US GENIUS Act moves toward implementation as regulator publishes draft rules for stablecoin issuers

• The National Credit Union Administration has unveiled draft rules for applicants seeking to issue stablecoin payments.
• The proposed stablecoin rule-making framework marks the initial step toward implementing the GENIUS Act.
• Stakeholders have been invited to submit comments via the Federal Register, with NCUA expected to meet Congress's July 18 deadline.

The National Credit Union Administration (NCUA) has published a Notice of Proposed Rule Making outlining the framework for applications seeking the regulator's approval to issue stablecoins under the United States (US) GENIUS Act.

NCUA on track to implement the GENIUS Act

The NCUA, one of the regulators tasked with implementing the GENIUS Act, which became a stablecoin governing law in July, said on Wednesday that the proposed rule is open for review in the Federal Registry. Stakeholders are invited to submit comments before the April 13 deadline.

Other regulators responsible for formulating rules to implement the payment stablecoin framework are the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Federal Reserve (Fed). The NCUA is the first regulator to take steps toward operationalising the GENIUS Act.

"We're on track to meet the Congress' July 18 deadline. Credit unions should be aware that they won't be at a disadvantage versus other entities, whether in timing or standards," NCUA Chairman Kyle Hauptman said.

Under the GENIUS Act, the NCUA is charged with licensing, regulating, and supervising payment stablecoin issuers that are subsidiaries of federally insured credit unions (FICU subsidiaries).

The NCUA proposed rule states that, under the GENIUS Act, insured depository institutions are not eligible to serve as issuers of payment stablecoins. However, they can do so through subsidiaries as issuers. Moreover, insured depository institutions must have a 10% stake in the FICU subsidiary. The NCUA licence will be issued to the subsidiaries.

The regulator will take 120 days from the date of receipt of a duly filled application to make a decision. Applicants will have the chance to resubmit applications if rejected. The NCUA will review public comments after the April 13 deadline, after which it will revise the rulemaking framework and clarify the provisions. Following the revision, updated, legally enforceable rules will be published, marking the final step in implementing the GENIUS Act.

"This proposed rule proposes regulations to implement the statutorily required process for approval and licensure of permitted payment stablecoin issuers (PPSIs) subject to the NCUA's jurisdiction," the NCUA stated via the Federal Registry.

Larger stablecoin issuers, including USDT's Tether, USDC's Circle and RLUSD's Ripple, fall under the OCC's oversight. These players have applied for national trust bank licenses.