US Banking Regulators Set to Tackle States’ Stablecoin Rules (1)

US banking agency leaders will soon have a chance to reshape state regulation of stablecoins under landmark legislation President Donald Trump signed into law.

The Stablecoin Certification Review Committee—led by the Treasury secretary and including the chairmen of the Federal Reserve and the Federal Deposit Insurance Corp.—will have to determine whether disparate state frameworks are “substantially similar” to the federal regime for stablecoin issuers.

The requirement, one of the less-noticed provisions in the “GENIUS Act” (Public Law 119-27) enacted last month, comes as companies including Walmart Inc., Amazon.com Inc., and Western Union Co. eye payment stablecoin products of their own alongside major banks.

“It creates a potential for less of a mosaic of state-by-state regulation, which kind of plagues other aspects of the financial industry,” said Gavin Meyers, a financial services regulatory partner at Pierson Ferdinand LLP. “Eliminating that barrier is a highly beneficial aspect of the committee.”

The Fed and FDIC chiefs will need to reach unanimous agreement with the Treasury secretary to give state jurisdictions the federal government’s blessing on stablecoin oversight.

“There will be some wiggle room in states that have been more favorable to crypto generally, like Wyoming,” Meyers added.

‘Rubber Stamp’ or ‘Bottleneck’

The “GENIUS Act” seeks to streamline an assortment of state-level regulations, tasking the federal committee with screening and recertifying each state regime to align with the statute itself.

Stablecoin issuers currently must contend with varying policies enacted by red and blue states alike.

Wyoming passed its own legislation in 2023 authorizing a state commission to issue stablecoins pegged to the US dollar. The state on Tuesday became the first to launch its own stablecoin, the Frontier Stable Token. Wyoming-domiciled crypto exchange Kraken will be among the first marketplaces to make FRNT available for purchase on the Solana blockchain.

Texas, which released its first stablecoin guidance in 2019, adopted the Money Services Modernization Act in 2023 that aligns closely with a model set forth by the Conference of State Bank Supervisors. Lawmakers in Texas added a provision defining monetary value to include stablecoins pegged to fiat currency, backed by assets held in reserve, and redeemable for fiat from the issuer.

Meanwhile, New York’s existing BitLicense virtual currency standards apply to stablecoins, and the state’s Department of Financial Services issued guidance in 2022 for stablecoin issuers that requires them to meet standards for redeemability, asset reserves, and attestations of how the coins were backed.

And in California, the state’s Digital Financial Assets Law will require companies to seek licensing from the state’s financial regulator starting in July 2026, stipulating that only licensees, banks, trust companies, and authorized national associations can exchange stablecoins. Standards set forth in 2023 also require reserves to be among a defined set of eligible securities listed in California’s Money Transmission Act, preventing issuers from representing stablecoins as safe bank credit or stored-value products.

The federal interagency panel is now poised to even out the state-by-state approach, curtailing stricter regulatory regimes or building upon permissive state frameworks.

“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,” said Rosemary Spaziani, a partner in the fintech and digital assets practice groups at Gibson Dunn & Crutcher LLP. “The ones that deviate are probably going to be a bit of a bottleneck.”

Scaling Up Stablecoins

Dollar-backed stablecoins are a serious consideration for Wall Street giants including Bank of America Corp. and Citigroup Inc., many of which used to steer clear of digital assets. Issuers such as Circle Internet Group Inc. and PayPal Holdings Inc. had already entered the fray even before a federal statute was on the books.

Companies hoping to enter the stablecoin business will likely welcome federal oversight to avoid potential compliance issues across disparate state regulatory regimes, Meyers said.

“If you are licensed by whichever state that qualifies under the ‘GENIUS Act,’ that certification is good across the country,’” he said. “Unlike on the securities side, here it’s more about the dollar threshold of the outstanding issuance.”

Under the stablecoin law, any state-chartered depository institution acting as a stablecoin issuer will transition to federal oversight within one year of crossing a $10 billion outstanding issuance threshold. Nonbank stablecoin issuers reaching that milestone will also be subject to a federal regulatory framework, administered by a state regulator in conjunction with the Office of the Comptroller of the Currency.

“Just because an issuer has less than $10 billion of outstanding stablecoin doesn’t mean it shouldn’t have to have substantially the same compliance regime as the larger issuers,” said Alan Bickerstaff, a partner at DLA Piper who focuses on blockchain and digital assets. “Some of the larger nonfinancial issuers are so big that they’re going to quickly surpass the $10 billion mark, depending on how they conduct their stablecoin, and they’d end up in the federal regulatory regime.”

Public companies that aren’t predominantly engaged in financial activities must also get unanimous certification from the federal committee before issuing stablecoins. Meanwhile, foreign issuers subject to approval by the panel are likely to influence the way their local jurisdictions oversee stablecoins in order to get a green light from all committee members.

“Ultimately these folks are going to be able to figure out how to work together, but it remains to be seen how that’s going to play out.” Bickerstaff said. “They’re going to be coming at it from different points of view.”