Re-Litigating the GENIUS Act Brings Risk and No Rewards
The GENIUS Act represents a bipartisan stablecoin framework intended to protect consumers, support innovation, and maintain the dollar’s global leadership. The implementation of the Act rests with federal regulators, including the Office of the Comptroller of the Currency (OCC).
Regulators face technically demanding tasks such as defining reserve composition, audits and disclosures, licensing and capital standards, and anti-money laundering and sanctions regimes. The rulemaking process is expected to extend into 2026.
There is a lobby from big banks seeking to block third-party yield and rewards for stablecoins, arguing that this would short-circuit the rulemaking process. Proponents warn that such efforts would undermine the GENIUS Act and broader market structure initiatives.
The Act bans issuer-provided yield but allows third-party rewards. Stablecoins are fully backed by cash and short-term Treasury securities and do not engage in maturity transformation or leverage.
The rewards programs for stablecoins are framed as optional third-party incentives, comparable to cash bonuses or airline miles, with aims to boost consumer choice and competition.
There is skepticism regarding the potential for deposit flight from insured banks; however, the article argues that greater stablecoin adoption does not displace deposits at scale and is primarily used for payments, settlement, and cross-border activity.
Congress deliberately delegated rulemaking on packaging, distribution, and third-party programs to regulators during the GENIUS Act’s implementation. Lawmakers are advised not to reopen these issues amid ongoing market structure negotiations.
The author urges completing the GENIUS Act implementation before considering any targeted amendments. This approach is recommended to preserve bipartisan trust, ensure the success of crypto market structure legislation, and allow for data-driven review once regulators gain experience.
