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We’ve finally reached Aug. 1, and that means three things: kids are about ready to go back to school, Congress is headed home for a month and college football is just around the corner.
I’ll let you decide in what order of priority you would place these items.
At least for this article, we’ll put the emphasis on the traditional August recess for Congress. All members have gone back to their respective states to handle business at home before they are set to return to Washington, D.C. on Sept. 9. This gives us an opportunity to take a pause and see what the fall looks like for us politically.
In the last month before Congress left, there was a flurry of activity. The most significant thing was the Senate and House passing the GENIUS Act. I’ll come back to this in a bit with a lot of information for you to digest. Beforehand, however, in the last couple of days in July the House Financial Services Committee moved several bills we are supporting.
Below is a brief description of each bill:
H.R. 3390, the Bringing the Discount Window into the 21st Century Act, sponsored by Rep. Monica De La Cruz (R-Texas). The bill would require the Fed to review its discount window lending programs, develop a remediation plan to address deficiencies and enhance the effectiveness of the programs. The committee vote was 48-1.
H.R. 4460, the Stop Agency Fiat Enforcement of Guidance (SAFE Guidance) Act, sponsored by Rep. Dan Meuser (R-Pa.). The legislation would require each financial regulator to include a guidance clarity statement with any guidance issued by that agency. The vote was 26-23.
H.R. 3446, the FDIC Board Accountability Act, sponsored by Rep. Bill Huizenga (R-Mich.). The bill would revise the membership requirements for the FDIC board by making the CFPB director a nonvoting member of the board, mandating that one member have state bank supervisory experience, and that one member have primary experience working in or supervising depository institutions with less than $10 billion in total assets. The vote was 26-23.
H.R. 4544, The American Access to Banking Act, sponsored by committee Ranking Member Maxine Waters (D-Calif). The bill would encourage the formation of de novo financial institutions by, among other things, directing agencies to streamline and simplify the application process. The vote was 49-0.
H.R. 4478, the Tailored Regulatory Updates for Supervisory Testing Act of 2025 (TRUST Act), sponsored by Reps. Tim Moore (R-N.C.) and Ritchie Torres (D-N.Y.). The bill would increase the total asset threshold under which institutions qualify for an 18-month exam cycle from $3 billion to $6 billion. The vote was 49-0.
H.R. 4437, the Supervisory Modifications for Appropriate Risk-Based Testing Act of 2025 (SMART Act), sponsored by Reps. William Timmons (R-S.C.) and Bill Foster (D-Ill.). The bill would increase the total asset threshold under which institutions qualify for a limited-scope examination directly after an on-site, full-scope exam from $3 billion to $6 billion. It also requires that if an institution is otherwise subject to a separate safety and soundness exam and a consumer compliance exam, at the request of the institution, the regulatory agency shall combine and carry out the exams at the same time. The vote was 53-1.
We will continue to monitor these bills as they move through the legislative process.
Now back to the aformentioned GENIUS Act. On Jan. 18, President Trump officially signed it into law. GENIUS stands for Guiding and Establishing National Innovation for U.S. Stablecoins. The ABA put together a comprehensive summary of the bill. I’ll summarize in the following paragraphs, which provides a lot of information for you and your staff.
1) What is a payment stablecoin?
A payment stablecoin is a digital asset designed for use as a means of payment or settlement. The issuer of a payment stablecoin is obligated to convert, redeem or repurchase it for a fixed amount of monetary value and represents it will maintain a stable value relative to a fixed amount of monetary value.
Payment stablecoins shall not be backed by the full faith and credit of the United States, guaranteed by the USG or subject to deposit insurance by the FDIC or NCUA.
2) Who can issue a payment stablecoin?
Only permitted stablecoin issuers can issue payment stablecoins in the United States.
Beginning three years after enactment, it shall be unlawful for a digital asset service provider to offer or sell a payment stablecoin to a person in the U.S. , unless it is issued by a permitted payment stablecoin issuer or it meets the conditions for the reciprocity addressed in question 7 below.
Further, it shall be unlawful for a digital asset service provider to offer, sell or make available for trading in the U.S., a payment stablecoin issued by a foreign payment stablecoin issuer that does not have the technological capability to comply and complies with lawful orders to seize, freeze or burn payment stablecoins. The Secretary of the Treasury may designate foreign issuers as noncompliant.
Permitted payment stablecoin issuers include:
Subsidiaries of insured depository institutions or credit unions approved to issue payment stablecoins by their primary Federal regulator (i.e., the Fed, FDIC, OCC or NCUA).
Federal-qualified payment stablecoin issuers approved by the OCC (i.e., nonbank, uninsured national bank, Federal branch).
