SEC Proposes Regulation Crypto Assets, White House Hosts Crypto Meeting, Treasury and OCC Advance GENIUS Act Rulemaking and States Enact Stablecoin Frameworks

The SEC introduced Regulation Crypto Assets, a proposed tailored offering regime for non-security crypto assets subject to an investment contract, building on the SEC’s March 17 interpretation. The White House hosted a meeting of crypto and traditional financial market executives and urged the Senate to pass the Clarity Act. The Treasury Department issued a notice of proposed rulemaking seeking public comment related to Treasury’s implementation of Section 3 of the GENIUS Act, which governs who may issue, offer or sell payment stablecoins in the United States. The Comptroller of the Currency said the OCC will issue the final rule establishing its licensing, activities and prudential framework for OCC-regulated payment stablecoin issuers by November and will be ready to process issuer applications in January. The CFTC Chairman said he has directed staff to begin exploring crypto market structure rules under the agency’s existing authority in the event the Clarity Act does not advance, stating that he will direct staff to move swiftly to propose the rules if Democrats cannot support the bill. Several states have enacted stablecoin issuance frameworks designed to be substantially similar to the GENIUS Act, including Alabama, Delaware, Florida and Georgia.

Regulatory Updates

SEC Proposes Regulation Crypto Assets

• On Aug.18, the SEC introduced Regulation Crypto Assets, a proposed tailored offering regime for non-security crypto assets subject to an investment contract, building on the SEC’s March 17 interpretation. 
• The proposal establishes four main components: (1) an investment contract safe harbor providing a defined path for crypto assets sold pursuant to an investment contract to “exit” securities status; (2) a non-exclusive “startup exemption,” which would allow for offerings up to $5 million during a four-year period; (3) a non-exclusive “fundraising exemption” allowing for offerings of up to $75 million in each 12-month period; and (4) the preemption of state registration and qualification requirements for offerings under Regulation Crypto Assets and for certain secondary market transactions. The proposed rule was published in the Federal Register on Aug. 21, with comments due on or before Oct. 20.
• Additional details can be found here.

White House Hosts Crypto and Financial Markets Innovation Meeting

• On Aug. 19, the White House hosted a meeting of crypto and traditional financial markets executives, attended by the SEC Chairman Paul Atkins, CFTC Chairman Michael Selig and chief executives of major crypto exchanges, trading platforms and national securities exchange operators. The President urged the Senate to pass the Clarity Act, describing the legislation as critical to U.S. leadership in emerging technologies. The meeting took place one day after the SEC proposed Regulation Crypto Assets and one day before the first meeting of the CFTC’s Innovation Advisory Committee.

Treasury Proposes Rules Defining US Stablecoin Market Entry Under the GENIUS Act

• On Aug. 17, the Treasury Department issued a notice of proposed rulemaking seeking public comment related to Treasury’s implementation of Section 3 of the GENIUS Act, which governs who may issue, offer or sell payment stablecoins in the United States.
• The proposed rule was published in the Federal Register on Aug. 18, with comments due on or before Oct. 19.

Comptroller Says Final OCC Stablecoin Rule Coming by November, Applications in January

• On Aug. 19, at the Wyoming Blockchain Symposium, Comptroller of the Currency Jonathan Gould said the OCC will issue the final rule establishing its licensing, activities and prudential framework for OCC-regulated payment stablecoin issuers by November and will be ready to process issuer applications in January.

CFTC Chairman Speaks at First Innovation Advisory Committee Meeting

• On Aug. 20, Chairman Selig delivered opening remarks at the inaugural meeting of the CFTC’s Innovation Advisory Committee. Selig said he has directed staff to begin exploring crypto market structure rules under the agency’s existing authority in the event the Clarity Act does not advance, stating that he will direct staff to move swiftly to propose the rules if Democrats cannot support the bill.

CFTC Proposes Registration Exemptions for Commodity Pool Operators and Commodity Trading Advisors

• On Aug. 18, the CFTC published a notice of proposed rulemaking proposing amendments to its Part 4 regulations governing commodity pool operator and commodity trading advisor registration. The proposal would add an exemption from CPO registration for SEC-registered investment advisers operating commodity pools limited to certain sophisticated investors; add a related CTA registration exemption; and double the capital contribution threshold in the small pool exemption from $400,000 to $800,000 to reflect inflation. Comments are due 45 days after Federal Register publication.

