Principles for how state regimes can comply with the federal GENIUS Act framework
The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) was the first major piece of crypto legislation in the United States, signed into law last year and passed with broad bipartisan support. Since GENIUS provided a clear legal pathway for stablecoins, we’ve seen stablecoin innovation and volume accelerate in the United States. This matters even beyond the crypto and traditional finance industries, because stablecoins give us something we’ve never really had before: open money infrastructure.
GENIUS demonstrates what’s possible when effective policy and technology work together. Now it’s time to get the implementation in practice right.
The U.S. Treasury Department recently issued a Notice of Proposed Rulemaking (NPRM) to clarify how each state can comply with and implement this historic federal legislation. Specifically, this NPRM aims to define when a state’s regime is “substantially similar” to the federal framework — which determines how a state-regulated stablecoin issuer will operate across the country, and how an issuer can transition to federal oversight after they exceed the state regulation threshold of $10 billion in total outstanding issuance.
Getting “substantial similarity” right matters. It’s what enables the U.S. to deliver a truly harmonized framework with uniform standards, avoiding the fragmented, multistate patchwork that has burdened money transmission for decades. a16z crypto just filed our response letter, urging Treasury to keep core requirements uniform; preserve a level playing field for issuers of every size; and make the certification process objective, simple, and efficient — all while respecting the areas Congress reserved for states.
You can read our response in full here, but see summary below.
Why this rulemaking matters
Stablecoins — cryptocurrency pegged to a fiat currency like the U.S. dollar — combine the benefits of blockchain-based transactions with the stability of government-backed money. We’ve described the advent of stablecoins as “money’s ‘WhatsApp moment’”: Just as chat apps like WhatsApp collapsed the cost of international messaging from about 30 cents per text to zero, stablecoins will do the same in financial transactions.
But stablecoins only work as a payment instrument if they’re fungible. That is, a coin issued under one state’s regime must hold the same value and redeemability as one issued federally or in any other state — circulating as a single payment instrument. Materially different state frameworks with different reserve, redemption, capital, liquidity, or risk management procedures would break that fungibility.
Likewise, state regimes that diverge from the federal standard risk creating a patchwork of dissimilar regulatory frameworks that makes it more difficult for startups to compete with incumbents on a level playing field. That’s why we advocate for all substantive GENIUS requirements to be uniform across the states, meaning a state-level regime must be consistent with the federal framework — not fall short of or exceed it. Congress reserved specific areas for states such as in licensing, chartering, and supervision; and provided for uniformity elsewhere.
We also call for uniform definitions to preserve core innovation safeguards established in GENIUS. With uniform definitions, states can’t reinterpret terms like “payment stablecoin” or “digital asset service provider” in a way that could endanger GENIUS’ important protections for decentralized stablecoins and DeFi innovation.
Making key GENIUS definitions and requirements uniform preserves fungibility and provides a path for growing stablecoin companies to compete and, eventually, transition from state to federal oversight — unlocking the true benefits GENIUS was intended to provide. Relatedly, passporting rules need to be clear: A host state shouldn’t be able to impose its own requirements on an issuer already licensed elsewhere. Certified state regimes should easily passport across state lines.
Incorporating these concepts into Treasury’s final rule will pave the way for Americans to reap the benefits of internet-native money.
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