must be filed in their native format ( e.g., .doc, .xml, .ppt, searchable .pdf). Participants in this proceeding should familiarize themselves with the Commission's ex parte rules.

Providing Accountability Through Transparency Act. Consistent with the Providing Accountability Through Transparency Act, Public Law 118-9, a summary of this document will be available on https://www.fcc.gov/proposed-rulemakings.

As required by RFA, the Commission has prepared this IRFA of the policies and rules proposed in the NPRM assessing the possible significant economic impact on a substantial number of small entities. The Commission request written public comments on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments specified in the DATES section of this document. In addition, the NPRM and IRFA (or summaries thereof) will be published in the Federal Register .

The Commission is required by section 254 of the Communications Act of 1934, as amended, to promulgate rules to implement the universal service provisions of section 254. The Lifeline program was implemented in 1985 in the wake of the 1984 divestiture of AT&T. On May 8, 1997, the Commission adopted rules to reform its system of universal service support mechanisms so that universal service is preserved and advanced as markets move toward competition. The Lifeline program is administered by the Universal Service Administrative Company (USAC), the Administrator of the universal service support programs, under Commission direction, although many key attributes of the Lifeline program are currently implemented at the state level, including consumer eligibility, eligible telecommunication carrier (ETC) designations, outreach, and verification. Lifeline support is passed on to the subscriber by the ETC, which provides discounts to eligible households and receives reimbursement from the universal service fund (USF or Fund) for the provision of such discounts.

In the NPRM, the Commission considers ways to promote principled service provider conduct, consumer protection and program integrity enhancements to ensure Lifeline services are actually used to benefit low-income consumers and ways to optimize Lifeline program processes for integrity and efficiency. Refinements to the Lifeline program under consideration include: enhancing verification processes; ensuring Lifeline ETC compliance with all Lifeline program rules; enhancing the enrollment and transfer experience for households; revisiting non-usage rules; improving minimum service standards; ending the voice-only service phase-down; preventing duplicative support; optimizing Lifeline program integrity and efficiency processes; reforming opt-out state requirements; minimizing reporting burdens for ETCs; streamlining Lifeline rule text; and other updates that may be appropriate to make the current Lifeline program's rules reflect how the program currently operates.

The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A “small business concern” is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA. The SBA establishes small business size standards that agencies are required to use when promulgating regulations relating to small businesses; agencies may establish alternative size standards for use in such programs, but must consult and obtain approval from SBA before doing so.

The Commission's actions, over time, may affect small entities that are not easily categorized at present. The Commission therefore describes three broad groups of small entities that could be directly affected by its actions. In general, a small business is an independent business having fewer than 500 employees. These types of small businesses represent 99.9% of all businesses in the United States, which translates to 34.75 million businesses. Next, “small organizations” are not-for-profit enterprises that are independently owned and operated and not dominant their field. While the Commission does not have data regarding the number of non-profits that meet that criteria, over 99 percent of nonprofits have fewer than 500 employees. Finally, “small governmental jurisdictions” are defined as cities, counties, towns, townships, villages, school districts, or special districts with populations of less than fifty thousand. Based on the 2022 U.S. Census of Governments data, the Commission estimates that at least 48,724 out of 90,835 local government jurisdictions have a population of less than 50,000.

The rules proposed in the NPRM will apply to small entities in the industries identified in the chart below by their six-digit North American Industry Classification System (NAICS) codes and corresponding SBA size standard. Based on currently available U.S. Census data regarding the estimated number of small firms in each identified industry, the Commission concludes that the proposed rules will impact a substantial number of small entities. Where available, the Commission also provides additional information regarding the number of potentially affected entities in the industries identified in Table 1— 2022 U.S. Census Bureau Data by NAICS Code, Table 2— Telecommunications Service Provider Data and Table 3— Cable Entities Data.

The RFA directs agencies to describe the economic impact of proposed rules on small entities, as well as projected reporting, recordkeeping and other compliance requirements, including an estimate of the classes of small entities which will be subject to the requirements and the type of professional skills necessary for preparation of the report or record.

