Paradigm Files Comment Letter on Treasury’s GENIUS State Pathway Rulemaking

Today, Paradigm filed a comment letter with the Department of the Treasury in response to the agency’s proposed rule regarding whether state stablecoin regimes are “substantially similar” to the federal regulatory framework under the GENIUS Act. Treasury’s rulemaking is, in many ways, the linchpin of the GENIUS Act’s dual federal-state design: without a workable certification pathway, the state regulatory pathway Congress created exists as a formal matter but operates as a dead letter. Treasury’s proposal offers a reasonable starting framework, and we support its core architecture. 

But there are four places where the proposal, left unchanged, would make the state pathway genuinely unavailable to the issuers it was designed to serve.

• First, Treasury’s proposal anchors the federal framework to OCC regulations that are still proposed and unsettled. Asking states and issuers to plan against a baseline that has not yet been finalized is a direct impediment to market entry. Treasury should not finalize its rule before the OCC’s implementing regulations are final.

• Second, under the rule, the heads of Treasury, the Fed, and the FDIC must unanimously agree to certify a state regime. But the proposed rule imposes no timeline for decisions, no standard for what a meaningful denial explanation looks like, and no mechanism to prevent a single SCRC member from blocking certification indefinitely. Our letter recommends a 180-day decision deadline, a defined cure-and-resubmission process for incomplete submissions, and particularized denial explanations specific enough to actually tell a state what it needs to fix.

• Third, the rule proposes requiring state regimes to mandate a 12-month operating expense operational backstop. This is potentially exclusionary for the early-stage issuers the state pathway was specifically designed to serve. Our letter recommends that Treasury instead allow states to calibrate backstop requirements to issuer size and risk profile, consistent with the Act’s own tailoring mandate.

• Fourth, we are concerned that the proposal does not adequately preempt hostile actions by individual states. A state regime that expands the yield prohibition or that inhibits state-to-state operations would put state issuers at a competitive disadvantage that Congress did not authorize and federalism does not allow. This loophole for state mischief must be closed.

You can read Paradigm’s full comment letter here.