Senators Push Treasury to Preserve State Role in GENIUS Act Rules
Lawrence Jengar Jun 17, 2026 02:48
Bipartisan senators urge Treasury to ensure states remain key regulators under GENIUS Act, shaping stablecoin frameworks for issuers below $10B market cap.
A bipartisan group of U.S. senators, led by Republican Senator Cynthia Lummis, has called on the Department of the Treasury to ensure states retain a critical role in regulating stablecoin issuers under the GENIUS Act. In a June 16 letter to Treasury Secretary Scott Bessent, the lawmakers stressed that the federal framework should not undermine state authority, particularly for stablecoin issuers with market caps below $10 billion.
The GENIUS Act, signed into law in July 2025, established the first comprehensive federal framework for U.S. dollar–denominated payment stablecoins. It allows smaller issuers—those under the $10 billion threshold—to be regulated at the state level, provided state rules align with the Act’s standards. This provision currently excludes major players like Tether (USDT), USDC, and USDS, all of which exceed the $10 billion cutoff, according to CoinGecko data.
The senators’ letter criticized Treasury’s April proposal for failing to outline clear timelines and procedures for state certification under the Act, creating what they described as “uncertainty for states.” They argued that a more flexible framework is essential, allowing states to develop and certify regulatory regimes as legislative schedules permit. The letter was co-signed by Senators Bill Hagerty, Kevin Cramer, Pete Ricketts (Republicans), and Kirsten Gillibrand, Angela Alsobrooks, Catherine Cortez Masto (Democrats).
“Congress clearly sought to preserve the dual banking system and the crucial role of state banking agencies in supervising this market,” the senators wrote. They emphasized that states must have the ability to adapt their laws over time, especially as demand for stablecoin charters grows.
GENIUS Act’s Regulatory Landscape
The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act aims to reduce systemic risks in the stablecoin market while providing regulatory clarity for issuers. Its key provisions include 1:1 reserve backing requirements in high-quality liquid assets like U.S. dollars or Treasury bills, mandatory redemption at par, and stringent licensing and audit standards. The Act explicitly excludes algorithmic stablecoins from qualifying as payment stablecoins.
Federal regulators, including the FDIC, OCC, and Federal Reserve, are working to finalize implementing rules by the statutory deadline of July 18, 2026. The rules take effect no later than January 18, 2027. The Treasury’s April rule proposal outlined reserve requirements and supervisory standards for stablecoin issuers but left questions about the state certification process unresolved.
In parallel, the FDIC advanced new Bank Secrecy Act and anti-money laundering (BSA/AML) rules for stablecoin issuers earlier this month, signaling a coordinated federal approach to oversight. However, the senators’ letter underscores the need to avoid sidelining states, which have historically served as primary regulators for smaller financial entities.
Market Implications
For stablecoin issuers, particularly those operating below the $10 billion market cap threshold, the outcome of this debate could shape their regulatory and operational strategies. A state-centric approach offers potentially faster approval timelines and lower compliance costs compared to navigating federal oversight. On the flip side, inconsistent state-level rules could create challenges for issuers seeking uniformity across jurisdictions.
Investors and market participants will be closely watching how the Treasury balances federal and state roles before publishing its final rule later this year. The GENIUS Act’s dual regulatory model has been touted as a way to foster innovation while safeguarding financial stability, but its effectiveness will hinge on clear and coordinated implementation.
Public comments on the Treasury’s proposal closed on June 2, and the department is expected to issue final guidelines by mid-July. As the clock ticks toward the 2027 effective date, the pressure is mounting to resolve these regulatory ambiguities.
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