GENIUS Act

It seems the OCC does not believe the GENIUS Act creates a new charter type, contrary to speculation late last year. They would, however, be pleased to offer applicants charters they already have. In the preamble to its proposed GENIUS Act rule, the OCC adopts a narrower reading than it could have of the savings clause that follows the Act's list of activities permitted to a stablecoin issuer. The savings clause says that nothing in the activities provision "shall limit a permitted payment stablecoin issuer from engaging in payment stablecoin activities or digital asset service provider...

Controversy is clustering around the GENIUS Act provision granting state depository institutions national money transmission and custody powers when acting through a stablecoin issuer subsidiary. Bank trades and state regulators are pushing to repeal the provision, saying it gives preemption power to uninsured banks like Wyoming's SPDI. But how do they know the provision applies to uninsured banks? And why didn't more people notice that sooner rather than later? The answer lies in the convoluted way the Act defines "state chartered depository institution." The definition's cross-references...

How long will a GENIUS Act application really take? If you just look at the law's timelines and make some reasonable assumptions, you can be forgiven for estimating "somewhere between 120-180 days." If you've been in the bank reg world for a while, you know the real answer is "you will never know ahead of time." Why? Meet "substantially complete." The GENIUS Act requires primary federal regulators to "render a decision on the application" within 120 days of receiving a "substantially complete application," or the application is deemed approved. This four-month timeline may appear short...

Combining ILC and GENIUS Act applications is an intriguing possibility for a fintech looking to break out of the sponsor-bank paradigm. In this scenario, the company applies for a new ILC charter whose business plan includes a subsidiary issuer. The federal approver and regulator for both applications would be the FDIC. The approach has pluses and minuses. On one hand, the ILC and its subsidiary would enjoy: ✅ Nationwide deposit-taking and lending powers with the ability to export home state interest rates; ✅ Full credit and debit card issuance and acquiring capabilities; ✅ Eligibility for...

The GENIUS Act purports to create three major types of stablecoin issuer. But by my count, there are at least 14 different forms that a permitted payment stablecoin issuer can take. The 14 forms differ from each other across 12 key dimensions. Some of these dimensions arise from the GENIUS Act itself. Others come from laws triggered by other characteristics of the issuer or its owner. Of these 14 forms, only ten "basic forms" are available as initial pathways to stablecoin issuance. The remaining four "evolved forms" are created when a smaller state qualified issuer crosses the $10b issuance...

Of the myriad structural choices facing a prospective GENIUS Act stablecoin issuer, the most significant is between depository and non-depository options. I see three key differences between these categories (though some play out differently for new issuers vs. existing ones.) 1️⃣ Capabilities The stablecoin issuance powers of the two categories are similar. But depository institution options provide additional capabilities such as: Federal Reserve master account eligibility, Cleaner preemption of multi-state money transmission and custody licensing, and The prospect of engaging in a wider...

No one knows exactly when the federal application window for GENIUS Act stablecoin issuers will officially open. But it's hard to see it happening much earlier than the statutory deadline in mid-July 2026. The Act mandates that the four primary federal payment stablecoin regulators issue regulations to carry out the licensing provisions and start accepting applications "before" July 18, 2026. It doesn't say how long before the deadline applications must be accepted, but the timeline is likely to be tight. One reason is the interagency process. Under the Act, federal regulators must...

Under the GENIUS Act, is a Puerto Rico-based stablecoin issuer a U.S. issuer or a foreign issuer? It seems like it could be either -- or even both. Reading the GENIUS Act as a banking lawyer, one thing leaps out: this is a banking law. The Act borrows heavily from existing banking statutes. In the process, it imports many features that make bank reg fun for me, but bewildering to outsiders. Among the many examples is the treatment of Puerto Rico-based issuers. In this respect, the GENIUS Act mirrors a peculiarity of U.S. law as it applies to banks: ➡️ Under the Federal Deposit Insurance Act...

A common misconception is that the GENIUS Act allows only sub-$10b issuers to be state-qualified and imposes federal regulation on all larger issuers. Neither is true. For a state issuer that reaches the threshold, the default path is transition to hybrid supervision, under the federal framework, by both a state and a federal regulator. The state issuer doesn't have to convert to a federal charter unless it wants to. The hybrid framework has some odd quirks: Nonbank issuers transition to supervision administered by the state and OCC "acting in coordination." Meanwhile, (uninsured) depository...

As fintechs work on GENIUS Act stablecoin strategies, one thing is becoming clear: The Act offers the equivalent of a national money transmission license for many previously non-crypto use cases. It could come to displace the traditional state money transmission licenses for many fintechs. This realization has partly sunk in with the trade associations and advocacy organizations that wrote Congress last week requesting repeal of the GENIUS Act's Section 16(d), which grants nationwide money transmitter powers to state depository institutions that own permitted payment stablecoin issuers. But...

We assist financial institutions and fintechs with charter strategy, regulatory applications, and transactions, including bank-fintech partnerships and acquisitions. Our practice covers the full range of licensing options including commercial bank charters, ILC charters, trust bank charters, and money transmission licenses. We prepare regulatory applications, conduct due diligence on acquisition targets, advise on control issues under the Bank Holding Company Act, Bank Merger Act, and Change in Bank Control Act, and help structure bank-fintech partnerships to address regulatory expectations....

Our fintech work spans regulatory, strategic, and policy engagements for a diverse range of payment ecosystem participants and digital lenders. Our lawyers have experience working with both traditional and innovative institutions, including: retail and commercial payments and lending fintechs (including buy-now-pay-later providers), fintech banks and neobanks, prepaid program managers and issuers, money transmitters, finance companies, crypto and digital asset service providers, payment processors, payment system infrastructure operators, and payments and credit units of technology companies....

BJ Sanford advises payments and fintech companies, U.S. and foreign banks, trade associations, investors, and policy and consulting firms. His practice centers on payments regulation, public policy, and the regulation of bank activities and structure. He also advises clients on regulatory capital, bank investments and control, affiliate transactions, the U.S. operations of foreign banks, and regulatory examinations. Payments regulation. BJ advises payments firms and banks on payment regulation, product development, and compliance with rules including Regulation E, Regulation Z, Regulation II...