US federal regulators are set to review state regulations of stablecoins to “even out” rules across jurisdictions under the new federal regulatory framework for the sector, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.
Following last month’s enactment of the landmark crypto legislation, the Stablecoin Certification Review, comprised of the US Treasury Secretary and the chairmen of the Federal Reserve and the Federal Deposit Insurance Corporation, is in charge of reviewing state-by-state rules and “establish broad-based principles for determining whether a State-level regulatory regime is substantially similar to the Federal regulatory framework under this Act.”
The requirement aims to level out regulatory approaches between states to make compliance by stablecoin issuers more seamless across jurisdictions, as issuers face a different set of rules and policies depending on each jurisdiction, with some states having a stricter approach to the industry while others have a more welcoming strategy.
Gavin Meyers, a financial services regulatory partner at Pierson Ferdinand LLP, told Bloomberg Law that “It creates a potential for less of a mosaic of state-by-state regulation, which kind of plagues other aspects of the financial industry,” asserting that “eliminating that barrier is a highly beneficial aspect of the committee.”
Rosemary Spaziani, a partner at Gibson Dunn & Crutcher LLP, told the news media outlet that “If 40 states all sign on to what the federal government does, those are going to be pretty simple rubber stamps—they’re going to adopt a model act and incorporate it into their laws,” while “the ones that deviate are probably going to be a bit of a bottleneck.”
Additionally, the companies hoping to enter the stablecoin sector will likely welcome federal oversight to avoid potential compliance issues. Meyers noted that “If you are licensed by whichever state that qualifies under the ‘GENIUS Act,’ that certification is good across the country.”
Among the recommendations, they urged the Committee to strengthen the prohibition on interest payments related to payment stablecoins and to repeal a section of the GENIUS Act that allows uninsured, out-of-state-chartered financial institutions to operate without the host states’ approval, which could complicate regulation.
