GENIUS Act Turns Stablecoin Domicile Into a High-Stakes Regulatory Bet

Stablecoin issuers deciding where to establish their regulatory home under the GENIUS Act are making a choice that could shape nearly every aspect of their business, from growth and product development to banking relationships and compliance costs.

An analysis by consulting firm Ankura argued that selecting a state or federal regulatory pathway is no longer a routine licensing exercise. It has become a board-level risk decision because the chosen supervisor could affect an issuer’s ability to launch, attract institutional partners and expand nationally.

The GENIUS Act generally limits issuance of payment stablecoins in the United States to approved issuers. Under Treasury Department regulations proposed in August, those restrictions are expected to take effect on Jan. 18.

The proposal would consider a stablecoin issued in the United States if either the issuer or the initial recipient is located in the country when the token is issued. Issuance would occur upon the first transfer giving another person the right to use, transfer or redeem the token.

That interpretation makes distribution architecture central to regulatory strategy. Delivering newly minted tokens to a U.S. exchange, market maker or institutional customer could establish a U.S. nexus even if other components of the transaction occur offshore. Issuers consequently must evaluate customer-location systems, intermediary agreements, geofencing, advertising and onboarding controls alongside their choice of regulator.

Domestic nonbank issuers generally can seek a federal license from the Office of the Comptroller of the Currency (OCC) or operate under an eligible state regime. The latter option is available only to issuers with no more than $10 billion in consolidated outstanding stablecoins.

But a state’s enactment of a stablecoin law does not automatically create a viable state pathway. The state must certify that its regime is substantially similar to the federal framework, and the federal Stablecoin Certification Review Committee must unanimously find that it meets or exceeds the GENIUS Act’s core standards.

Those standards cover areas including reserves, redemption, capital, liquidity, governance, risk management, audits and disclosures. States also will need enough supervisory capacity, examination expertise and enforcement authority to satisfy federal officials.

If a state fails to obtain approval, issuers relying on its regime could be required to stop issuing stablecoins or move to federal supervision. That risk argues against surrendering existing licenses or restructuring operations before certification and transition issues have been resolved, Ankura said.

New York enters the competition with an established virtual-currency supervisory program and experience overseeing stablecoin reserves and redemptions. Its Department of Financial Services has proposed regulations intended to align its framework with the GENIUS Act. That regulatory maturity could appeal to banks and institutional customers, although issuers should expect intensive supervision, higher compliance costs and close scrutiny of product changes.

Emerging regimes in states including Florida, Alabama and Georgia could offer greater accessibility or more tailored frameworks. Their challenge will be proving that regulatory flexibility is accompanied by credible supervision.

The $10 billion state-pathway ceiling adds another strategic complication. An issuer that chooses a state based on its launch-stage needs could face a compressed transition to OCC supervision just as its circulation and operational risks are growing. Boards therefore must model conservative, expected and high-growth scenarios rather than treating the threshold as a distant concern.

Domicile also can influence access to reserve custodians, settlement banks and liquidity providers. Those firms are likely to consider the experience and standing of an issuer’s regulator when evaluating risk. A permissive jurisdiction could lower initial compliance burdens but make critical banking relationships more difficult or expensive.

The emerging system resembles charter competition, but with a federal gatekeeper and a national regulatory floor. The winners may not be the states promising the fastest approvals. They are more likely to be jurisdictions capable of convincing issuers, federal regulators and financial institutions that their oversight will remain credible during a run, cyberattack or sanctions crisis.

For stablecoin companies, the central question is not where authorization is easiest today. It is which regulatory home can support the business they expect to operate several years from now.