New U.S. Stablecoin Bill Proposes Shared Oversight Between State and Federal Regulators

The revised stablecoin bill increases state involvement in regulation while introducing enhanced transparency and enforcement measures.

Key Points:

• The latest draft of the GENIUS Act restructures stablecoin regulation, distributing oversight between state and federal agencies while adding new transparency and enforcement rules for issuers.
• States will have authority over stablecoin issuers with a market cap of up to $10 billion, while larger issuers can stay under state regulation if they meet certain conditions.
• The revised bill requires issuers to release monthly liquidity reports, comply with transaction freeze orders, and classifies them as financial institutions for anti-money laundering compliance.

The latest draft of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, presented ahead of a Tuesday hearing, outlines a major shift in stablecoin oversight.

The proposal seeks to divide regulatory responsibilities between state and federal authorities while implementing stricter transparency and enforcement measures for stablecoin issuers.

The GENIUS Act is backed by Senators Bill Hagerty (R-TN), Tim Scott (R-SC), Kirsten Gillibrand (D-NY), Cynthia Lummis (R-WY), and Angela Alsobrooks (D-MD), with Hagerty initially introducing the bill in February.

A key update in the latest draft is the expanded role of state regulators in overseeing stablecoin issuers. States would now have the authority to regulate issuers with a market cap of up to $10 billion, working alongside federal agencies. This change grants states greater influence over a larger share of the stablecoin market.

The latest draft of the GENIUS Act introduces a waiver process that allows larger stablecoin issuers to remain under state supervision if they meet specific requirements. To qualify, issuers must demonstrate strong capital reserves, a solid track record, and oversight from an experienced state regulator.

The bill also strengthens transparency and disclosure requirements, mandating that issuers publish monthly liquidity reports detailing the composition of their reserves, including the total number of outstanding stablecoins. Reserves must consist of U.S. currency, demand deposits, Treasuries, or other approved assets.

Additionally, issuers must establish mechanisms to comply with transaction freeze orders, while the Secretary of the Treasury gains authority to block or prohibit stablecoin transactions involving foreign entities.

The updated bill explicitly classifies stablecoin issuers as financial institutions for anti-money laundering (AML) purposes, requiring them to implement compliance programs and conduct due diligence on high-value transactions.

The bill is now under review by the Senate Banking Committee, where amendments may be introduced before it moves to the full Senate for debate and a final vote.