A bipartisan group of senators has called on the Treasury Department to ensure states remain the primary regulators for stablecoin issuers with market caps under $10 billion, as the GENIUS Act moves through Congress. The lawmakers argue that state-level oversight has worked effectively and should not be preempted by federal rules.
The letter, sent this week, underscores a key tension in the ongoing debate over stablecoin regulation: whether federal or state authorities should have the final say over smaller issuers. The GENIUS Act would establish a federal framework for stablecoins, but the senators want to preserve a role for state regulators when it comes to firms below the $10 billion threshold.
Why states matter for stablecoin oversight
The senators argue that state financial regulators have developed deep expertise in supervising digital asset firms, particularly those that don't pose systemic risk. Under the proposed framework, issuers below the market cap cutoff would fall under state jurisdiction — a structure the letter describes as appropriate and proven. The lawmakers worry that concentrating authority in Washington could slow down licensing and innovation, especially for smaller startups.
Stablecoin issuers have historically operated under state money transmitter laws, with New York's BitLicense being one of the most well-known examples. The senators want to ensure that model survives as Congress writes new rules.
What's at stake for the Treasury
The Treasury Department has been weighing its role in the stablecoin market as the GENIUS Act advances. The senators' letter urges Treasury to support maintaining state authority, warning that a federal takeover could stifle competition and drive smaller issuers out of business. The department has not publicly responded to the letter.
The push comes as stablecoins like USDC and USDT have grown into a $150 billion market, attracting scrutiny from both regulators and lawmakers. The GENIUS Act, introduced with bipartisan backing, aims to set clear rules for reserves, transparency, and consumer protection. But the division of power between states and the federal government remains a sticking point.
The Treasury has not yet issued a formal position on the state vs. federal question. The senators are asking the department to clarify its stance before the bill moves further.
Next steps on the Hill
The GENIUS Act remains under consideration in the Senate Banking Committee, with no clear timeline for a vote. The senators' letter adds to the pressure on Treasury to weigh in before the committee marks up the bill. Whether state regulators will retain their role — or lose it to a new federal regime — depends on the final language lawmakers adopt.
