BlackRock used the last day of the OCC's GENIUS Act comment window to demand the regulator scrap a proposed limit on how much of a stablecoin's reserves can be held in tokenised form. BUIDL backs more than 90 per cent of two of the largest crypto-native dollar tokens.
BlackRock filed a 17-page comment letter with the Office of the Comptroller of the Currency on May 1, telling the regulator that a proposed 20 per cent cap on tokenised reserve assets would gut the very product the asset manager has spent two years building. The letter landed on the final day of the OCC's 60-day comment window for its GENIUS Act rulemaking, the federal stablecoin framework that will govern how dollar tokens are issued, what their reserves can hold, and which firms can play.
The cap, which the OCC floated as one option in its draft rules, would limit any GENIUS-licensed stablecoin to holding no more than a fifth of its reserves in tokenised form. BlackRock called the limit "extraneous" to the OCC's stated objectives and argued that the risks regulators care about — credit quality, duration, liquidity — are properties of the underlying instrument, not of whether it is held on a distributed ledger. A short-dated Treasury bill is the same Treasury bill on-chain or off-chain, in the firm's framing, and capping the on-chain version makes no more sense than capping the share of reserves that happen to be held at a particular custodian.
BlackRock's interest is unusually direct. Its BUIDL fund, which tokenises short-dated US Treasuries on Ethereum, holds roughly $2.6 billion in assets and sits as one of the two largest products in a tokenised-Treasury market that crossed $13.5 billion last month. More importantly for this fight, BUIDL backs more than 90 per cent of the reserves behind Ethena's USDtb stablecoin and Jupiter's JupUSD on Solana. If a 20 per cent cap on tokenised reserves becomes the federal rule, those issuers would have to liquidate the bulk of their BUIDL holdings and replace them with off-chain Treasuries, destroying the integration BlackRock spent over a year building and removing one of the few products giving the firm meaningful crypto-native distribution.
The substantive argument in the letter is more interesting than the lobbying. BlackRock told the OCC that risk regulation should be technology-neutral. A reserve asset's safety is determined by the issuer of the underlying instrument, the duration of the cash flow, and the depth of the market for selling it under stress, not by the ledger format. Imposing a tokenisation cap would, the firm argued, treat distributed-ledger custody as inherently riskier without evidence, and it would push stablecoin issuers toward off-chain reserves precisely at the moment regulators elsewhere are encouraging banks to move onto blockchain rails.
BlackRock also asked the OCC to do two more concrete things: confirm that Treasury ETFs (its iShares 0-3 Month Treasury ETF, SGOV, would be the obvious beneficiary) qualify as reserve assets, and add two-year Treasury floating-rate notes to the eligible asset list. Both requests would broaden the universe of instruments stablecoin issuers can use, with BlackRock conveniently dominant in each. The firm is not subtle about its commercial position, but it does not have to be — the agency's decision will affect every dollar-pegged token regulated under federal law.
On reserve diversification, BlackRock backed the OCC's Option A, which pairs a principles-based standard with an optional quantitative safe harbour. Option B would impose the same standards (a 40 per cent concentration limit on any single institution and a weighted-average maturity ceiling of 20 days) as mandatory daily requirements for every issuer. The difference matters operationally. Principles-based supervision lets larger issuers run more sophisticated cash-management strategies and explain themselves to examiners; mandatory daily limits create a compliance burden that disproportionately raises costs for smaller issuers and pushes the market toward concentration in firms with the back-office to match.
That makes BlackRock's preference unsurprising in commercial terms (the firm has the back-office to do anything) but the public-policy argument has weight. A rigid daily concentration limit would have triggered forced selling during the March 2023 banking stress, when the underlying issuers most stablecoins would otherwise hold deposits with were the same banks under run pressure. Principles-based supervision lets a stablecoin issuer respond intelligently to a crisis instead of mechanically rebalancing into the storm.
The OCC's draft rules came out of the GENIUS Act, the federal stablecoin statute paired with the CLARITY Act compromise on stablecoin yield reached by the Senate Banking Committee last week. The two pieces of legislation are designed to be a regulated alternative to the offshore stablecoin model that Tether has dominated for years. BlackRock's letter is, in effect, an argument for keeping that alternative attractive enough that issuers actually use it.
The OCC has not signalled which of the comment-letter recommendations it will adopt. The agency has discretion to revise the rule before finalising it, and the comment window now closed gives staff weeks to review the responses. Industry trade groups largely echoed BlackRock's pushback on the tokenisation cap; consumer-protection commenters were split, with some supporting a hard limit on the grounds that on-chain reserves expose holders to smart-contract risk that off-chain reserves do not.
The smart-contract risk argument has merit at the margin. BUIDL relies on Securitize's transfer-agent infrastructure, and a successful exploit there would freeze BlackRock's tokenised Treasuries even if the underlying assets were perfectly safe. That is an operational risk the OCC can legitimately price into its rules. Whether it should price it through a blunt 20 per cent cap, or through diligence requirements on the smart-contract layer, is the question BlackRock's letter is asking the regulator to answer the right way.
