The U.S. Department of the Treasury on April 1, 2026, published an 87-page notice of proposed rulemaking (NPRM) — the first regulation issued under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, signed into law July 18, 2025. The proposal opens a 60-day public...
"Implementing the GENIUS Act is essential to securing American leadership in digital assets. Stablecoins will expand dollar access for billions across the globe and lead to a surge in demand for U.S. Treasuries, which back stablecoins." — Scott Bessent, U.S. Secretary of the Treasury
The U.S. Department of the Treasury on April 1, 2026, published an 87-page notice of proposed rulemaking (NPRM) — the first regulation issued under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, signed into law July 18, 2025. The proposal opens a 60-day public comment period and establishes broad principles for determining whether state-level stablecoin regulatory regimes are "substantially similar" to the federal framework.
The NPRM arrives as the stablecoin market exceeds $300 billion in combined capitalization, with USDC adding $4.5 billion in supply through Q1 2026 while USDT shed approximately $3.2 billion. It follows 333 public comment submissions received during the September 2025 advance NPRM, and a March 31 speech by Federal Reserve Governor Michael Barr warning that the law "adds clarity but does not remove key stablecoin risks." The rulemaking sets the terms of a jurisdictional contest between 50 state regulators and three federal agencies — the OCC, FDIC, and Federal Reserve — over a market projected by Treasury to reach $3.7 trillion by decade's end.
The Treasury NPRM, published April 1, 2026, does not prescribe a compliance checklist. Instead, it proposes broad-based principles that the department will use to evaluate state regulatory regimes on a case-by-case basis. The core question: whether a given state's framework is "substantially similar" to the federal standards codified in the GENIUS Act.
The proposal anchors the federal benchmark largely to rules and interpretations issued by the Office of the Comptroller of the Currency (OCC), which published its own GENIUS Act implementation NPRM on March 2, 2026, via the Federal Register. The OCC's framework governs nonbank entities that apply for permission to issue payment stablecoins as "federal qualified payment stablecoin issuers." For issuers crossing the $10 billion threshold, the OCC serves as primary supervisor.
State frameworks must "meet or exceed" federal requirements across several domains: reserve backing, anti-money laundering (AML) compliance, consumer protections, custody standards, and insolvency procedures. States may exceed federal requirements but cannot conflict with federal law or dilute core protections such as reserve composition or disclosure frequency.
The NPRM builds on an advance notice of proposed rulemaking (ANPRM) issued in September 2025 and a separate August 2025 inquiry focused on illicit activity detection. The Treasury received 333 submissions in response to the ANPRM from individual contributors, state regulators, financial institutions, and payments firms.
The GENIUS Act's architecture creates a dual-track supervisory system hinging on a single metric: $10 billion in consolidated total outstanding stablecoin issuance.
Below $10 billion: Issuers may elect state-level regulation, provided their state's regime passes Treasury's "substantially similar" test. This path is designed for smaller and mid-tier issuers — the long tail of the market that includes regional banks, fintech startups, and crypto-native firms seeking to issue compliant stablecoins without the cost of full federal licensure.
Above $10 billion: Issuers transition to federal supervision under the OCC, FDIC, or Federal Reserve, depending on their charter type. Currently, only two issuers — Tether (USDT, approximately $183.6 billion) and Circle (USDC, approximately $75.3 billion) — exceed this threshold. PayPal's PYUSD, at roughly $1 billion, falls well below it.
The framework creates a regulatory funnel. An issuer that launches under state supervision and grows past $10 billion must migrate to federal oversight. This has capital planning implications: issuers must build compliance infrastructure scalable to federal standards from inception or face costly retrofits upon crossing the threshold.
The FDIC published its own implementation proposal in December 2025, establishing application procedures for FDIC-supervised insured depository institutions seeking to issue payment stablecoins through subsidiaries. The comment period, originally set to close February 17, 2026, was extended to May 18, 2026. No applications will be accepted until final rules take effect, anticipated before the GENIUS Act's statutory effective date — the earlier of January 18, 2027, or 120 days after regulators issue final regulations.
The stablecoin market's composition is changing under regulatory pressure.
USDC's ascent: Circle's USDC added $4.5 billion in supply through March 2026, with its market cap reaching approximately $75.3 billion — up 72% year-over-year, according to CoinGenius. Approximately 86% of surveyed institutional firms now use or hold USDC, compared with 68% for USDT. Circle received conditional OCC approval in December 2025 to establish First National Digital Currency Bank, N.A. Circle's stock (CRCL), which debuted via IPO in July 2025, traded at $121.45 as of March 12, 2026.
