The U.S. Department of the Treasury issues proposed rules on the "substantial similarity" standard for state-level stablecoin regulation under the GENIUS Act

Deep Tide TechFlow message, April 02, according to a proposed rulemaking notice (NPRM) issued by the U.S. Department of the Treasury, the Treasury plans to establish broad principles to clarify when state-level stablecoin regulatory regimes can be deemed to be “substantially similar” to the federal regulatory framework, to fulfill the requirements of Section 4© of the “Laying the Groundwork for U.S. Innovation in Stablecoins Act” (GENIUS Act).

The core points are as follows:

1. State-level regulatory regimes must meet or exceed the federal standards set out in Section 4(a) of the GENIUS Act, and must not be less stringent than the federal regulatory floor on core prudential requirements, including reserve assets, redemptions, capital requirements, liquidity management, and risk management;

2. The “federal regulatory framework” definition covers the text of the Act and the interpretations and regulations published by the Office of the Comptroller of the Currency (OCC) in the Federal Register; for the BSA/sanctions compliance portion, the Treasury’s requirements apply; for the anti-binding clause, the Federal Reserve’s requirements apply;

3. Regulatory requirements are divided into two categories: “uniform requirements” and “state-determined requirements.” The former requires state-level regimes to be fully identical in substance to the federal framework, while the latter allows states to set their own requirements, but the regulatory outcome must be at least equally strict;

4. State-level regimes must include supporting frameworks for transitioning to federal oversight, applying for authorization, supervision and enforcement, custody, and insolvency/bankruptcy, and may add additional requirements on the condition that they do not conflict with federal law.