Bipartisan Senators Urge Treasury to Preserve State Authority Under GENIUS Act
A group of U.S. senators from both parties sent a formal letter to the Treasury Department on June 16, urging officials not to override states' rights to regulate stablecoin issuers under the GENIUS Act, as a deadline to finalize implementing rules approaches.
The lawmakers' concern centers on how Treasury interprets a pivotal phrase in the law: "substantially similar." Under the GENIUS Act, signed into law on July 18, 2025, stablecoin issuers with less than $10 billion in outstanding issuance may choose state-level oversight instead of federal supervision, but only if the state's regulatory framework meets that federal standard. The senators argue that Treasury's current approach to defining that standard risks functionally preempting state authority by imposing overly rigid federal standards, even in areas where the GENIUS Act explicitly preserved state discretion.
The Dispute
The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) created the first federal framework for payment stablecoins in the United States. It was designed to mirror the country's longstanding "dual banking system," which lets banks choose between federal and state charters. The law passed the Senate 68 to 30, a margin that reflected genuine bipartisan support. The legislation was introduced by a bipartisan group of co-sponsors including Senators Bill Hagerty (R-TN), Cynthia Lummis (R-WY), Kirsten Gillibrand (D-NY), and Tim Scott (R-SC).
In April 2026, Treasury issued a Notice of Proposed Rulemaking (an NPRM, the formal first step toward binding regulations) that outlined how it would evaluate state frameworks. Treasury divided requirements into two categories. The first category covers reserve asset standards, anti-money-laundering and Bank Secrecy Act compliance, and sanctions rules, areas where states must match federal standards exactly. The second covers capital requirements, governance provisions, and risk management, areas where states may impose stricter but not weaker rules.
The problem, according to the senators and state regulators, is that Treasury defined the federal baseline broadly. It incorporated not just the statutory text but also rules from the Office of the Comptroller of the Currency, FinCEN guidance, Federal Reserve regulations, and Federal Register interpretations. That wide definition leaves states with a much narrower lane to operate independently.
The Conference of State Bank Supervisors (CSBS), which represents state financial regulators nationally, filed formal comments in response to Treasury's NPRM ahead of the June 2, 2026 comment deadline, arguing that federal standards should function as a floor, not a ceiling. "Stablecoins are still evolving; locking them into a single template makes little sense," said Brandon Milhorn, the organization's president and CEO, writing in the CSBS's formal comment letter.
Eric Grover of Intrepid Ventures, a payments industry consultancy, put it plainly in comments reported by PaymentWeek: "States want latitude to impose tougher standards, not weaker ones."
A parallel rulemaking from the OCC, issued in February 2026, adds another layer of pressure. The OCC proposed rules governing nationally chartered stablecoin issuers that, the CSBS warned, could draw issuers away from state supervision entirely, even before Treasury finalizes the "substantially similar" certification process. That certification will be overseen by the Stablecoin Certification Review Committee (SCRC), an interagency body chaired by the Treasury Secretary and including the chairs of the Federal Reserve and the FDIC.
Why the July Deadline Matters
All GENIUS Act implementing regulations must be finalized by July 18, 2026, one year after the law took effect. That timeline is tight, and it is now less than five weeks away. The senators' letter lands just two weeks after the public comment period for Treasury's NPRM closed on June 2. If the one-year deadline is not fully met, a backstop date of January 18, 2027 represents the outer limit for implementation.
States are not waiting passively. Georgia, Florida, and Delaware have already passed or introduced legislation designed to align with GENIUS Act requirements, each hoping to attract stablecoin issuers seeking a state charter.
The Stakes for Users Outside the United States
The regulatory outcome in Washington carries direct consequences for stablecoin users in South Asia and sub-Saharan Africa, where dollar-pegged tokens have become core financial infrastructure.
Africa leads global stablecoin adoption. Among crypto-active users on the continent, 79% hold stablecoins, and stablecoins account for 43% of sub-Saharan Africa's total crypto transaction volume. Nigeria and South Africa together processed more than $22 billion in stablecoin transactions in 2023 and 2024. For users in these markets, stablecoins offer practical access to dollar liquidity in countries where local currencies such as Nigeria's naira have lost significant value.
In South Asia, remittance corridors depend increasingly on stablecoin rails. Pakistan's Virtual Assets Regulatory Authority signed an MoU on January 14, 2026, with SC Financial Technologies to explore integrating the USD1 stablecoin into domestic digital payment rails for remittances. India was selected by Zelle for its first international remittance corridor launch, with the ZLUSD stablecoin expected to play a central role before the end of 2026. Meanwhile, TransFi, a Dubai-based stablecoin payments infrastructure firm, raised $19.2 million in March 2026 to expand across 53 countries, with an explicit focus on South Asia and Southeast Asia corridors.
The structure of U.S. stablecoin regulation shapes which issuers can operate, at what cost, and with what level of consumer protection. If Treasury adopts a narrow definition of "substantially similar" and squeezes out state-regulated issuers, the market may consolidate further around USDT (current market cap approximately $186.8 billion) and USDC (approximately $75.8 billion). Together, those two issuers account for approximately 85% of the total stablecoin market by current capitalization figures. A BIS Working Paper places their combined share above 95%, reflecting a different measurement methodology and time period. Either way, further consolidation would reduce counterparty diversity in international corridors. If states retain meaningful authority, smaller, specialized issuers focused on diaspora remittance or emerging market payments would have a clearer path to operate.
What Comes Next
Treasury must finalize its rules before July 18. The senators' letter is not expected to halt that rulemaking process. It may, however, influence how broadly or narrowly Treasury draws the "substantially similar" threshold in the final rule, which is the assessment shared by most regulatory observers tracking the docket. For developers and fintech firms building stablecoin infrastructure for South Asian or African markets, the certification outcomes for state frameworks are worth tracking closely. Those outcomes will determine which issuers remain viable and which are effectively pushed toward federal supervision or out of the market altogether. Treasury's Federal Register docket and updates from the SCRC on state framework certifications are the two most direct sources to monitor as the July 18 deadline approaches.