OCC GENIUS Act Implementation Proposal Must Balance Innovation with Stability

Washington, D.C. - The OCC's proposed rule on GENIUS Act implementation requires updates and clarifications to better balance the potential benefits of stablecoins with the risks to financial stability and consumer protection, the Bank Policy Institute, Consumer Bankers Association and Financial Services Forum said in a comment letter filed today.

"The way in which the GENIUS Act is implemented, and the prudential requirements that will apply to payment stablecoin issuers, could have significant effects on financial stability, credit creation, consumer protection and the broader economy. Changes and clarifications to the proposed rule are important to ensure the GENIUS Act is implemented in a manner that, as Congress envisioned, appropriately balances the benefits and innovative potential of payment stablecoins with the broader economic and consumer protection risks that these instruments may pose." - BPI, CBA and FSF

Context. The GENIUS Act establishes a new federal framework for payment stablecoins and directs the OCC to implement key elements of that framework through regulation and supervision. The OCC's proposal addresses the requirements that would apply to permitted payment stablecoin issuers it will regulate and supervise, including capital, liquidity and operational risk management standards. Given the novelty of payment stablecoins and their potentially significant role in the financial system, the associations emphasize the importance of a prudential framework that is durable, risk-appropriate and aligned with broader financial stability objectives.

Recommendations. The associations urge the OCC to ensure that the rules implementing the GENIUS Act reflect the following principles:

• Balancing innovation with safety and soundness, ensuring that payment stablecoin issuers operate in a safe and sound manner and cannot evade the requirements of the GENIUS Act. In addition, the OCC should ensure that the scope of "payment stablecoins" is clearly defined and sufficiently broad to include future innovations.

• Avoiding harm to lending and the real economy by carefully considering how the proposed framework could affect deposit-taking, credit provision and competition between banks and non-bank financial institutions. This should include applying the prohibition on payment of interest or yield in a manner that addresses the numerous ways in which payment stablecoin issuers may coordinate with affiliates and third parties to evade the prohibition.

• Applying the principle of "same risk, same regulation," recognizing payment stablecoins as debt obligations of the payment stablecoin issuer and subjecting these issuers to commensurate supervision and regulation, including appropriately tailored requirements for capital, liquidity, risk management, reporting and timely redemption.

• Committing to timely re-evaluation of the framework, within three years of the GENIUS Act's effective date, of the OCC's regulatory and supervisory approach to payment stablecoins based on market and supervisory experience.

The letter stresses that the associations' recommendations would help ensure that the OCC's rules support responsible innovation while mitigating risks to consumers, the banking system and the broader economy.

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About Bank Policy Institute

The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud and other information security issues.

About Consumer Bankers Association

The Consumer Bankers Association represents America's leading retail banks. We promote policies to create a stronger industry and economy. Established in 1919, CBA's corporate member institutions account for 1.7 million jobs in America, extend roughly $4 trillion in consumer loans and provide $275 billion in small business loans annually. Follow us on X @consumerbankers.

About Financial Services Forum

The Financial Services Forum is an economic policy and advocacy organization whose members are the eight largest and most diversified financial institutions headquartered in the United States. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.

Media Contact

Sam FabensBank Policy [email protected]

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Laura PeaveyFinancial Services [email protected]