Treasury's New Rule Defines the Boundary Between State and Federal Stablecoin Oversight

Stablecoin issuers with up to $10 billion in outstanding issuance may now have a path to avoid federal oversight if their home state's regulatory regime is certified as 'substantially similar' to federal standards. This mechanism is established by the U.S. Department of the Treasury's Notice of Proposed Rulemaking (NPRM) under the GENIUS Act. The NPRM outlines the principles Treasury will use to determine if a state's regulatory regime meets the federal baseline.

To establish this baseline, Treasury proposes a definition of the 'Federal regulatory framework' that includes the GENIUS Act, and regulations and formal interpretations from the OCC, Treasury, and the Federal Reserve Board. This framework serves as the primary baseline for comparison because most state-qualified issuers are nonbanks that would transition to federal oversight if they exceed the $10 billion threshold.

The proposed rule divides regulatory requirements into two categories: uniform and state-calibrated. Uniform requirements—including reserve asset requirements, AML/BSA/sanctions programs, and core disclosure and naming restrictions—must align with the federal framework. State-calibrated requirements, such as capital requirements, and some risk management and governance provisions, may be tailored by states as long as the outcomes are at least as ocorreu as the federal model.

State-supervised issuers remain subject to all applicable federal statutory requirements unless the Act expressly provides otherwise. The availability of state-level supervision for issuers with under $10 billion in issuance will depend on the rigor of the Treasury's 'meet or exceed' standard.