State-qualified payment stablecoin issuers approved by a State payment stablecoin regulator, subject to certification of regulatory equivalence and size thresholds.
A public company not predominantly engaged in financial activities may not issue a payment stablecoin unless approved unanimously by the Stablecoin Certification Review Committee (Secretary of the Treasury, Chair of the Federal Reserve, Chair of the FDIC).
3) What obligations apply to payment stablecoin issuers?
Payment stablecoin issuers must:
Maintain reserves backing their stablecoins on at least a 1:1 basis with specified assets.
Reserves include U.S. coins and currency or money standing to the credit of an account with a Federal Reserve Bank; demand deposits; T-bills, notes or bonds with maturity fewer than 93 days; repurchase agreements backed by T-bills with a maturity fewer than 93 days; reverse repurchase agreements that are collateralized by Treasury notes, bills or bonds on an overnight basis; money market funds invested in the underlying assets described above; other similarly liquid federal government-issued asset approved by the primary federal regulator; any reserve described above in tokenized form.
Publicly disclose their redemption policy establishing procedures for timely redemption and disclosing all fees associated with purchasing and redeeming payment stablecoins.
Publish monthly reports on the composition of their reserves.
Have their monthly reports examined by a registered public accounting firm and have the issuer’s CEO and CFO certify as to the accuracy of the monthly report.
Comply with capital, liquidity, reserve asset diversification, and operational, compliance, and IT risk management requirements set by regulators, including BSA and sanctions compliance.
Be treated as financial institutions for purposes of the Bank Secrecy Act.
Maintain the technological capability to comply with the terms of any lawful order to seize, freeze, burn or prevent the transfer of payment stablecoins issued by the person.
Limit their activities to issuing, redeeming, managing related reserves, providing custodial or safekeeping services, or undertaking other payment stablecoin activities that directly support these.
If more than $50 billion in total payment stablecoins outstanding, prepare audited financial statements.
Payment stablecoin issuers are prohibited from:
Pledging, rehypothecating or reusing reserves.
Pay the holder of any payment stablecoin any form of interest or yield solely in connection with holding, using or retaining the payment stablecoin.
Tying provision of services on the condition that the customer obtains an additional paid product or service from the issuer.
Using any combination of terms relating to the U.S. government or marketing the payment stablecoin such that it is perceived to be legal tender or guaranteed by the U.S. government.
Misrepresenting the insured status of payment stablecoins.
Having an officer or director who has been convicted of a felony offense involving insider trading, embezzlement, cybercrime, money laundering, financing of terrorism or financial fraud.
4) Who will supervise payment stablecoin issuers?
Subsidiaries of insured depository institutions or credit unions approved to issue payment stablecoins are subject to regulation, supervision, and enforcement by their primary federal regulator (i.e., the Fed, FDIC, OCC or NCUA).
Federal-qualified payment stablecoin issuers are subject to regulation, supervision, and enforcement by the OCC, and shall be required to submit reports and undergo examinations by the OCC.
State-qualified stablecoin regulators shall have supervisory, examination, and enforcement authority over a state qualified payment stablecoin issuer of such a state, with the caveats described below and in question 5 regarding the issuer’s size and the state regulatory regime.
State regulators may enter a memorandum of understanding with the Federal Reserve Board under which the board may participate in the supervision, examination, and enforcement authority with respect to state qualified payment stablecoin issuers of that state.
The Fed and the OCC have the authority to take enforcement actions against state qualified payment stablecoin issuers in exigent circumstances after 48 hours prior written notice to the state regulator.
5) What is the role of states in regulating payment stablecoin issuers?
State regulators may establish a regulatory framework to approve and supervise state qualified payment stablecoin issuers.
Payment stablecoin issuers may opt for state regulation if the issuer’s market capitalization is less than $10 billion and the state-level regulatory regime is “substantially similar” to the Federal framework.
A state qualified payment stablecoin issuer that scales above $10 billion shall transition to the Federal framework administered by the state regulator and the federal regulator acting jointly. The federal regulator may provide a waiver to permit a state regulator to be the sole supervisor. Further, a state regulator that has an existing regulatory regime within 90-days of enactment and has approved one or more issuers shall be presumptively approved for a waiver.
The following process will determine substantial similarity between the state-level regulation and federal regulation:
The Secretary of the Treasury will establish broad-based principles for determining whether a state regulatory regime is substantially similar to the Federal framework.
State regulators must submit an annual certification to the Stablecoin Certification Review Committee, attesting that the state-level regulatory regime meets the criteria for substantial similarity. The Committee has the authority to review and approve (unanimously) or deny a certification. If denied, an explanation must be provided, and the state may cure and resubmit.
