The U.S. Treasury Department issued its first proposed rule under the GENIUS Act, opening a federal notice-and-comment process for certifying state regulators to oversee payment stablecoin issuers.

The proposal, flagged by legal publisher JDSupra, addresses the state-supervision track created by the Guiding and Establishing National Innovation for U.S. Stablecoins Act, which President Trump signed into law on July 18, 2025. Treasury's rule initiates the process for determining which state regulatory regimes will be permitted to supervise stablecoin issuers operating below the federal chartering threshold.

What does the GENIUS Act require for state oversight?

The statute divides oversight of payment stablecoins between federal banking regulators and state authorities based on issuer size. Issuers with more than $10 billion in outstanding stablecoins must operate under a federal charter from the Office of the Comptroller of the Currency or as a subsidiary of an insured depository institution. Issuers below that threshold may apply to operate under a state regulatory framework, provided Treasury certifies that the state's regime is "substantially similar" to the federal standards.

The Act defines a "permitted" stablecoin issuer as one that holds reserves backing tokens on a one-to-one basis with high-quality liquid assets, including U.S. currency and Treasury bills. Issuers must also provide redemption rights to holders and comply with disclosure obligations. State regulators seeking certification will need to enforce equivalent standards within their jurisdictions, including routine examinations of issuer reserve composition.

Treasury's proposed rule, the first issued under the statute, sets out how state regulators will apply for that certification and the criteria they must satisfy.

Why does the rule matter now?

Treasury faced a 120-day deadline from enactment to publish an interim final rule on the federal permitting process for larger issuers. The state-oversight proposal sits outside that initial timeline, and its publication marks the start of secondary rulemakings required by the Act. Those additional rulemakings cover anti-money-laundering standards, examination procedures for permitted issuers, and the state-certification framework.

The proposal is the procedural mechanism that will determine when state-supervised issuers can begin operating under the Act's state track. State regulators — including the New York Department of Financial Services, which supervises dollar-pegged tokens through its BitLicense regime, and Wyoming's special-purpose depository framework — will eventually apply for certification. Several existing stablecoin issuers operate under state trust company charters, and the certification process will determine whether those structures transition seamlessly into the new federal framework or require additional regulatory steps.

What is the path forward?

The proposed rule enters a standard notice-and-comment period before Treasury issues a final version. Until at least one state regime receives federal certification, all permitted stablecoin issuers under the Act must operate under federal oversight regardless of size. The timing of a final state-oversight rule will set the schedule for the first cohort of state-supervised issuers to enter the market under the new federal framework, with industry response during the comment period likely shaping the implementation timeline.