Treasury Issues NPRM On State Oversight Of Stablecoin Issuers Under The GENIUS Act

The U.S. Department of the Treasury has issued its first proposed rule under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, marking a key milestone in federal efforts to regulate payment stablecoins. The Notice of Proposed Rulemaking (NPRM) outlines the principles Treasury will use to assess whether a state’s regulatory regime is “substantially similar” to the federal framework, which determines whether certain stablecoin issuers may be supervised by states rather than the OCC or other federal agencies. Comments on the proposal are due by June 2, 2026.

Background: The GENIUS Act’s Federal–State Opt-In Model

Passed in July 2025, the GENIUS Act created the first comprehensive federal framework for stablecoin regulation. (See our blog post, here.) It allows “State qualified payment stablecoin issuers,” defined as issuers with up to $10 billion in outstanding issuance, to elect state-level supervision if their state’s regulatory regime is certified as “substantially similar” to the federal approach. The model is intended to balance innovation, flexibility, and uniformity while reducing opportunities for regulatory arbitrage.

Treasury published an Advance Notice of Proposed Rulemaking (ANPRM) in September 2025 to gather stakeholder feedback. The current NPRM reflects that input and begins the formal rulemaking process.

Scope and Structure of the NPRM

The proposed rule would add a new Subchapter C to Title 12 of the CFR, containing:

• Part 1520: Authority, purpose, and scope
• Part 1521: Core principles for determining substantial similarity between state and federal regimes

Part 1521 is the key component of the proposal and sets out how Treasury will evaluate whether a state’s regime meets or exceeds the standards required by section 4(a) of the Act.

Defining the Federal Regulatory Framework

A central question addressed by the NPRM is what constitutes the “Federal regulatory framework.” Treasury proposes a definition that extends beyond the statute and includes:

1. The GENIUS Act
2. OCC regulations and formal interpretations published in the Federal Register
3. Treasury regulations and guidance implementing BSA, sanctions, and technological compliance requirements under sections 4(a)(5) and (6)
4. Federal Reserve Board rules implementing the Act’s anti-tying provisions under section 4(a)(8)

Treasury explains that relying solely on statutory text would leave significant gaps, particularly in prudential areas such as capital, liquidity, and reserve diversification, where implementing detail resides in agency rules. The OCC’s framework serves as the primary baseline for comparison because most state-qualified issuers are nonbanks that would transition to OCC oversight if they exceed the $10 billion threshold.

Uniform Requirements and State-Calibrated Flexibility

The NPRM distinguishes between two categories of requirements:

• Uniform requirements: Areas where the Act provides no substantive discretion. State regimes must align with the federal framework. Examples include reserve asset requirements, AML/BSA/sanctions programs, and core disclosure and naming restrictions.
• State-calibrated requirements: Areas where states may tailor standards if the outcomes are at least as robust as the federal model. These include capital requirements, certain governance provisions, and some risk management practices.

Appendix A maps each statutory requirement to one of these categories and provides a practical guide for state regulators.

Federal Law and State Qualified Issuers

Treasury reiterates that state-supervised issuers remain subject to all applicable federal statutory requirements unless the Act expressly provides otherwise. State regimes cannot authorize activities prohibited under federal law, and federal disclosure and naming restrictions apply universally. The goal is to maintain a consistent baseline of protections regardless of supervisory regime.

Principles, Flexibility, and Ongoing Supervision

States may impose requirements beyond the federal baseline as long as they do not conflict with federal law or undermine substantial similarity. Statutes, regulations, and enforceable guidance may all serve as vehicles for compliance.

The NPRM also addresses how future federal legislation or rule changes could interact with state frameworks and seeks comment on definitional issues, classification of requirements, and whether rules for foreign issuers should be incorporated.

Next Steps in the Rulemaking Process

Treasury is seeking comment on all aspects of the proposal, including the scope of the federal regulatory framework, the division of statutory requirements into uniform and state-calibrated categories, the degree of flexibility states should retain, and the practical criteria for assessing substantial similarity. Comments are due June 2, 2026, according to the Federal Register notice.

Outstanding Issues and Policy Implications

Although the NPRM clarifies core structural elements, several practical questions remain:

1. Supervision and enforcement: The proposal emphasizes supervisory design but is less specific about how Treasury will evaluate the strength or consistency of state enforcement.
2. Durability of certification: The NPRM does not detail how Treasury will monitor state regimes over time or under what conditions certifications may be revisited or withdrawn.
3. Regulatory competition: Allowing state-level supervision may encourage innovation but could also create competitive pressures among states. The rigor with which Treasury applies the “meet or exceed” standard will be central to preventing regulatory arbitrage.
4. Issuer threshold management: The NPRM explains the $10 billion transition point but does not address how Treasury might respond if issuers structure operations to remain within the state-qualified category.

Conclusion

Treasury’s proposed rule provides the first detailed framework for harmonizing state and federal oversight of stablecoin issuers under the GENIUS Act. Its two-tier structure, which combines uniform requirements with calibrated flexibility, reflects an effort to maintain consistent protections while supporting regulatory innovation. Stakeholders should review the proposal closely and consider submitting comments by the June 2, 2026 deadline.

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