USDT's contraction: Tether's market cap declined from $186.8 billion to approximately $183.6 billion since January 2026. The firm burned 6.5 billion tokens across January and February 2026. The shift reflects institutional compliance teams' growing caution: USDT, issued by the El Salvador-headquartered Tether, has never completed a full independent audit, relying instead on attestations.
Daily volumes: Transfer volumes exhibited a major spike reaching $715.3 billion on March 22, 2026 — more than double typical daily activity earlier in the month, according to DefiLlama data.
Bank-issued stablecoins: Ten banks have now issued stablecoins, including JPMorgan Chase (JPM Coin/JPMD via Kinexys), Société Générale (EURCV), and several smaller institutions. JPMorgan plans to issue JPMD natively on the Canton Network. PayPal and Fidelity's FIUSD are pursuing interoperability. The GENIUS Act's framework may accelerate this pipeline: analysts at several firms anticipate a wave of bank-issued stablecoins in late 2026 and early 2027 as final rules take effect.
Section 4(c) of the GENIUS Act prohibits payment stablecoin issuers from paying interest or yield directly to holders. The intent: focus stablecoin use on payments, not deposits, and prevent deposit flight from the banking system into stablecoin holdings.
The OCC's proposed rules, with a comment period closing May 1, 2026, go further. The OCC would extend the yield prohibition to affiliates and third parties — not just issuers. This expansion targets arrangements where issuers funnel yield through intermediaries to circumvent the statutory ban.
The prohibition reshapes the economic model. Stablecoin issuers earn revenue from reserve assets — primarily short-dated U.S. Treasuries — but cannot share that income with holders. Circle, for example, generates substantial revenue from the spread between Treasury yields and zero-cost stablecoin deposits. The Coinbase-Circle revenue-sharing arrangement, which gave Coinbase a percentage of USDC reserve income, faces potential restructuring under the OCC's expanded interpretation, according to VanEck analysis.
The Bank Policy Institute (BPI) has argued the ban should extend further to close what it calls the "payment of interest loophole." The banking lobby contends that any mechanism allowing stablecoin holders to earn returns — however structured — threatens the deposit base that underpins the lending system.
Tether is pursuing parallel compliance paths. On January 27, 2026, the firm launched USAT (USA₮), a federally regulated dollar-backed stablecoin issued through Anchorage Digital Bank under OCC supervision. Cantor Fitzgerald serves as reserve custodian. USAT launched with exchange support from Kraken, OKX, and Crypto.com.
The first USAT reserve attestation, published in March 2026, showed $17.6 million in backing assets — a fraction of USDT's scale but a proof-of-concept for Tether's U.S. market strategy. Tether invested $100 million in Anchorage Digital, valuing the bank at $4.2 billion.
Simultaneously, Tether hired KPMG to conduct its first full audit of USDT reserves — a step the company has deferred for years. The audit targets GENIUS Act compliance, though USDT itself operates outside the Act's framework: issued from El Salvador, it is not required to register as a permitted payment stablecoin issuer.
This creates a regulatory gap. Senator Jack Reed (D-RI) introduced the Foreign Stablecoin Transparency Act in February 2026 to address the loophole, noting that USDT can be freely purchased and used by Americans despite Tether facing no domestic reserve disclosure requirements. Reed's bill would mandate that foreign-issued stablecoins meeting a volume threshold in U.S. markets comply with equivalent reserve transparency rules. The legislation has not advanced out of committee.
Federal Reserve Governor Michael Barr, speaking at a Federalist Society event on March 31, 2026 — one day before the Treasury NPRM — flagged specific risks that the GENIUS Act's rulemaking must address.
Barr warned that "bad actors can purchase stablecoins in secondary markets that may not have customer identification requirements," citing AML gaps in the current ecosystem. He drew historical parallels to the Free Banking Era and the Panic of 1907, when insufficient safeguards led to bank runs and financial instability.
On reserve assets, Barr noted that stablecoin issuers "have an incentive to maximize the return on their reserve assets by extending the risk spectrum, which can increase profits in good times but risks undermining confidence during market stress." The GENIUS Act restricts reserves to "an itemized list of high-quality, highly liquid assets," but Barr indicated that the specific implementation — how regulators define and enforce reserve quality — will determine whether the law prevents runs.
Barr identified five implementation areas requiring resolution: reserve asset regulation, regulatory arbitrage prevention, permissible issuer activities, capital and liquidity standards, and consumer protections. His remarks signaled that the Fed intends to take an active supervisory role despite the OCC's primary position under the GENIUS Act.
The Conference of State Bank Supervisors (CSBS), representing regulators from all 50 states, filed a detailed comment letter urging Treasury to preserve state authority in GENIUS Act implementation.