The NPRM seeks comment on proposed rules that would improve the Lifeline program by promoting principled service provider conduct, implementing consumer protection and program integrity enhancements to ensure Lifeline services are actually used to benefit low-income consumers and optimizing Lifeline program processes for integrity and efficiency. Small entities that voluntarily choose to participate in the Lifeline program, may face costs associated with new or modified recordkeeping, reporting, and other compliance obligations. Small entities may need to hire professionals to comply with the requirements that may be adopted as a result of the proposals and matters discussed in the NPRM. Compliance costs may include requirements associated with consent collection, de-enrollment, consumer eligibility evaluation, as well as technical and programmatic costs to adjust internal Lifeline databases and compliances practices for covered providers. For example, in the NPRM the Commission inquires about whether the Commission should require service providers to obtain an affirmative response to a text or email to verify consumers' new enrollment and transfer requests and submit this evidence of consumer consent for each transfer transaction to the Universal Service Administrative Company and whether the Commission should require service providers to enter the date and time in the National Lifeline Accountability Database (NLAD) that households provided their enrollment or transfer consent. As another example, the Commission also inquires about whether to modify the Commission's rules to identify the methods of tracking usage and the documentation that providers must maintain to comply with its non-usage rules.

In assessing the cost of compliance for small entities, at this time the Commission cannot quantify the cost of compliance with the potential rule changes that may be adopted. In accordance with the Commission's requests for comments in the NPRM, small entities are encouraged to provide specific information pertaining to the costs, benefits, and impacts of any potential reporting, recordkeeping, or compliance requirements the Commission discusses. The Commission expects the comments received to include information on the costs and benefits, and other pertinent matters that should help us identify and evaluate relevant issues for small entities, including compliance costs and other burdens (as well as countervailing benefits), so that the Commission may develop final rules that minimize such costs and address such issues to the extent possible.

The RFA directs agencies to provide a description of any significant alternatives to the proposed rules that would accomplish the stated objectives of applicable statutes, and minimize any significant economic impact on small entities. The discussion is required to include alternatives such as: “(1) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rule for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such small entities.”

The NPRM seeks comment throughout on the burdens of the proposed rules, and any alternatives, on providers, which includes small providers. Additionally, the NPRM seeks comment on the ways in which program changes to the Lifeline program might impact both consumers and service providers, which includes small providers, participating in the Lifeline program. Further, the NPRM seeks comments on ways to reduce regulatory reporting burdens on ETCs participating in Lifeline, particularly small businesses.

In the NPRM, the Commission seeks comments on adjusting minimum service standards in the low income communications market. Specifically, the NPRM seeks comments on whether small businesses would be disproportionately impacted if minimum service standards were increased and what the impact would be on those small service providers. Further, the Commission seeks comments on ways to reduce reporting burdens on Lifeline ETCs who are small businesses. Annually, ETCs must file FCC Form 481 to report financial and operations data and FCC Form 555 to report recertification results. In the NPRM, the Commission seeks comment on the possibility of combining these two forms and other FCC forms or moving the filing deadlines to the same date and whether it would be more or less burdensome for ETCs that are small businesses to file combined forms or to require multiple forms filed on the same date. The Commission also seeks comments on ways to amend or eliminate certain information that is required on these forms or whether to entirely eliminate the use of certain forms.

The Commission expects to more fully consider the economic impact and alternatives for small entities following the review of comments filed in response to the NPRM, including cost and benefit analyses. Having data on the costs and economic impact of proposals and possible approaches the Commission discusses will allow the Commission to better evaluate options and alternatives to minimize any significant economic impact on small entities that may result from the proposals and approaches, if adopted. The Commission's evaluation of this information will shape the final alternatives it considers to minimize any significant economic impact that may occur on small entities, the final conclusions it reaches and any final rules it promulgates in this proceeding.

None.

Accordingly, it is ordered, pursuant to the authority contained in section 1, 4(i), 4(j), 254, 345, and 403 of the Communications Act of 1934, as amended; 47 U.S.C. 151, 154(i), 154(j), 254, 345, and 403; that the Notice of Proposed Rulemaking is adopted.

It is further ordered that, pursuant to applicable procedures set forth in §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments on the Notice of Proposed Rulemaking on or before May 4, 2026 and reply comments are due on or before June 2, 2026.

For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 54 as follows:

In the beginning of the ADDRESSES section of the proposed rule (March 18, 2026, 91 FR 12972), NMFS used an incorrect link to https://www.regulations.gov. The previous link in the proposed rule was https://www.regulations.gov/docket/NOAA-NMFS-2025-0141 rather than the correct link https://www.regulations.gov/docket/NOAA-NMFS-2025-0801 to the Federal e-Rulemaking Portal. The ADDRESSES section has been corrected in this document.