[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 394 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 394
To provide for the regulation of payment stablecoins, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
February 4, 2025
Mr. Hagerty (for himself, Mr. Scott of South Carolina, Mrs. Gillibrand,
and Ms. Lummis) introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To provide for the regulation of payment stablecoins, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Guiding and Establishing National
Innovation for U.S. Stablecoins of 2025'' or the ``GENIUS Act of
2025''.
SEC. 2. DEFINITIONS.
In this Act:
(1) Bank secrecy act.--The term ``Bank Secrecy Act''
means--
(A) section 21 of the Federal Deposit Insurance Act
(12 U.S.C. 1829b);
(B) chapter 2 of title I of Public Law 91-508 (12
U.S.C. 1951 et seq.); and
(C) subchapter II of chapter 53 of title 31, United
States Code.
(2) Board.--The term ``Board'' means the Board of Governors
of the Federal Reserve System.
(3) Comptroller.--The term ``Comptroller'' means the
Comptroller of the Currency.
(4) Comptroller-regulated entity.--The term ``Comptroller-
regulated entity'' means any Federal qualified nonbank payment
stablecoin issuer that is subject to regulation and supervision
exclusively by the Comptroller, pursuant to section 4(a)(7).
(5) Corporation.--The term ``Corporation'' means the
Federal Deposit Insurance Corporation.
(6) Digital asset.--The term ``digital asset'' means any
digital representation of value which is recorded on a
cryptographically-secured distributed ledger.
(7) Distributed ledger.--The term ``distributed ledger''
means technology where data is shared across a network that
creates a public digital ledger of verified transactions or
information among network participants and the data is linked
using cryptography to maintain the integrity of the public
ledger and execute other functions.
(8) Federal qualified nonbank payment stablecoin issuer.--
The term ``Federal qualified nonbank payment stablecoin
issuer'' means a nonbank entity approved by the primary Federal
payment stablecoin regulator, pursuant to section 5, to issue
payment stablecoins.
(9) Institution-affiliated party.--With respect to a
permitted payment stablecoin issuer, the term ``institution-
affiliated party'' means any director, officer, employee, or
person in control of, or agent for, the permitted payment
stablecoin issuer.
(10) Insured depository institution.--The term ``insured
depository institution'' means--
(A) an insured depository institution, as defined
in section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813); and
(B) an insured credit union, as defined in section
101 of the Federal Credit Union Act (12 U.S.C. 1752).
(11) Monetary value.--The term ``monetary value'' means a
national currency or deposit (as defined under Section 3 of the
Federal Deposit Insurance Act) denominated in a national
currency.
(12) National currency.--The term ``national currency''
means a Federal Reserve note (as the term is used in the first
undesignated paragraph of section 16 of the Federal Reserve Act
(12 U.S.C. 411)), money issued by a central bank, and money
issued by an intergovernmental organization pursuant to an
agreement by 1 or more governments.
(13) Nonbank entity.--The term ``nonbank entity'' means a
person that is not an insured depository institution or
subsidiary of an insured depository institution.
(14) Payment stablecoin.--The term ``payment stablecoin''--
(A) means a digital asset--
(i) that is or is designed to be used as a
means of payment or settlement; and
(ii) the issuer of which--
(I) is obligated to convert,
redeem, or repurchase for a fixed
amount of monetary value; and
(II) represents it will maintain or
creates the reasonable expectation that
it will maintain a stable value
relative to the value of a fixed amount
of monetary value; and
(B) that is not--
(i) a national currency; or
(ii) a security issued by an investment
company registered under section 8(a) of the
Investment Company Act of 1940 (15 U.S.C. 80a-
8(a)).
(15) Permitted payment stablecoin issuer.--The term
``permitted payment stablecoin issuer'' means--
(A) a subsidiary of an insured depository
institution that has been approved to issue payment
stablecoins under section 5;
(B) a Federal qualified nonbank payment stablecoin
issuer that has been approved to issue payment
stablecoins under section 5; or
(C) a State qualified payment stablecoin issuer.
(16) Person.--The term ``person'' means an individual,
partnership, company, corporation, association (incorporated or
unincorporated), trust, estate, cooperative organization, or
other entity.
(17) Primary federal payment stablecoin regulator.--
(A) In general.--The term ``primary Federal payment
stablecoin regulator'' means--
(i) with respect to an insured depository
institution (other than an insured credit
union) or a subsidiary of an insured depository
institution (other than an insured credit
union), the appropriate Federal banking agency
of such insured depository institution (as
defined under section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813));
(ii) with respect to an insured credit
union or a subsidiary of an insured credit
union, the National Credit Union
Administration;
(iii) with respect to a Federal qualified
nonbank payment stablecoin issuer that is not a
national bank, the Comptroller; and
(iv) with respect to any entity chartered
by the Comptroller, the Comptroller.
(B) Primary federal payment stablecoin
regulators.--The term ``primary Federal payment
stablecoin regulators'' means the Comptroller, the
Board, the Corporation, and the National Credit Union
Administration.
(18) Registered public accounting firm.--The term
``registered public accounting firm'' has the meaning given
that term under section 2 of the Sarbanes-Oxley Act of 2002 (15
U.S.C. 7201).
(19) State.--The term ``State'' means each of the several
States, the District of Columbia, and each territory of the
United States.
