The Conference of State Bank Supervisors (CSBS) has formally objected to the US Treasury's proposed rulemaking for state-issued stablecoins under the GENIUS Act, arguing the department is overstepping its statutory authority by importing OCC standards into the state regulatory framework.

In its comment letter to Treasury, the CSBS acknowledged that the proposal gets much of the state-level architecture right. Its core complaint is narrower and structural: the Treasury wants state regimes to satisfy rules set by the Office of the Comptroller of the Currency, a federal agency the GENIUS Act did not place in the state certification process.

"The statute does not direct states to follow or defer to the OCC or any other federal payment stablecoin regulator," the CSBS wrote.

What does the GENIUS Act actually require?

The legislation sets a federal baseline for payment stablecoins. State-issued stablecoins must meet or exceed the standards in the Act, and issuers must comply with their own state regulations. Oversight of whether those state regimes are adequate falls to the Stablecoin Certification Review Committee (SCRC), composed of the Treasury, the Federal Reserve and the FDIC.

The OCC has no seat on that committee. Yet the Treasury's proposal, according to the CSBS, effectively writes the agency into the process by requiring state regimes to incorporate OCC requirements.

The CSBS also accused the OCC of using the GENIUS Act as a vehicle to expand the range of activities nationally chartered trusts may undertake — a jurisdictional question that extends beyond stablecoin policy into the broader federal-state banking fault line.

Where does the flexibility argument come in?

The thread running through most of the CSBS objections is that Congress designed the GENIUS Act to preserve state flexibility. States must hold to the Act's baseline, but they retain room to encourage innovation rather than operate under a rigid, uniform rulebook.

The Treasury's proposal splits its requirements between state-calibrated provisions, which use the GENIUS Act as the baseline, and others designated as "uniform." The CSBS objected to the second category, warning that a one-size-fits-all standard contradicts the statute's structure.

"Treasury may not adopt a principle for substantial similarity that prevents states from exceeding the standards or requirements" of the GENIUS Act, the group wrote.

In other words, if a state wants stricter reserves, tighter redemption rules or additional consumer protections than the federal floor, the Treasury cannot use a similarity test to block that choice.

What are the operational consequences?

If the Treasury finalizes the rule as drafted, state-chartered stablecoin issuers could face effectively two supervisors: their state regulator and OCC-derived standards they never elected. That raises compliance costs, creates potential conflict between state statutes and federal expectations, and could discourage issuers from choosing state charters at all — concentrating issuance in the federal pathway.

For state banking departments, the stakes are institutional. A certification regime that quietly imports OCC rules would shift the balance of payment-stablecoin supervision toward Washington and reduce the relevance of the state charter as a regulatory product.

The dispute now sits with Treasury, which must review public comments before finalizing the rule. How it treats the "uniform" requirements and the OCC's indirect role will determine whether state-issued stablecoins develop under a genuine dual system or a federal framework in all but name.