The formation of GENIUS Act regulations marches on, with the US government seeking public comments this summer on various aspects that should be of keen interest to corporate treasurers.
There are looming deadlines coming up in July and August.
The Office of the Comptroller of the Currency (OCC) is seeking comment on proposed rules ensuring that payment stablecoin issuers and state-qualified payment stablecoin issuers comply with laws countering money laundering and finance of terrorism. The deadline to submit is 22nd July.
Then, mark your calendars for 11th August, when a consortium of US agencies will close a comment period on proposed rules establishing regular reporting practices for payment stablecoin issues, both domestic and foreign, registered by the OCC.
At least five US financial regulators are cooperating on the proposed rule to require payment stablecoin issuers to submit quarterly reports to the OCC as well as confidential weekly reports. The forms would ask for documentation of activity and reserve assets.
The regulatory landscape for stablecoin usage is still an emerging subject for corporate treasurers, who are advised to participate in, or at least monitor, the public comment process. Virtually all corporations are familiar with stablecoins, but only 8% were using stablecoins as of last year, according to a survey by EY-Parthenon. That’s even though many of their banking partners probably have services ready for them.
“Some large banks already are offering blockchain-based deposits to existing clients on private internal blockchains,” states a report from Brookings Institution. “For example, J.P. Morgan Chase is offering a deposit token to institutional clients on a privacy-enabled public blockchain for global transactions between corporate clients, and Bank of New York is offering tokenized deposits to its clients to improve collateral and margin workflows.”
John Gannon, Senior Advisor with BNY Global Payments & Trade, notes that the associated regulations are under development now.
“Among the most closely observed developments is the emergence of new forms of digital money, such as stablecoins, which enable always-on, programmable settlement of funds – and will potentially streamline certain cross-border or liquidity-management processes,” Gannon writes in a BNY corporate treasury strategy insights report.
“Treasurers are closely monitoring how digital money is evolving – assessing potential use cases, regulatory developments and infrastructure maturity,” Gannon adds.
The federal agencies are also busy approving emerging banking-related roles.
On 6th July, Japan’s Sony Bank disclosed that OCC had approved its plans to establish a national trust bank plans “in preparation for the commercialisation of businesses related to the issuance and management of US dollar denominated stablecoins in the United States.”
Just four days later, the OCC said it conditionally approved applications for national trust bank charters for Circle’s First National Digital Currency Bank and Ripple National Trust Bank. The same announcement notes that conditional approval was given to others to convert from state to national trust banks: BitGo Bank & Trust, Fidelity Digital Assets and Paxos Trust Company.
“The OCC will continue to provide a path for both traditional and innovative approaches to financial services to ensure the federal banking system keeps pace with the evolution of finance and supports a modern economy,” Comptroller of the Currency Jonathan Gould stated.
The Federal Reserve is, of course, involved in the various stablecoin rulemakings and must consider its own direct involvement.
“The Fed is considering offering limited access to the Fed’s payment rails for federally regulated stablecoin issuers with bank charters,” the Brookings report explains.
“A ‘skinny’ master account would cap balances, not pay interest on balances, not have daylight overdraft privileges, and not be eligible for discount window borrowing,” Brookings continues. “It would permit a non-bank stablecoin issuer with a national trust bank charter to directly clear and settle transactions in central bank money, reducing settlement and liquidity risk. By facilitating convertibility into fiat currency on Fed payment rails, this would simplify the exchange of stablecoins with bank deposits and cash.”
