U.S. senators urge Treasury not to leave states out of GENIUS Act stablecoin process

State regulators got sidelined in the U.S. Department of the Treasury's effort to implement the new U.S. stablecoin law, according to several senators from both parties who insist that the states need to be given an explicit process for proving their supervision and standards are on par with federal regulators'.

The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act to regulate stablecoin issuers is being translated into regulations across several federal financial agencies, including the Treasury. But the opening effort may not have satisfied state regulators who are trying to push their own GENIUS-related regulations, according to a Tuesday letter from the lawmakers, led by Republican Senator Cynthia Lummis, chair of the Senate Banking Committee's crypto subcommittee.

"Treasury’s finalized principles for assessing whether state regimes are substantially similar to the federal regulatory framework are critical in this process," according to the letter, also signed by fellow Republicans and a few Democrats, including Angela Alsobrooks, Catherine Cortez Masto and Kirsten Gillibrand. "The proposed principles were published by Treasury but did not address the timeline and procedural requirements related to state certification."

As a result, the states are confused about next steps, according to the lawmakers, who have been prominent among those negotiating crypto legislation, including the all-important Digital Asset Market Clarity Act that's still winding its way through the Senate.

"We have heard from stakeholders that, absent clear procedural guidance, the certification process could be interpreted or applied in a manner that effectively forecloses future participation," the senators wrote to Treasury Secretary Scott Bessent, whose department had proposed stablecoin regulations in April.

The lawmakers now want a new Treasury effort to produce "written procedural guidance clarifying the application, review, and certification process for state regimes," making sure the process has "clear timelines and requirements" and is flexible enough for widely varied state legislatures to deal with on their own timelines.