Reforming the Proposed GENIUS Bill for Stablecoins

The recent passage of the GENIUS Act in the Senate and the STABLE Act in the House marks a significant step towards establishing a regulatory framework for stablecoins. However, these bills have flaws that need to be addressed to avoid imposing excessive costs on the industry and taxpayers. The proposed legislation allows issuers to choose from 55 different regulators, which could lead to a race to the bottom, with stablecoin issuers opting for the regulator with the laxest oversight. This could result in regulators missing important issues, and the bills' requirement for the Secretary of the Treasury to certify that a state's regulation is 'substantially similar' to the federal regulation may be redundant and wasteful. Furthermore, the House bill's requirement for joint rulemaking among the OCC, FDIC, and Fed, in consultation with state regulators, could lead to a lengthy and contentious process. The bills also fail to cover stablecoins that pay interest and those that are considered 'securities,' which could lead to regulatory confusion and disputes. To rectify these issues, Congress should select a single regulator, such as the Fed, to oversee stablecoins and eliminate joint rulemakings and state loopholes. This would help to promote innovation safely and ensure American leadership in the financial technology sector. Ultimately, a more streamlined and effective regulatory structure is necessary to support the growth of stablecoins and the broader financial technology industry.