Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—Treasury proposes its first regulation to implement GENIUS Act, (Apr 2, 2026)

By Sherri M. Schroeder, J.D.

The agency proposes implementing section 4(c) of the act by establishing broad-based principles for determining when a state-level regulatory regime is substantially similar to the federal regulatory framework.

The Treasury Department has issued a Notice of Proposed Rulemaking (NPRM) seeking public comment concerning the agency’s implementation of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. Under the GENIUS Act, issuers of payment stablecoin with a consolidated total outstanding issuance of not more than $10 billion generally may opt for a state-level regulatory regime so long as the state-level regulatory regime is substantially similar to the federal regulatory framework. The NPRM proposes to implement section 4(c) of the GENIUS Act by establishing broad-based principles for determining when a state-level regulatory scheme is substantially similar to the federal regulatory framework. It is the first regulation the Treasury has proposed to implement the GENIUS Act. Comments are due June 2, 2026.

The GENIUS Act was enacted on July 18, 2025. It provides a comprehensive framework for the regulation of payment stablecoins, which are defined by the Act as digital assets that are designed to be used as a means of payment or settlement and that the issuer of which is obligated to convert, redeem, or repurchase for a fixed amount of monetary value and represents or creates the reasonable expectation that it will maintain a stable value relative to a fixed amount of monetary value. Under the GENIUS Act, only permitted payment stable coin issuers may issue a payment stablecoin in the U.S., subject to certain exceptions and safe harbors. Under the Act, state-qualified payment stable coin issuers with a consolidated total outstanding issuance of payment stablecoins of no more than $10 billion may opt for state regulation so long as that state-level regulatory regime is substantially similar to the federal regulatory framework and the Stablecoin Certification Review Committee (SCRC) has approved the state-level regime and determined it meets or exceeds the standards and requirements described in section 4(a) of the GENIUS Act.

On Sept. 19, 2025, the Treasury published an Advance Notice of Proposed Rulemaking (ANPRM) to solicit public comment on a wide range of questions relating to the implementation of the GENIUS Act (see Banking and Finance Law Daily, Sept. 18, 2025). In drafting this NPRM, the Treasury considered comments received on the ANPRM that were relevant to the subjects contained in this NPRM.

Proposed § 1521.1 defines key terms. Under the proposed rule, “Federal regulatory framework” would be defined to include both the relevant provisions of the Act as well as a limited scope of interpretations and regulations issued by federal agencies. “State-level regulatory regime” would be defined broadly to provide states with discretion to design their regimes using a mix of legislation, regulation, and enforceable guidance as they deem appropriate.

Proposed § 1521.2 sets out the overall broad-based principles explaining how the statutory provisions of the Act apply to state-qualified payment stablecoin issuers and how state-level regulatory regimes may be considered substantially similar to the federal regulatory framework. The proposed principles reflect the Act’s requirement that the SCRC determine that states “meet or exceed” the core prudential standards and requirements described in the Act while providing more flexibility for states to design their own regimes for other topics covered by the Act, such as applications, licensing, supervision, and enforcement.

According to the NPRM, “the Act provides that States retain relatively more discretion in certain areas, such as capital standards (which we refer to as “State-calibrated requirements”), while setting uniform standards that should be consistent across Federal and State regimes in other areas, such as reserve requirements and anti-money laundering and sanctions program requirements (which we refer to as “uniform requirements”).” Proposed § 1521.3 provides additional broad-based principles for the uniform requirements, and proposed § 1521.4 provides additional broad-based principles for the state-calibrated requirements.

Proposed § 1521.5 identifies broad-based principles for several sections of the Act relevant to state-level regulatory regimes, such as transition to federal oversight, applications and licensing, supervision and enforcement, custody, and insolvency. Proposed § 1521.6 recognizes that states may impose requirements that go beyond what is included in the federal regulatory framework. It also provides that such additional requirements are permissible so long as they do not conflict with the Act and other federal law and do not modify the state-level regulatory regime such that it can no longer be reasonably viewed as substantially similar to the federal regulatory framework. Lastly, proposed § 1521.7 includes a severability provision.

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