The US Department of the Treasury has issued a notice of proposed rulemaking and is inviting public comment on how states may govern stablecoins under the GENIUS Act, formally titled the Guiding and Establishing National Innovation for US Stablecoins Act. The proposal outlines the conditions under which state-level frameworks can operate alongside federal oversight. Comments must be submitted within 60 days of the announcement.
Under the proposed rules, states are permitted to regulate stablecoins with a market capitalization below $10 billion, provided their frameworks do not fall short of federal standards. Once an issuer crosses that threshold, regulatory authority shifts exclusively to the federal government. This means the largest stablecoin issuers will be subject solely to federal oversight regardless of where they are based.
The Treasury has identified several baseline requirements that state frameworks must incorporate without exception. These include a 1:1 reserve backing using cash or high-quality cash equivalents, monthly reporting obligations, and full compliance with federal anti-money laundering and sanctions policies. States must also enforce bans on token rehypothecation, the practice of using a single asset to support multiple financial claims simultaneously.
States retain flexibility to go beyond these minimums by applying stricter liquidity, reserve, risk management, enforcement, and administrative rules. However, any state-level deviation must result in outcomes that are at least as protective as the federal framework. The proposal states directly that state regimes must lead to regulatory outcomes no less stringent than those set at the federal level.
US President Donald Trump signed the GENIUS Act into law in July, an event widely regarded as a significant milestone for cryptocurrency regulation in the United States. The legislation established the first comprehensive federal framework for stablecoin oversight and granted states a defined but bounded role in the regulatory structure.
Despite the passage of the GENIUS Act, broader crypto legislation has encountered obstacles in Congress. The CLARITY crypto market structure bill has stalled partly due to unresolved questions about yield-bearing stablecoins and whether issuers may distribute interest payments to token holders. The debate has drawn sharp divisions between the crypto industry and traditional financial institutions.
Coinbase and other crypto firms contend that yield-bearing stablecoins offer savers a meaningful alternative to conventional savings accounts, which typically carry interest rates well below 1%. The banking lobby, however, opposes such products, arguing they could trigger deposit flight and reduce banks’ share of the broader financial market. The outcome of that debate is expected to influence the trajectory of the CLARITY bill.
Originally reported by CoinTelegraph.
