A better way to make stablecoins safe and secure

Last year, Congress passed the GENIUS Act by big margins in the House and Senate, the first comprehensive federal framework for stablecoins. This law requires 100% reserve backing of these coins with safe assets, monthly public disclosures, registration with federal or state regulators, strong consumer protections, and anti-money laundering compliance.

The law is meant to establish clear guardrails for the financial road to help avert any kind of e-commerce crash that could sink the economy.

At the Treasury, the Office of the Comptroller of the Currency is crafting the implementing regulations.

It’s tricky business. Banks fear, understandably, that the carefully balanced arrangement struck in Congress would be undermined by a Wild West set of lax rules that could put the financial system and the soundness of the banking system at risk. On the other hand, rules that unnecessarily handcuff the stablecoin industry would undermine many of the inherent benefits of digital currencies. Excessive and stifling regulation could also push the industry transactions into the hands of high-risk, and in some cases, nefarious, foreign operators.

The OCC’s current Notice of Proposed Rulemaking tries to strike a balance of safety and security, and is close to accomplishing it. We would suggest three key improvements.

First, the OCC should abandon the idea of limiting an approved issuer to a single brand. Banning multiple brands would mean a second brand requires an entirely separate company, with its own license, management team, IT systems, and government examinations. Nowhere else in the economy is a regulated entity limited to just a single brand. There is no logical reason that a company with all of the required structure shouldn’t be able to offer multiple products.

Second, we would broaden the assets for reserve requirement, which, as proposed, would be nearly all short-term U.S. Treasuries. Market projections show stablecoins could reach $1 trillion to $2 trillion by 2028. That scale could unnecessarily concentrate large volumes in the short end of the Treasury curve. While strict reserves promote stability, the flexibility of allowing other cash equivalents, such as longer-term Treasuries or agency securities, could provide slightly higher returns without sacrificing the essential safety of the coins.

Finally, the loophole that allows foreign-issued stablecoins to operate without reserve verification should be eliminated. It makes no sense to impose more stringent rules on American issuers as part of a regime intended to cement U.S. leadership in this area.

The OCC should understand that the purpose of this rulemaking is to clear the path to a safe, efficient, and competitive digital currency system that facilitates trillions of dollars in free-market transactions. That is in keeping with what President Donald Trump intended when he signed into law the GENIUS Act into law.

Steve Moore is co-founder of Committee to Unleash Prosperity and an expert on the intersection of law, economics, and public policy formation. Phil Kerpen is president of American Commitment and Principal at Committee to Unleash Prosperity.