On October 19, a coalition of organizations representing state bank and financial regulators, money transmitter regulators, state credit union supervisors and state legislatures submitted a joint comment letter to Treasury. The letter responds to Treasury’s NPRM implementing the GENIUS Act’s limits on payment stablecoin issuance and on the offer and sale of payment stablecoins by digital asset service providers (previously covered by InfoBytes here). The groups urged Treasury to create safe harbors that let issuers operate under qualifying state regimes as of the act’s effective date. They said this would carry out “the GENIUS Act’s clear intent to preserve an important role for state regulation of payment stablecoin issuers.” They noted that the proposal already includes a safe harbor for issuers seeking federal approval as of the effective date.

Under the GENIUS Act, a state regulator certifies that its regime is “substantially similar” to the federal framework, and the Stablecoin Certification Review Committee then reviews that certification under a different standard, namely whether the state regime meets or exceeds the act’s federal requirements. The groups said the time between a state’s certification and the committee’s approval creates uncertainty and, because federal applicants already have a safe harbor, the gap could also push issuers toward OCC approval even if they would prefer a state regulator. They asked for a safe harbor covering issuers under certified but not yet approved state regimes, including the 180-day period a state has to fix its certification after a denial. They also said most of the relevant implementing rules remain unfinished, even though the statute required them by July 18.

The groups asked for a second safe harbor, with conditions, for issuers waiting on states that have filed a conditional certification with the committee. It would apply where the state expects to submit a final certification by January 18, 2028, and the issuer meets GENIUS Act requirements and the state’s existing stablecoin rules. The state would also have to let the issuer keep issuing while it finalizes its regime. The protection would end if the state indicates it will not submit a certification by that date. The letter also requested another safe harbor for issuers in states whose annual recertification the committee denies after a material change to the state’s framework. Without that protection, the groups warned, states could be locked into their originally certified regimes, which could hold back new business models. Finally, the groups asked Treasury to state in the final rule that the GENIUS Act does not set up a comprehensive regulatory framework for digital asset service providers, and that state laws still apply to them.