In the United States, a bipartisan group of senators is urging the Treasury Department to protect state oversight authority in the regulation of stablecoins, especially for smaller issuers operating within state borders. The lawmakers are challenging the Treasury’s approach to implementing the GENIUS Act, insisting that states maintain meaningful supervisory powers.
Senators seek clarity from the Treasury
The initiative, led by Senator Cynthia Lummis of Wyoming, centers on a letter sent to Treasury Secretary Scott Bessent requesting detailed guidance on how states can qualify under the GENIUS Act. The senators stressed that the certification mechanism should encourage, rather than obstruct, state participation and should avoid creating unnecessary hurdles in the process.
According to the senators, the Treasury should not design the certification process as a one-time or time-limited opportunity, but instead ensure permanent access for states, which would better reflect the intent of the law.
Enacted in 2025, the GENIUS Act established a federal framework for payment stablecoins and their issuers. The law also grants states the ability to oversee stablecoin companies, provided those states adopt regulations closely aligned with federal standards. Under the Act, stablecoin operators with a market capitalization of $10 billion or less can fall under state supervision if certain conditions are met.
The senators argued that the Treasury’s preliminary approach lacks sufficient detail regarding the eligibility process. This lack of clarity, they believe, may leave states uncertain about developing their own regulatory frameworks. They called for the Department to release written guidance outlining deadlines, application steps, and procedural requirements.
Debate centers on dual banking system
Lawmakers based their objections on the United States’ dual banking system. They emphasized that, in crafting the GENIUS Act, Congress sought to maintain states’ longstanding role in banking oversight. The senators noted that some states operate on a biennial legislative schedule, making it essential for certification applications to remain open continuously.
They also pointed to the Act’s requirement for annual recertification, seeing it as evidence of the law’s goal for ongoing cooperation between federal and state financial regulators.
$10 billion threshold defines oversight
The $10 billion market cap threshold in the law determines which stablecoin issuers are subject to federal versus state oversight. Currently, major stablecoins such as Tether, USDC, and USDS (previously known as Dai) exceed this limit, placing them under federal rather than state regulation.
Quick glossary: Payment stablecoins are digital assets primarily pegged to the US dollar and used for transfers and payments. The issuer is the organization responsible for circulating the asset and managing its reserves.
| Criterion | Status |
|---|---|
| $10 billion or less | State oversight possible |
| Above $10 billion | Federal compliance prevails |
| Tether, USDC, USDS | Examples exceeding the threshold |
This creates a two-tiered regulatory structure between large and small stablecoin operators. Smaller companies may rely on state licensing if states obtain the necessary federal approval, but the extent of this possibility hinges on the Treasury’s final rulings.
Treasury’s final rules awaited
The Treasury opened a public consultation on state-level stablecoin regulation in April, with the comment period closing on June 2. The Department is now finalizing the regulations for publication in the Federal Register.
The senators argued that fostering responsible innovation and robust oversight are compatible, and that a flexible certification process would help ensure fair competition in the expanding market.
The senators’ letter highlights the ongoing debate over the role of states in applying the GENIUS Act. For smaller stablecoin issuers, the final regulations from the Treasury will determine which paths remain open to them going forward.
