Advocacy Groups Urge Removal of GENIUS Act Preemption Provision

A coalition of state, banking industry, and consumer advocacy organizations urged Congress to repeal a provision in the recently adopted GENIUS Act that grants nationwide money transmission powers to uninsured state-chartered banks with stablecoin subsidiaries.

The organizations warned that Section 16(d) ("State-Chartered Depository Institutions") of the GENIUS Act allows state-chartered uninsured banks with stablecoin subsidiaries to conduct traditional money transmission and custody activities nationwide, bypassing host state licensing requirements and weakening local oversight. The organizations warned that Section 16(d) undermines the established system in which both home and host states license and oversee uninsured depositories, and that it erodes consumer protections and limits states’ ability to address failures or misconduct. They also (i) cautioned that the provision invites regulatory arbitrage by giving such institutions bank-like privileges without comparable obligations, (ii) argued there is no compelling federal interest to override state authority, and (iii) argued the measure is not required to develop a national stablecoin framework.

The organizations urged Congress to use ongoing market structure legislation debates as an opportunity to repeal the Section and prevent its expansion.

Signatories to the letter included the American Bankers Association, Americans for Financial Reform, the Conference of State Bank Supervisors, the Independent Community Bankers of America, the Money Transmitter Regulators Association, the National Conference of State Legislatures, and the National Consumer Law Center.