CRS Analyzes Policy Issues Raised by Proposed Legislation on Stablecoins

The Congressional Research Service ("CRS") reviewed key issues raised in recent legislative efforts to establish a federal framework for stablecoin regulation.

Specifically, CRS reviewed two bills introduced in the 119th Congress—H.R. 2392 ("STABLE Act") and S. 919 ("GENIUS Act") (with an updated version of the latter—S. 1582, placed on the Senate Calendar)—that create a regulatory framework for the issuance of stablecoins (i.e. digital assets intended to maintain a stable value relative to a reference asset such as the US dollar). 

Issuers of Stablecoins. CRS said that both bills would allow banks, nonbank financial firms and commercial firms to issue stablecoins under the same regulatory regime. CRS said that some policymakers argue that banks are best suited to issue stablecoins due to their experience with payments and existing prudential oversight. However, CRS highlighted that the proposals create a carve-out for stablecoin issuers relieving them from consolidated capital requirements and subjecting them to a new, less comprehensive framework. Critics contend this could expose banks to crypto-related risks. Others caution that permitting commercial firms—particularly large technology companies—to issue stablecoins could allow them to dominate digital payments markets.

Run Risk and Reserve Requirements. CRS emphasized that the bills aim to mitigate run risk—i.e. the risk of mass redemptions—through reserve requirements. Both bills would mandate 100% backing by safe, liquid assets such as deposits and government money market funds. CRS stated that while such requirements reduce run risk, they do not eliminate it entirely. CRS stated that under the proposed legislation, stablecoin issuers would not benefit from federal protections such as deposit insurance or Federal Reserve liquidity facilities.

Federal and State Oversight. CRS highlighted the tension between federal and state regulatory roles. CRS stated that the STABLE Act would broadly allow issuers to choose state or federal regulation, whereas the GENIUS Act would limit state-regulated issuers to those with under $10 billion in stablecoins outstanding. Both bills would allow national banks to place stablecoin subsidiaries under state regulation in certain circumstances. CRS noted that this could result in bank subsidiaries falling outside the supervisory reach of federal regulators.

Treatment of Foreign-Issued Stablecoins. CRS pointed to differences in how the bills address foreign-issued stablecoins, particularly given the market dominance of Tether (licensed in El Salvador) and Circle (US-based). The STABLE Act would limit the secondary market availability of foreign-issued stablecoins unless the issuer becomes US-licensed or is subject to a "comparable" foreign regime. The GENIUS Act would allow broader access through undefined reciprocity arrangements. CRS noted that both bills stop short of restricting Americans from accessing foreign stablecoins via decentralized public blockchains.

Anti-Money Laundering Obligations. CRS observed that both bills would designate stablecoin issuers as financial institutions under the Bank Secrecy Act, requiring them to implement anti-money laundering controls. However, CRS questioned how issuers could meet AML obligations once stablecoins circulate on pseudonymous public blockchains beyond their control. CRS also raised concerns about how AML compliance would be monitored for foreign issuers operating in secondary markets without reciprocal regulatory agreements.

Conflict of Interest Concerns. CRS referenced the announcement by World Liberty Financial—associated with former Trump Administration figures—that it would issue a stablecoin. CRS said that this development sparked debate over whether conflict-of-interest provisions for public officials should be added to the bills.