Treasury: When Implementing GENIUS, Follow Congress’ Direction

To ensure laws are implemented well requires constant vigilance.

Today, Paradigm is filing a comment with the Treasury Department in response to its Advanced Notice of Proposed Rulemaking (ANPRM) from Sep. 19, regarding the implementation of the GENIUS Act. This matter carries profound significance. At its core, the question is whether the Treasury will honor Congress’s clear intent or allow the GENIUS Act to be reshaped into something it was never meant to be. The law must be implemented exactly as written, faithfully, and in full accordance with the text enacted by Congress.

Today, there is a real danger that the GENIUS Act, as implemented, could become a grotesque distortion of the law -- a warped imitation of what Congress actually enacted. Just as we would not hang a scrawled facsimile of the Mona Lisa in the Louvre, we cannot allow a twisted version of the GENIUS Act to stand in place of the paragon Congress intended.

A fierce fight has emerged over one aspect of the GENIUS Act: whether affiliates of stablecoin issuers or others may pay yield or interest to holders. But this is not a new battle. It is an attempt to relitigate, through rulemaking, an issue Congress already settled when it enacted the law.

As our comment details, Congress considered this very question and resolved it decisively. The law prohibits stablecoin issuers from directly paying yield or interest to holders, but it places no such restriction on other entities – including affiliates. That judgment is embedded in the statute itself. No administrative agency has the power to rewrite Congress’s choice through regulation.

More importantly, altering the law’s boundaries would undermine the GENIUS Act’s purpose. Payment stablecoins are neither banks nor money market mutual funds; they are something new. Allowing affiliates to pay rewards or interest to users strengthens this system, delivering tangible benefits to stablecoin holders rather than inflating corporate profits. At a time when many households are searching for ways to make ends meet (and when traditional financial institutions are cutting back on interest payments) affiliate interest programs create healthy competitive pressure on incumbents to share more value with consumers. Interest payments from affiliates are a pro-consumer innovation, precisely the kind of development policymakers should encourage, not constrain.

Opponents of stablecoin issuers paying interest are relying more on speculation than evidence. As we detail, these claims rely on thin research and speculative models that lack real-world support. Agencies should not base regulatory decisions on conjecture.

Caution against altering a core feature of the GENIUS Act is especially warranted given the real-world evidence already available. For several years, digital asset platforms have offered rewards programs without any observable impact on bank deposit levels. 1 Likewise, jurisdictions with established stablecoin regimes, including in Japan and the European Union, have seen no measurable drops in deposits. Deposit flight isn’t just a dog that hasn’t barked, it’s a dog that hasn’t even stirred.

Beyond preserving affiliates’ ability to pay interest, our comment also advances another key point: payment stablecoins should be treated as cash equivalents for all retail and consumer transactions. Federal statute and common usage already define “cash” to include its equivalents, including checks. Payment stablecoins meet this definition because they are (i) intended to be used as payment and (ii) redeemable for legal tender under a regulatory structure that provides at least as much protection for payees as traditional cash equivalents like checks or commercial bank money.

Additionally, stablecoins are, under GENIUS, regulated more stringently than many financial instruments already being treated as cash today. For example, under GENIUS, payment stablecoins are required to be backed 1:1 with various extremely low-risk reserve assets, such as U.S. currency. Conversely, banks are permitted reserve requirements far lower than the 1-to-1 reserve required of payment stablecoins. In fact, Regulation D no longer requires member banks to maintain reserves on transaction accounts or savings accounts. 2

As the saying goes in Washington, the real fight begins after the law is passed. But we are committed to making sure the regulatory regime reflects the law as written, not some hollow, lobbyist-influenced imitation of it.

GENIUS Act Implementation Comments here.