The US government has delivered additional clarity on the GENIUS Act rollout and the next stages of tokenisation, offering corporate treasurers a better idea of what protections and scrutiny will underly payment stablecoin issuance.
On 21st October, the Office of the Comptroller of the Currency (OCC) announced the final rule for the implementation of the GENIUS Act requirements. The last stage of the rulemaking included modification to regulations covering yield arrangements, reserve requirements, minimum capital floors, operational backstops, and some redemption and self-custody controls.
“We are providing a clear, practical framework for payment stablecoin innovation, with strong standards for reserve backing, redemption and risk management,” commented US Comptroller of the Currency Jonathan Gould.
Also last month, the Federal Reserve Bank of Kansas City published a payments research briefing that outlines the next set of challenges for tokenisation. The Fed staff noted the greater complexity in the emerging payment rails, including the central bank’s own FedNow, and the movement of money via stablecoins.
“Facing an uncertain payments future, banks are taking a multipronged approach to meet customers’ future demands,” the Kansas City Fed writes. “Customers may want access to multiple payment systems, as different payment methods solve different problems. For example, tokenised deposits may be good for wholesale cross-border money movements, stablecoins may be suited for cross-border B2B and P2P payments, and instant payment rails may be used for most domestic money transfers.”
Tokenisation poses liquidity issues
The push towards tokenisation, however, “presents challenges for banks and the banking system. Regulations will need to be modified to meet the special needs of the movement of deposit tokens and tokenised deposits,” the Fed staff further warns.
“For example, it is not yet clear how the bank frameworks know your customer, anti-money laundering and combating the financing of terrorism will be implemented, or how deposit insurance will work with deposit tokens. Banks will also face new challenges in liquidity management, as they must anticipate faster, round-the-clock, and less consistent deposit outflows.”
The Fed’s report predicts that tokenisation ultimately may impact deposit “stickiness”, defined as the likelihood that a deposit will not be withdrawn. It may “blur the line” between operational cases used for daily expenses and non-operational funds whose baseline purpose is to earn yield.
“Anticipating and addressing these challenges will be crucial as both demand and implementation of commercial bank deposit tokenisation grow,” the Fed experts conclude.
Rebeca Wiadacz, a longtime corporate cash management official and treasurer in the logistics and health-care segments, says innovative blockchain solutions are a catalyst for faster payments across geographies. Risk mitigation is vital, however.
“I believe the banking system is on the right track, but it will take a minute until the stablecoins and blockchain become mainstream,” Wiadacz tells Treasury Today Group. “The ledger needs to be shared with all the participants of the system. Otherwise it defeats its purpose. That is my two cents.”
Final rule removes, amends prior proposals
In the final GENIUS Act rule, some earlier proposals were reconsidered, and other monitoring likely will evolve as a result of lessons learned during early implementation.
“The final rule relaxes several proposed requirements, including eliminating the rebuttable presumption on yield, while introducing new obligations such as stress testing of reserves and, where necessary, reserve buffers,” the law firm Wilmer Hale notes in a 27th October client alert.
“Several important issues will be resolved through the application process and ongoing supervision, including how the OCC will evaluate yield arrangements and its expectations regarding stress testing, reserve buffers and application of the new capital requirement.”
Now that the final rule is available, implementation will arrive rapidly. Two of the required filings are due by 18th January.
“That date has teeth,” another law firm, Orrick, Herrington & Sutcliffe LLP, wrote in its own summary on 30th October. Participants should act quickly to prepare.
“After January 18th, 2027, no one may issue a payment stablecoin in the United States without approval under either the federal or state framework or an OCC waiver,” the Orrick firm emphasises. “Existing issuers that cannot be licenced by then need two filings on record: a substantially complete application and a written waiver request.
“Because the OCC takes up to 30 days to rule on completeness, prepare the application now, schedule a prefiling meeting, and file the day OCC intake opens.”
