Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—CPAC Group issues policy recommendations to support effective implementation of GENIUS Act, (Jan 16, 2026)

By A. Bryan Gerepka

The group says its recommendations reflect a coherent implementation strategy grounded in the GENIUS Act’s core purpose.

As the Treasury Department undertakes implementation of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS ACT), a critical design question has emerged: whether regulatory enforcement will track the economic substance of stablecoin activity or instead rely on narrow, formalistic distinctions that risk undermining congressional intent? Center for Regulatory Reform (CRF)—the research arm of the Conservative Political Action Conference (CPAC)—in the Jan. 13, 2026, paper titled “STABLECOIN and The Implementation of The GENIUS Act,” urged Treasury to preserve innovation in payment settlement, avoid regulatory overreach, and enforce the clear prohibition on yield-bearing stablecoins as it develops regulations to implement the Act.

Policy Recommendations. The CRF paper recommended that Treasury implement guardrails to ensure that the GENIUS Act translates congressional intent into administrable rules that preserve financial innovation, protect financial stability, and maintain constitutional and market neutrality. According to CRF, its policy recommendations reflect comments gathered from a variety of market participants during the Treasury’s Advance Notice of Proposed Rulemaking comment period, which closed in November 2025. Across the spectrum, most of the commenters want the implementation rules to close the rewards loophole, protect community banks, ensure deposit stability and local access to credit, and provide regulatory clarity and predictability. The CRF recommendations are:

• Enforce the prohibition on yield functionally, not linguistically. The Treasury should clarify that any economic return tied to holding stablecoin balances—whether labeled interest, rewards, cash back, points, rebates, or incentives—constitutes prohibited yield, regardless of the entity offering it.

• Apply the yield prohibition across issuers, affiliates, and intermediaries. Implementation should make explicit that platforms, exchanges, wallets, and affiliated entities may not provide indirect yield mechanisms that replicate the economic effect of interest-bearing stablecoins.

• Adopt bright-line anti-circumvention standards. The Treasury should prohibit structures designed to evade the yield ban through corporate separation, promotional framing, or bundled services that condition benefits on balance retention.

• Affirm stablecoins as payment instruments, not deposit substitutes. Rules should reinforce that compliant stablecoins are settlement tools and may not be marketed, structured, or operated as savings vehicles or return-generating accounts.

• Right-size regulation to function rather than analogy. The Treasury should avoid imposing bank-style capital or prudential regimes on fully reserved payment stablecoins and instead focus oversight on reserve integrity, custody segregation, redemption reliability, and transparent attestation.

• Define clear reserve and redemption requirements. Implementation should specify acceptable reserve assets, require legal segregation of reserves from operating capital, and mandate timely, unconditional redemption at par.

• Maintain proportional, risk-based AML enforcement. The Treasury should target anti-money laundering (AML) oversight at gateways, custodial services, and fiat conversion points, rather than imposing blanket surveillance or technology-based presumptions of risk.

• Reject platform-level exclusion of lawful commerce. Rules should make clear that stablecoin settlement infrastructure may not be used to deny or restrict transactions involving lawful goods or services without explicit statutory authorization.

• Preserve payment neutrality in programmable settlement. Treasury should establish guardrails to ensure that programmability features are not used to embed ideological, political, or discretionary transaction filters into payment rails.

• Provide regulatory clarity early and explicitly. The Treasury should resolve these issues through clear rule text and guidance rather than deferring to case-by-case interpretation, thereby reducing uncertainty and regulatory arbitrage.

• Promote domestic compliance and competitiveness. Implementation should be calibrated to keep compliant stablecoin activity within U.S. jurisdiction, avoiding incentives for offshore migration that would weaken oversight and dollar primacy.

• Commit to ongoing review without mission creep. The Treasury should periodically assess implementation outcomes while resisting pressure to expand the GENIUS framework beyond its statutory scope.

Taken together, these recommendations reflect a coherent implementation strategy grounded in the GENIUS Act’s core purpose, the group stated. They preserve the distinction between payment settlement and financial intermediation, protect community-based credit systems, and ensure that innovation proceeds within clear legal boundaries.

Companies: Center for Regulatory Reform

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