Banking Associations Call for Strong GENIUS Act Oversight

Five financial and banking trade associations urged the U.S. Department of the Treasury to implement strong, consistent rules under the GENIUS Act to ensure stablecoins are safely integrated into the financial system.

In their joint comment letter responding to the U.S. Department of the Treasury’s Advance Notice of Proposed Rulemaking, the associations expressed appreciation for Treasury’s "careful consideration" of the complex policy issues raised by the GENIUS Act. They emphasized the need for rules that preserve the benefits of stablecoin innovation while preventing regulatory arbitrage, maintaining a clear separation between banking and commerce, and safeguarding consumers and financial stability.

The associations outlined eight recommendations to guide Treasury’s rulemaking:

1. Prohibit Interest and Yield Broadly. The associations urged Treasury to interpret the GENIUS Act’s prohibition on interest or yield expansively to include any economic benefit—whether paid directly by an issuer or indirectly through affiliates or partners. They warned that without a broad interpretation, stablecoins could become investment products offering yield, triggering deposit flight from banks and reducing credit availability in the broader economy.
2. Limit Regulatory Arbitrage. The associations called on Treasury to prevent a "race to the bottom" by ensuring that state and foreign regulatory regimes meet standards that are genuinely, substantially similar or comparable to the federal framework. They recommended that large state-regulated issuers—those with more than $10 billion in circulation—be required to transition to federal oversight, with waivers granted only rarely and under strict scrutiny.
3. Establish Strong Anti-Illicit Finance Obligations. The associations emphasized that Permitted Payment Stablecoin Issuers and Digital Asset Service Providers must be subject to the same AML/CFT and sanctions requirements as banks.
4. Separate Banking and Commerce. The associations urged Treasury to interpret the Act’s prohibition on non-financial or foreign companies issuing payment stablecoins broadly to prevent conflicts of interest and the excessive concentration of economic power. They said any exception allowing a commercial or foreign entity to issue stablecoins should face a very high bar for approval and be subject to periodic review.
5. Ensure High Standards for Custody. The associations called for Treasury to impose rigorous standards on custodians of payment stablecoin reserves and the stablecoins themselves. They recommended requirements for asset segregation under UCC Article 8, the separation of custody and trading functions, robust capital and liquidity standards, and comprehensive cybersecurity programs to protect consumers and the financial system.
6. Strengthen Consumer Protections. The associations argued that the GENIUS Act’s consumer protection provisions should be strengthened. They urged Treasury to adopt uniform disclosure models, clarify the application of prohibitions against unfair or deceptive acts or practices, confirm the applicability of the Electronic Fund Transfer Act, and ensure data security rules apply to market participants are equivalent to those that apply to banks.
7. Clarify the "Payment Stablecoin" Definition. The associations urged Treasury to interpret the statutory definition broadly to prevent loopholes that could allow unregulated products to evade oversight. At the same time, they said the definition should explicitly exclude any tokenized product issued by an insured depository institution, as such products are already subject to comprehensive federal regulation.
8. Strictly Regulate Digital Asset Service Providers. The associations called for Treasury to enforce prohibitions preventing DASPs from offering or selling unregulated stablecoins through broad interpretations of the terms "offer" and "sell."