The CSBS argued that "substantially similar" principles should be flexible and focus on whether state regimes "faithfully implement the fundamental requirements of Section 4 of the GENIUS Act" — rather than requiring mirror-image replication of federal rules. The group called Treasury's proposed timelines for state certification "unrealistically short" and recommended a streamlined process allowing states to express regulatory intent and apply for certification when ready.
The CSBS also insisted that issuers are not banks or money transmitters and cannot engage in lending, yield-bearing programs, or other financial services outside the Act's express authorizations. The group underscored that the GENIUS Act explicitly preserves host-state consumer protection authority for both federal and state-qualified issuers.
The tension is structural. States fear that an overly prescriptive federal framework will render state regulation nominal — a concern sharpened by the NPRM's anchoring of the "substantially similar" standard to OCC rules and interpretations. The OCC, as a federal agency, sets the benchmark that states must match. States worry this creates a one-way ratchet: as the OCC updates its rules, states must continuously chase compliance or lose their regulatory role.
| Date | Event | |------|-------| | July 18, 2025 | GENIUS Act signed into law | | August 2025 | Treasury issues inquiry on illicit activity detection | | September 2025 | Treasury issues advance NPRM; 333 comments received | | December 2025 | FDIC publishes stablecoin application procedures NPRM; Circle receives conditional OCC charter | | January 27, 2026 | Tether launches USAT via Anchorage Digital | | February 2026 | Senator Reed introduces Foreign Stablecoin Transparency Act | | March 2, 2026 | OCC publishes GENIUS Act implementation NPRM | | March 31, 2026 | Fed Governor Barr delivers stablecoin risk speech | | April 1, 2026 | Treasury publishes 87-page NPRM | | May 1, 2026 | OCC comment period closes | | May 18, 2026 | FDIC comment period closes | | ~June 2026 | Treasury comment period closes (60 days from Federal Register publication) | | November 2026 | Full system implementation expected | | January 18, 2027 | Statutory effective date (absent earlier final regulations) |
Treasury's 87-page NPRM, published April 1, 2026, is the first regulation under the GENIUS Act. It establishes principles — not a checklist — for evaluating whether state stablecoin regimes are "substantially similar" to the federal framework.
The $10 billion threshold creates a two-tier system. Only Tether and Circle currently exceed it. Every other issuer, including PayPal, operates in the state-eligible tier. The threshold has capital planning implications for any issuer targeting scale.
The stablecoin market is $300 billion and restructuring. USDC gained $4.5 billion in Q1 2026 while USDT lost $3.2 billion. Institutional preference is shifting toward regulated, audited issuers.
Section 4(c)'s yield ban, expanded by the OCC, reshapes issuer economics. Issuers keep reserve income; holders receive nothing. Third-party yield pass-throughs face prohibition. The Coinbase-Circle arrangement may require restructuring.
Tether is hedging with USAT for the U.S. market while seeking its first full USDT audit via KPMG. The Foreign Stablecoin Transparency Act, if passed, would close the loophole allowing USDT to circulate domestically without U.S. reserve disclosure.
The Fed is not ceding the field. Governor Barr's March 31 speech flagged AML gaps, reserve quality risks, and run vulnerabilities — signaling active Fed engagement in the rulemaking process.
State regulators are fighting for relevance. The CSBS called Treasury's certification timelines "unrealistically short" and warned against reducing state regulation to a nominal role.
The Treasury's April 1 NPRM marks the transition from legislation to regulation for the U.S. stablecoin market. The 87-page document is the first of several interlocking rulemakings — from the OCC, FDIC, and Federal Reserve — that will collectively define the operating environment for an asset class that settles hundreds of billions of dollars daily.
The economic value at stake is substantial. Stablecoin issuers earn revenue from the spread between reserve asset yields and the zero cost of stablecoin deposits. Treasury Secretary Bessent has projected the market could reach $3.7 trillion by decade's end. At current Treasury yields, that implies tens of billions of dollars in annual issuer revenue — revenue that, under Section 4(c), cannot be shared with holders.
The rulemaking's outcome will determine whether the stablecoin market consolidates around a handful of federally supervised issuers or sustains a diverse ecosystem of state-regulated participants. It will determine whether Tether's USDT — the largest stablecoin by capitalization but the least transparent by disclosure standards — can maintain its market position as institutional capital shifts toward regulated alternatives. And it will determine whether the "substantially similar" standard becomes a cooperative framework or a federal preemption mechanism that marginalizes state regulators.
The 60-day comment period is open. The stakes, for a $300 billion market with trillion-dollar aspirations, are set.