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The U.S. Treasury Department has launched a consultation to guide implementation of the GENIUS Act, requesting public comments by October 17. The department is seeking feedback on tools such as blockchain analytics, artificial intelligence, and digital identity verification for combating illicit finance. Treasury confirmed that the findings will be submitted to Congress as part of the mandated reporting process.
Treasury Outlines Consultation Process
Treasury issued its notice on Monday, inviting “interested individuals and organizations” to share input on digital asset oversight. Officials stressed that contributions will help establish clear standards for stablecoin risk management. The consultation will shape regulations under the GENIUS Act, signed into law by President Donald Trump in July.
The department noted that comments should address solutions for monitoring money laundering and terrorist financing risks linked to cryptocurrencies. Respondents are encouraged to propose technological approaches, including application programming interfaces and identity checks. Treasury emphasized that practical tools are necessary to maintain compliance across institutions.
Treasury Secretary Scott Bessent called the consultation “essential” for protecting U.S. leadership in digital assets. He said, “Stablecoins will expand dollar access for billions across the globe.” Bessent added that increased demand for U.S. Treasuries would follow wider stablecoin adoption.
Key Provisions of the GENIUS Act
The GENIUS Act creates a federal framework for stablecoin regulation, requiring tokens to be fully backed by dollars or liquid assets. Issuers with market capitalization above $50 billion must undergo annual audits. Additionally, the law establishes requirements for foreign issuers offering stablecoins in U.S. markets.
The law is scheduled to take effect 18 months after Trump’s signature. However, enforcement could begin sooner if Treasury and the Federal Reserve finalize regulations within 120 days. This timeline provides financial institutions with a limited adjustment period.
Banking groups have raised concerns over potential loopholes in the law. Specifically, they warned about the absence of explicit prohibitions on paying interest to stablecoin holders. Analysts argue such gaps could accelerate deposit flight from traditional banks.
Political and Market Implications
The GENIUS Act represents the first federal crypto legislation signed into law under Trump. It sets a precedent for regulating dollar-pegged tokens, with implications for both U.S. banks and international competitors. Treasury officials highlighted that stablecoin oversight is crucial to maintaining financial stability.
The law was passed alongside two additional Republican-backed bills: the CLARITY Act and the Anti-CBDC Surveillance State Act. Both measures remain under Senate review, with action expected later this year. Senate Banking Committee leaders indicated plans to advance their own version of the CLARITY Act by October.
Market analysts warn that consumer adoption of stablecoins could outpace traditional safeguards. TD Cowen analyst Jaret Seiberg wrote, “We believe the flight to stablecoins would be a bigger threat than money market funds during the 2008 crisis.” Treasury’s consultation is designed to address these concerns.
Summary
The U.S. Treasury has initiated a consultation to gather public feedback on implementing the GENIUS Act, the country’s first federal stablecoin law. The department seeks comments on compliance tools to curb illicit finance and protect financial stability. The law requires stablecoins to be fully backed and audited, with new rules for both domestic and foreign issuers. Treasury’s findings will be reported to Congress, while Senate leaders prepare additional digital asset legislation.
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FAQs
What is the GENIUS Act?
The GENIUS Act is a federal law regulating stablecoins. It requires full dollar or liquid asset backing and annual audits for large issuers.
When does the GENIUS Act take effect?
The GENIUS Act becomes effective 18 months after signing, or within 120 days of final regulations by the Treasury and the Federal Reserve.
Who must comply with the law?
All stablecoin issuers offering products in the United States must comply, including foreign issuers targeting U.S. consumers.
Why is Treasury seeking public feedback?
Treasury seeks feedback to evaluate tools for detecting illicit activity in digital assets and to strengthen oversight under the GENIUS Act.
What concerns have banks raised?
Banks worry about loopholes related to interest payments, which could drive depositors toward stablecoins and away from traditional banking.
Glossary of key terms
Stablecoin – A cryptocurrency developed to have a stable value, commonly pegged in reference to the U.S. dollar.
GENIUS Act- Guiding and Establishing National Innovation by Federal Stablecoins Act.
CLARITY Act – SB 1342, an associated proposed legislation on more widespread digital asset regulation.
CBDC –Central Bank Digital Currency, digital currency issued by a government separate to privately run stablecoins.
Blockchain analytics – systems to record and track cryptocurrency transactions to enable compliance and security controls.
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