CFTC Requests Comment on Compute Derivatives

• On Aug. 19, the CFTC issued a request for comment to inform its understanding and oversight of derivatives markets in compute, the computing capacity underlying artificial intelligence workloads. Chairman Selig stated that “America cannot win the AI race without a robust derivatives market for compute.” The proposed rule was published in the Federal Register on Aug. 21, with comments due on or before Oct. 20.

Additional Updates

CFTC Resolves Enforcement Actions Against Former Crypto Exchange Executives

• On Aug. 19, the CFTC announced that the U.S. District Court for the Southern District of New York entered supplemental consent orders against a cryptocurrency firm’s former CEO and the firm’s co-founder. The order requires them to continue cooperating with the CFTC and imposes trading and registration bans on them. The court entered an initial consent order in 2022, finding them liable on counts of fraud.

States Enact Stablecoin Issuance Regimes Designed to Be Substantially Similar to the GENIUS Act

• Several states have enacted stablecoin issuance frameworks designed to be substantially similar to the GENIUS Act. The GENIUS Act introduces a dual-track framework that permits certain smaller issuers, those with less than $10 billion in consolidated outstanding stablecoin issuance, to opt into a state-level regulatory regime, provided that the regime is certified as “substantially similar” to the federal framework. Certification of a state regulatory regime under the GENIUS Act requires a determination by a new Stablecoin Certification Review Committee, composed of the Treasury, the Federal Reserve and the FDIC. Recently passed state bills include:
  • Alabama. HB 259 implements Section 4(c) of the GENIUS Act, creating a regime governing regulation of payment stablecoins at the state level. The legislation prohibits a person from issuing payment stablecoins unless that person is a permitted payment stablecoin issuer and prohibits the offer or sale of any payment stablecoin, beginning in 2028, unless the payment stablecoin is issued by a permitted payment stablecoin issuer. The bill also authorizes the Alabama Securities Commission to process and license applicants to become Alabama qualified payment stablecoin issuers and to enforce the new statute.
  • Delaware. SB 19 creates a licensing framework for payment stablecoin issuers and digital asset service providers operating with or on behalf of Delaware residents. The Act adopts definitions drawn from the GENIUS Act and from the OCC’s proposed rulemaking implementing that statute, where those definitions do not duplicate existing Delaware law.
    • The Act establishes reserve requirements, including reserve shortfall remediation cascades, mandatory redemption timing standards, capital standards, anti-money laundering obligations, data privacy statutory floors, change-in-control notice procedures, custody safeguards, a federal-to-state charter conversion pathway and preemption provisions.
    • The State Bank Commissioner is directed to promulgate implementing regulations within specified timeframes to align Delaware’s framework with evolving federal standards.
  • Florida. CS/CS/HB 175 establishes a regulatory framework for state-qualified payment stablecoin issuers that is substantially similar to the GENIUS Act. The bill establishes issuers as a separate category of money services business under Florida law and authorizes a trust company to obtain certificate of approval to engage in limited issuer activities. Effective Oct. 1, the bill:
    • Prohibits a person from engaging in authorized issuer activity without being licensed as a money services business under Florida law or obtaining a certificate of approval as a trust company from the Office of Financial Regulation.
    • Provides factors and requirements that must be met for issuers to become licensed or approved.
    • Provides that certain issuers are not required to be licensed or obtain a certificate of approval.
    • Limits the activities in which issuers may engage.
    • Requires issuers to comply with minimum prudential requirements in accordance with the GENIUS Act.
    • Updates provisions in current law to apply to stablecoins.
  • Georgia. HB 1272, the Georgia Payment Stablecoin Act, establishes a licensing and regulatory framework for payment stablecoin issuers in the state. The law, which becomes effective on the earlier of Jan. 18, 2027, or 120 days after the issuance of final implementing regulations for the federal GENIUS Act, authorizes the state’s Department of Banking and Finance to license entities incorporated under Georgia law or the laws of a foreign country to issue payment stablecoins. Under the statute, payment stablecoin issuance is excluded from Georgia’s money transmission laws.