US Senators Urge Treasury to Uphold State Authority in Stablecoin Regulation

A bipartisan group of US senators has urged the Treasury Department to preserve and promote state authority and participation in the regulation of stablecoins. The senators expressed concern that the Treasury's proposed rules for implementing the GENIUS Act lack clarity regarding the timelines and criteria for states to apply for and obtain certification for their stablecoin regulatory frameworks.

The senators, led by Republican Senator Cynthia Lummis, formally conveyed their concerns in a letter sent to Treasury Secretary Scott Bessent on June 16, 2026. The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, signed into law in July 2025, established a comprehensive federal regulatory framework for stablecoins in the United States. This act permits stablecoin issuers with a market capitalization of $10 billion or less to be regulated at the state level, provided their state regulatory frameworks are “substantially similar” to federal requirements.

The Treasury Department had issued a Notice of Proposed Rulemaking (NPRM) in April 2026, outlining broad-based principles for determining when state regulatory regimes are “substantially similar” to the federal framework. However, the senators emphasized that this NPRM failed to specify timelines or procedural requirements for state certification, creating uncertainty for state regulators. While some states, such as the New York Department of Financial Services (NYDFS), have moved to align their stablecoin frameworks with the GENIUS Act, these federal-level ambiguities negatively impact the overall process.

This situation not only creates a significant environment of uncertainty for state regulators but also has the potential to stifle innovation and competition within the stablecoin market. The dual regulatory structure of the GENIUS Act, encompassing both federal and state levels, aims to balance innovation, flexibility, and uniformity. However, the absence of a clear roadmap for state certification processes risks disrupting this balance and making it challenging for states to effectively fulfill their roles in the digital asset ecosystem.

The GENIUS Act marks the first comprehensive federal law governing payment stablecoins in the US. It aims to unify stablecoin oversight, which previously existed across a patchwork of state and federal guidance, to support responsible innovation, protect consumers, and clarify regulatory boundaries. The law introduces clear rules on how stablecoins are issued, backed, and utilized, prioritizing interoperability and transparency within the broader financial system. The current situation poses a significant implementation hurdle for this act, which seeks to establish a structure similar to the US’s dual banking system, to reach its full potential.

Analysts and market expectations suggest that the Treasury Department needs to issue additional guidance clarifying the application, review, and certification processes for state systems. The senators highlighted the importance of a flexible and continuously open certification process, given that state legislative cycles vary significantly, to ensure states can apply for certification as needed. Such clarity would allow for leveraging the expertise of states in the digital asset space and help the US maintain its leadership in financial innovation.