Overview
Brookings identifies four critical challenges for regulators implementing the GENIUS Act stablecoin framework. The overarching challenge: translating broad legislative intent into detailed rules that enable payment efficiency while protecting financial stability and the monetary system.
Regulators must establish prudential requirements within 18 months to prevent runs and maintain stable value. The article warns that permissible reserve assets include risky, uninsured bank deposits, which could create “fire sale dynamics” similar to the 2008 money market mutual fund crisis unless proper safeguards exist.
Key Regulatory Challenges
Four Critical Issues
- Capital and Liquidity Standards: Establishing prudential requirements within 18 months to prevent runs and maintain stable value
- Nonfinancial Company Participation: The law allows publicly-traded nonfinancial corporations to issue stablecoins if approved by the Stablecoin Certification Review Committee, threatening traditional banking-commerce separation
- Foreign Issuer Parity: Treasury must ensure “comparable regulatory regime” standards for foreign stablecoin issuers to prevent regulatory arbitrage
- Anti-Money Laundering Capacity: FinCEN must write regulations ensuring issuers possess technological capabilities to detect illicit activity, including AI and blockchain monitoring
The article notes a “glaring loophole” remains: privately-held companies face no restrictions on stablecoin issuance, which only Congress can address.