The Treasury Department has issued an 87-page notice of proposed rulemaking establishing how state-level stablecoin regimes can qualify as 'substantially similar' to the federal framework under America's first crypto law.
The United States Department of the Treasury on 1 April published its first notice of proposed rulemaking under the Guiding and Establishing National Innovation for US Stablecoins Act, better known as the GENIUS Act, opening a 60-day public comment period that will shape how America's nascent stablecoin regime operates in practice. The 87-page proposal addresses the critical question of whether state-level regulatory frameworks can be deemed 'substantially similar' to the federal standard — a threshold that determines which issuers may remain under state supervision rather than seeking a federal charter. With the stablecoin market now exceeding $310 billion in total capitalisation and monthly transfer volume running at roughly $2.8 trillion, the practical details of this rulemaking carry significant consequences for the payments industry and broader financial system.
What the Proposed Rule Contains
At its core, the Treasury's proposal distinguishes between two categories of regulatory requirements. The first, labelled 'uniform requirements,' comprises non-negotiable standards that every state regime must meet to qualify for substantial similarity. These include reserve backing mandates — requiring one-to-one coverage of outstanding stablecoins with high-quality liquid assets — anti-money laundering compliance, sanctions screening obligations, and consumer disclosure rules. The second category, termed 'state-calibrated requirements,' grants local regulators meaningful discretion. Capital adequacy thresholds, risk management frameworks, cybersecurity standards, and examination schedules all fall into this flexible tier, acknowledging that a Wyoming trust company and a New York-licensed money transmitter operate in fundamentally different regulatory environments.
Under the GENIUS Act, which President Donald Trump signed into law in July 2025, payment stablecoin issuers with consolidated outstanding issuance of $10 billion or less may opt for state-level regulation provided their home state's regime passes the substantial similarity test. Issuers above that threshold must obtain a federal charter from the Office of the Comptroller of the Currency. The proposed rule builds on an advanced notice of proposed rulemaking the Treasury issued in September 2025, which drew more than 400 public comment letters from banks, fintech firms, state regulators, and consumer advocacy groups.
Industry and Regulatory Reaction
The proposal has drawn cautious optimism from both sides of the regulatory debate. Brian Armstrong, chief executive of Coinbase, said in a post on X that the rulemaking suggested stablecoin rules could be finalised 'very soon,' calling the pace of implementation 'encouraging.' The American Bankers Association, which had lobbied for stricter federal pre-emption of state rules, acknowledged that the proposal provided states with 'wider latitude than initially expected' but withheld full endorsement pending review of the comment period submissions.
State regulators have also weighed in. The Conference of State Bank Supervisors issued a statement describing the proposal as 'a workable framework that respects the dual banking system,' while noting that several of the uniform requirements would require legislative action in states that have not yet enacted stablecoin-specific statutes. At least 14 states — including Wyoming, Texas, Nebraska, and New York — already have some form of digital asset licensing or chartering legislation in place, though the degree of alignment with the GENIUS Act varies considerably.
Context: America's First Crypto Law Takes Shape
The GENIUS Act represented a watershed moment for the US digital asset industry when it cleared Congress with bipartisan support in June 2025. Unlike the broader market structure legislation embodied in the CLARITY Act — which remains mired in a four-way Congressional deadlock — the stablecoin bill attracted support from legislators who viewed payment tokens as a relatively contained regulatory problem with clear consumer protection implications. The law established the OCC as the primary federal regulator for large stablecoin issuers while preserving the existing state-federal dual system for smaller players.
This latest rulemaking is the first of several expected from the Treasury over the coming year. Future proposals are anticipated to address reserve asset eligibility in greater detail, redemption timing requirements, and the treatment of interest or yield generated by stablecoin reserves — a politically sensitive topic that contributed to the CLARITY Act's stalemate. The 60-day comment period closes on 31 May 2026, after which the Treasury will review submissions and issue a final rule, likely before the end of the third quarter.
What to Watch Next
The rulemaking arrives at a pivotal moment for the stablecoin sector. Tether's USDT and Circle's USDC together account for approximately 85 per cent of the market, but a growing cohort of bank-issued and fintech-issued tokens is emerging in anticipation of regulatory clarity. PayPal's PYUSD has crossed $3 billion in circulation, while JPMorgan's tokenised deposit product continues to expand across institutional settlement use cases. The Treasury's willingness to grant states meaningful flexibility could accelerate this diversification by lowering barriers for smaller, regionally focused issuers.
Market participants will be watching three indicators closely in the weeks ahead: the volume and tenor of public comment letters, whether any states announce accelerated legislative efforts to align with the GENIUS Act framework, and whether the OCC issues complementary guidance on federal charter requirements for issuers above the $10 billion threshold. With stablecoin transfer volume on track to exceed $35 trillion in 2026, the stakes of getting this framework right extend well beyond the crypto industry into the broader architecture of digital payments.
