One of the more complex—and politically delicate—features of the GENIUS Act is how it balances federal authority with state-level regulation. Stablecoins, by their nature, move fluidly across borders and platforms. But financial regulation in the U.S. has always been split between federal and state jurisdictions. This law doesn’t eliminate that split. Instead, it creates a structured framework for coexistence—with clearly defined thresholds, conditions, and backstops to preserve national consistency while allowing room for state innovation.

At the center of this balance is a size-based trigger. Any stablecoin issuer with more than $10 billion in outstanding issuance must transition into a federally supervised framework. That doesn’t necessarily mean becoming a federally chartered bank or giving up state oversight—but it does mean accepting joint supervision between the relevant state regulator and a designated federal agency (typically the OCC or FDIC, depending on the issuer’s structure). The transition must be completed within 360 days of crossing the threshold, or the issuer must stop minting new coins until they fall back below it.

However, the Act does leave room for exceptions. A waiver process allows a large issuer to remain under sole state oversight—if it can convince the federal regulator that its operations are sufficiently safe, well-capitalized, and properly supervised. The law even outlines the criteria for such a determination, including the issuer’s past compliance history, the maturity of the state’s regulatory framework, and the financial soundness of the issuer itself. In short, federal regulators cannot arbitrarily deny waivers—they must evaluate them against specific standards.

To support this dual regime, the law creates a formal state certification process. Every state that wants its stablecoin regime to be recognized must submit an annual certification, attesting that its laws and oversight structure are “substantially similar” to the federal framework established by the Act. This certification is reviewed by the Stablecoin Certification Review Committee, a federal interagency panel led by the Treasury Secretary and including key banking regulators. The Committee must approve or deny the certification within 30 days, and if denied, it must provide a written explanation detailing the deficiencies.

The law builds in a powerful presumption in favor of approval—if a state has a functioning, prudentially sound framework in place and has already been supervising active issuers, its certification must be approved unless there is clear and convincing evidence that the framework falls short. And even if a certification is denied, states have the right to revise and resubmit, and ultimately to appeal a denial to the U.S. Court of Appeals for the D.C. Circuit.
Taken together, this structure is both cautious and pragmatic. It gives the federal government oversight over the largest and potentially most systemic stablecoin issuers, while allowing smaller issuers to operate under state regimes—if those regimes meet clear and enforceable standards. It avoids a one-size-fits-all mandate while still creating national guardrails. And most importantly, it introduces accountability into the approval process, so that state innovation is not arbitrarily shut down by federal gatekeepers.

In the digital asset space, regulatory legitimacy is earned, not assumed. States that want to play a role must demonstrate their capability and submit to federal review. Federal agencies, in turn, must justify any denial with real evidence. In that sense, the Act doesn’t just regulate stablecoins—it models a new kind of regulatory federalism for the digital economy.