The latest draft of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, introduced before a hearing Tuesday, proposes a significant shift in the approach to stablecoin oversight.
This draft aims to create a framework for dividing stablecoin regulation between state and federal authorities, introducing new enforcement and transparency requirements for issuers along the way.
The GENIUS Act is co-sponsored by Senators Bill Hagerty (R-TN), Tim Scott (R-SC), Chairman of the Senate Banking Committee, Kirsten Gillibrand (D-NY), Cynthia Lummis (R-WY), and Angela Alsobrooks (D-MD). It was first introduced by Hagerty in February.
One of the most notable changes in this latest iteration of the bill is the increased threshold for state regulatory authority over stablecoins. Under the new provisions, states would be permitted to oversee stablecoin issuers, in collaboration with federal authorities, for companies with a market cap of up to $10 billion. This shift grants states greater power to regulate a larger segment of the stablecoin market.
Moreover, the updated draft introduces a waiver process that allows larger issuers to remain solely under state supervision if they meet specific criteria. Issuers seeking a waiver must demonstrate strong capital reserves, a proven track record of compliance, and be supervised by what the bill designates as an experienced state regulator.
In addition to regulatory oversight, the GENIUS Act enhances transparency and disclosure mandates for stablecoin issuers. Under the new requirements, issuers will be obligated to publish monthly liquidity reports detailing the composition of their reserves, including the total number of outstanding stablecoins issued.
According to the latest draft, reserves must consist of U.S. currency, demand deposits, Treasuries, or other “approved assets,” ensuring that the value backing stablecoins remains stable and secure. Furthermore, stablecoin issuers will be required to create mechanisms that facilitate compliance with orders to freeze transactions, with the Secretary of the Treasury granted authority to block and prohibit transactions involving stablecoins issued by foreign entities.
Lastly, while previous versions of the bill contained provisions related to enhanced Know Your Customer (KYC) and Anti-Money Laundering (AML) measures, the current draft explicitly designates stablecoin issuers as financial institutions for AML compliance. This categorization necessitates that issuers establish robust compliance programs and conduct due diligence on high-value transactions.
The bill is now set to undergo amendments by the Senate Banking Committee before being referred to the full Senate for debate and a final vote, marking a significant step towards comprehensive regulation of stablecoins in the United States.
