Updates on Proposed Stablecoin Legislation: the GENIUS Act and the STABLE Act
As Congress moves to enact comprehensive stablecoin legislation under the Trump administration, both the Senate and the House of Representatives have updated their respective payment stablecoin bills. Our recent Commentary discusses the prior versions of the bills.
GENIUS Act Updates
As discussed in our recent Commentary, "Stablecoin Legislation: A Stroke of GENIUS?," revisions to the Senate's GENIUS Act signal several new areas of focus, including more cooperation between state and federal regulators and heightened compliance requirements to avoid risk. The bill also updates the definition of a "payment stablecoin" to exclude any such coins backed by other digital assets.
The bill creates a dual framework for stablecoin issuers that issue more than $10 billion in payment stablecoins: (i) joint regulation of depository institution issuers by state and federal regulators; or (ii) state regulation of other issuers where state regulators administer the federal framework.
Notably, the bill now categorizes permitted stablecoin issuers as financial institutions for anti-money laundering purposes under the Bank Secrecy Act, which would require them to establish compliance programs and conduct diligence on certain transactions. But the bill also loosens some restrictions on the use of required reserves.
Moreover, the bill requires the Secretary of the Treasury to: (i) seek to avoid conflicts between foreign and domestic regulation; (ii) facilitate international transactions and interoperability; and (iii) ensure that issuers can effectively comply with lawful orders to block a foreign person's digital assets.
The bill also clarifies that payment stablecoins are neither securities nor commodities, clarifies that payment stablecoin issuers are not investment companies, increases protections for stablecoin holders during insolvency proceedings, and requires relevant regulators to coordinate on issuing implementing regulations within a year of the bill's enactment.
STABLE Act Updates
Discussed during a recent hearing by the House Financial Services Committee, the revised STABLE Act no longer suggests that state regulators issue capital, liquidity, or risk management standards applicable to state stablecoin issuers. However, federal regulators would be required to promulgate cybersecurity requirements and approve foreign depository institutions holding issuers' demand deposits.
The updated bill also details the Treasury-supervised process by which a state regulatory framework could be certified as meeting or exceeding federal regulatory standards. Lastly, the bill permits state regulators to appeal—directly to the U.S. Court of Appeals for the District of Columbia Circuit—determinations by the Secretary of the Treasury that state regulatory regimes do not meet minimum federal standards.
