White House Nears Consensus on Stablecoin Rules
U.S. regulatory authorities are reportedly nearing a consensus on stablecoin regulation, with a framework expected by March 1. Proposals include banning or penalizing passive stablecoin rewards and granting enforcement powers to multiple agencies like the SEC and CFTC. While some forms of yield may be permitted, penalties for violations could reach up to $500,000 per day.
- The current regulatory push builds on the November 2021 report from the President's Working Group on Financial Markets, which recommended that Congress enact legislation requiring all stablecoin issuers to be regulated as insured depository institutions to address risks of stablecoin runs and protect users. - The collapse of the TerraUSD (UST) algorithmic stablecoin and its sister token LUNA in May 2022, which erased approximately $45 billion in market value, significantly intensified calls for regulation. Following the collapse, Treasury Secretary Janet Yellen urged Congress to act promptly on stablecoin legislation, citing the event as an illustration of the risks to financial stability. - The de-pegging of USD Coin (USDC) from its $1 value in March 2023 served as another catalyst for the new rules. This occurred after Circle, its issuer, disclosed that $3.3 billion of its reserves were held at the failed Silicon Valley Bank, highlighting the direct link between the stability of the digital asset market and the traditional banking sector. - A significant piece of legislation, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, was signed into law in July 2025, establishing a comprehensive federal framework for stablecoin issuers. - The GENIUS Act restricts the issuance of payment stablecoins to "permitted payment stablecoin issuers," which include subsidiaries of insured depository institutions and other approved entities, and mandates they hold 1:1 reserves in assets like U.S. currency or Treasury bills. - The Office of the Comptroller of the Currency (OCC) will be the primary regulator for federally licensed nonbank stablecoin issuers, while the respective federal banking agency will oversee issuers that are subsidiaries of insured depository institutions. - While the GENIUS Act is now law, its full implementation is pending, with an effective date set for either 18 months after enactment or 120 days after final regulations are issued by federal banking regulators.
