An updated version of the ‘GENIUS Act’, the stablecoin bill proposed by Republican Senator Bill Hagerty, is released today. However, the US Senate Banking Committee has disclosed plans to make changes to the bill on Thursday.
Key Aspects of GENIUS Act
According to the proposal, The GENIUS Act sets requirements for issuing payment stablecoins in the US. It would allow certain entities, including subsidiaries of insured banks, nonbank issuers, and state-chartered institutions, to legally issue payment stablecoins. Issuers must comply with bank-like regulations, including capital, liquidity, and privacy standards. Small issuers (with under $10 billion market cap) can opt for state-level regulation, provided it aligns with federal guidelines.
Federal and state regulators would oversee issuers, with the Comptroller handling federal nonbank issuers and the Federal Reserve having limited authority.
The Act clarifies that payment stablecoins are not securities, but their status as commodities remains unclear. It prioritizes stablecoin holders in insolvency proceedings and excludes stablecoins issued on private blockchains.
Moreover, the Act does not mandate access to the Federal Reserve’s master accounts for issuers, nor does it impose new accounting requirements like those under SAB 121. It also encourages international cooperation for stablecoin transactions.
The GENIUS Act outlines regulations for permitted payment stablecoin issuers, offering three main registration options:
- Subsidiaries of Insured Depository Institutions (IDI): These require approval from federal regulators to issue stablecoins.
- Federal Qualified Nonbank Issuers: Nonbank entities approved by the Comptroller can issue stablecoins.
- State Qualified Issuers: Entities approved by state regulators can issue stablecoins within the state’s framework.
Issuers must comply with reserve requirements, ensuring their stablecoins are fully backed, and disclose reserve details monthly. Redemption procedures must be in place, and issuers cannot rehypothecate reserves. Payment stablecoin holders are prioritized in the event of issuer insolvency.
The Act also establishes supervisory and enforcement powers for regulators, including the Comptroller and Federal Reserve, for federal and state issuers. It restricts activities of issuers to stablecoin-related functions, sets capital and liquidity requirements, and introduces privacy rules under the Gramm-Leach-Bliley Act.
State and federal regulators are given authority to set rules for stablecoin issuers, with provisions for supervision, enforcement, and back-up authority. The Act also encourages international cooperation for stablecoin interoperability, mandates a study on algorithmic stablecoins, and creates custodial rules for wallet providers.
Lastly, the ‘Reciprocity for Payment Stablecoins Issued in Overseas Jurisdictions’ include “reserve requirements, supervision, anti-money laundering and counter-terrorism features, sanctions compliance standards, liquidity requirements, and risk management standards, to facilitate international transactions and interoperability with United States dollar-denominated payment stablecoins issued overseas.”
Also Read: Banks and Fintechs Race to Launch Their Own Stablecoins
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