If a certification is rejected, the payment stablecoin issuer operating under the state-level regulatory regime will be subject to the federal regulatory framework, regardless of the market capitalization threshold.
The Secretary of the Treasury must publish and maintain a list of States that have submitted initial certifications and recertifications in the Federal Register and on the website of the Department of the Treasury.
State regulators must share information with the board on an ongoing basis, including copies of initial applications and accompanying documents.
6) What is the application process for a payment stablecoin issuer?
The process below applies to payment stablecoin issuers applying to a federal regulator; states would develop their own application processes.
The primary federal payment stablecoin regulator will receive applications and evaluate complete applications based on the financial condition and resources of the applicant to meet the requirements set forth in the Act; the competence, experience and integrity of the officers, directors, and principal shareholders; whether the redemption policy meets the standards; and any other factors necessary to ensure the safety and soundness of the issuer.
The primary federal payment stablecoin regulator shall render a decision within 120 days after informing the applicant that the application is complete. The application is deemed approved if not decisioned within the specified time.
Written explanation is required if an application is denied, and there is a process for appealing the denial.
7) How does the legislation treat foreign payment stablecoin issuers?
Prohibitions against foreign payment stablecoin issuers shall not apply if the issuer 1) is subject to regulation and supervision by a regulator that has a payment stablecoin regime that is comparable to the US, 2) is registered with the OCC, 3) holds reserves in a US financial institution sufficient to meet liquidity demands of U.S. customers unless otherwise permitted, and 4) is not in a foreign country subject to comprehensive sanctions.
The Secretary of the Treasury may determine whether a foreign country has a regulatory and supervisory regime that is comparable to the U.S.
A foreign payment stablecoin issuer shall be subject to reporting, supervision and examination requirements as determined by the OCC.
8) What else is addressed in the bill?
Preemption: The laws of a host state shall only apply to the activities conducted in the host state by an out-of-state state qualified payment stablecoin issuer to the same extent as such laws apply to the activities conducted by an out-of-state federal qualified payment stablecoin issuer.
Customer protection: Entities providing custodial or safekeeping services for payment stablecoins and reserves must be subject to supervision by a primary federal regulator or by a state bank supervisory, and they must comply with segregation requirements to protect customer assets.
Insolvency: In any insolvency proceeding of a payment stablecoin issuer, claims of persons holding payment stablecoins will have priority over other claims against the issuer.
Interoperability standards: Regulators will assess and may prescribe standards to promote compatibility and interoperability of payment stablecoins.
Non-payment stablecoins: Requires a study on non-payment stablecoins, including endogenously collateralized stablecoins and a report to Congress on the findings.
Authority of Banking Institutions: Clarifies that the Act does not limit the authority of depository institutions, credit unions or trust companies to engage in permissible activities under state and federal law, including to issue digital assets that represent deposits (i.e., tokenized deposits), otherwise use distributed ledgers for recordkeeping, and provide custodial services for payment stablecoins and their reserves. The bills also codify the repeal of Staff Accounting Bulletin 121 (SAB 121).
A state-chartered depository with a permitted payment stablecoin issuer subsidiary may engage in the business of money transmission or provide custodial services through the permitted payment stablecoin issuer in any state if it is required by its home state to establish and maintain adequate liquidity and capital.
Securities categorization: Amends various securities laws to clarify that payment stablecoins issued by permitted payment stablecoin issuers are not considered securities.
The next step in the process of implementing the GENIUS Act is crafting and passing the CLARITY Act. The CLARITY Act is the bill that will develop the regulatory framework for digital assets in the U.S. Below are current key aspects of the CLARITY Act.
Regulatory framework: The act defines a new regulatory regime for digital assets, distinguishing between those that are considered “digital commodities” and those that fall under existing securities laws.
CFTC jurisdiction: The CLARITY Act grants the CFTC primary regulatory authority over digital commodities, including their exchanges, brokers, and dealers.
SEC role: The SEC retains jurisdiction over digital assets that are considered securities, particularly in primary market transactions.
Digital Commodity Definition: The bill defines “digital commodities” as digital assets whose value is derived from their use within a blockchain system.
“Mature blockchain”: The act includes provisions related to “mature blockchains,” which are systems that have achieved decentralized control and may be exempt from certain SEC registration requirements under specific conditions.
Exemptions and definitions: The bill introduces various exemptions, including exemptions for certain digital commodities on mature blockchains, and defines key terms like “digital asset,” “blockchain protocol,” and “end user distribution”.
Consumer protection and innovation: The CLARITY Act aims to balance consumer protection with the need to foster innovation and growth in the digital asset market.
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We will keep you posted on any and everything that happens with these issues.