ICBA urges OCC to strengthen GENIUS Act safeguards on stablecoin risks

ICBA urged the OCC to strengthen its proposed GENIUS Act rules to protect against the risks stablecoins pose to community bank lending capacity, consumers, and financial stability.

ICBA Recommendations: In a letter to the OCC, ICBA said the agency must:

• Minimize the negative impacts of stablecoins on community banks and credit to local communities.

• Minimize deposit flight and the impact on credit creation.

• Clarify key definitions to prevent regulatory gaps and protect end users.

• Establish strong consumer protection guardrails for payment stablecoins.

• Foster safety and soundness of payment stablecoin issuers.

• Place appropriate operational limits on permitted payment stablecoin issuers.

ICBA Analysis: ICBA also provided a detailed economic analysis that says:

• Community banks could lose more than $1 trillion of deposits in the coming years as customers move payments to payment stablecoins, resulting in a decline in community bank lending of at least $850 billion.

• Recycled wholesale deposits from payment stablecoin issuers cannot make up for lost retail deposits at community banks, which will harm access to credit in local communities.

• The ultimate impact of stablecoin adoption at-scale would be a more concentrated U.S. banking system.

GENIUS Act Proposals:

• FinCEN and OFAC last month issued a joint proposed rule to implement the GENIUS Act’s anti-money laundering and sanctions compliance program requirements.

• An FDIC proposed rule would establish a prudential framework for FDIC-supervised payment stablecoin issuers under the GENIUS Act.

• In a separate Treasury Department proposed rule to implement GENIUS Act policies on state-level regulatory regimes, Treasury said the OCC’s rule will serve as a key component of the federal regulatory framework.

• The FDIC in December proposed a rule to establish GENIUS Act procedures for the agency to accept and process payment stablecoin issuer applications from FDIC-supervised banks, with comments due May 18 following an ICBA-advocated extension.

ICBA Principles: ICBA in November sent key principles for payment stablecoin supervision in a letter to the Treasury Department regarding implementation of the GENIUS Act.