(20) State qualified payment stablecoin issuer.--The term
``State qualified payment stablecoin issuer'' means an entity
that--
(A) is legally established and approved to issue
payment stablecoins by a State payment stablecoin
regulator; and
(B) issues a payment stablecoin in compliance with
the requirements under section 4.
(21) State payment stablecoin regulator.--The term ``State
payment stablecoin regulator'' means a State agency that has
primary regulatory and supervisory authority in such State over
entities that issue payment stablecoins.
(22) State regulated depository institution.--The term
``State regulated depository institution'' has the meaning
given the term ``State depository institution'' in section 3(c)
of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)).
(23) Subsidiary of an insured credit union.--With respect
to an insured credit union, the term ``subsidiary of an insured
credit union'' means--
(A) an organization providing services to the
insured credit union that are associated with the
routine operations of credit unions, as described under
section 107(7)(I) of the Federal Credit Union Act (12
U.S.C. 1757(7)(I)); and
(B) a credit union service organization, as such
term is used under part 712 of title 12, Code of
Federal Regulations, with respect to which the insured
credit union has an ownership interest or to which the
insured credit union has extended a loan.
SEC. 3. LIMITATION ON WHO MAY ISSUE A PAYMENT STABLECOIN.
It shall be unlawful for any person other than a permitted payment
stablecoin issuer to issue a payment stablecoin in the United States.
SEC. 4. REQUIREMENTS FOR ISSUING PAYMENT STABLECOINS.
(a) Standards for the Issuance of Payment Stablecoins.--
(1) In general.--Permitted payment stablecoin issuers
shall--
(A) maintain reserves backing the issuer's payment
stablecoins outstanding on an at least 1 to 1 basis,
with reserves comprising--
(i) United States coins and currency
(including Federal reserve notes);
(ii) funds held as demand deposits (or
other deposits that may be withdrawn upon
request at any time) at insured depository
institutions, regulated foreign depository
institutions, or insured shares at insured
depository institutions, subject to limitations
established by the Corporation and the National
Credit Union Administration, respectively, to
address safety and soundness risks of such
insured depository institutions;
(iii) Treasury bills, notes, or bonds--
(I) with a remaining maturity of 93
days or less; or
(II) issued with a maturity of 93
days or less;
(iv) repurchase agreements with a maturity
of 7 days or less that are backed by Treasury
bills with a maturity of 90 days or less;
(v) reverse repurchase agreements with a
maturity of 7 days or less that are
collateralized by Treasury notes, bills, or
bonds on an overnight basis, subject to
overcollateralization in line with standard
market terms, that are--
(I) tri-party;
(II) centrally cleared through a
clearing house; or
(III) bilateral with a counterparty
that the issuer has determined to be
adequately creditworthy even in the
event of severe market stress;
(vi) money market funds, invested solely in
underlying assets described in clauses (i)
through (iv) of subparagraph (A); or
(vii) Central Bank reserve deposits;
(B) publicly disclose the issuer's redemption
policy;
(C) establish procedures for timely redemption of
outstanding payment stablecoins; and
(D) publish the monthly composition of the issuer's
reserves on the website of the issuer, containing--
(i) the total number of outstanding payment
stablecoins issued by the issuer; and
(ii) the amount and composition of the
reserves described under subparagraph (A).
(2) Prohibition on rehypothecation.--Reserves described
under paragraph (1)(A) may not be pledged, rehypothecated, or
reused, except for the purpose of creating liquidity to meet
reasonable expectations of requests to redeem payment
stablecoins, such that reserves in the form of Treasury bills
may be pledged as collateral for repurchase agreements with a
maturity of 90 days or less, provided that either--
(A) the repurchase agreements are cleared by a
central clearing counterparty that is approved by the
primary Federal or State payment stablecoin regulator;
or
(B) the permitted payment stablecoin issuer
receives the prior approval of the primary Federal or
State payment stablecoin regulator.
(3) Monthly certification; examination of reports by
registered public accounting firm.--
(A) In general.--A permitted payment stablecoin
issuer shall, each month, have the information
disclosed in the previous month-end report required
under paragraph (1)(D) examined by a registered public
accounting firm.
(B) Certification.--Each month, the Chief Executive
Officer and Chief Financial Officer of a permitted
payment stablecoin issuer shall submit a certification
as to the accuracy of the monthly report to--
(i) the primary Federal payment stablecoin
regulator; or
(ii) in the case of a State qualified
payment stablecoin issuer, to the State payment
stablecoin regulator.
(C) Criminal penalty.--Any person who submits a
certification required under subparagraph (B) knowing
that such certification is false shall be subject to
the criminal penalties set forth under section 1350(c)
of title 18, United States Code.
(4) Capital, liquidity, and risk management requirements.--
(A) In general.--The primary Federal payment
stablecoin regulators shall, jointly, or in the case of
a State qualified payment stablecoin issuer, the State
payment stablecoin regulator shall, issue--
(i) capital requirements applicable to
permitted payment stablecoin issuers, which may
not exceed what is sufficient to ensure the
permitted payment stablecoin issuer's ongoing
operations;
(ii) appropriate liquidity and interest
rate risk management standards applicable to
permitted payment stablecoin issuers, which may
not exceed what is sufficient to ensure the
financial integrity of the permitted payment
stablecoin issuer and the ability of the issuer
to meet the financial obligations of the
issuer, including redemptions; and
(iii) appropriate operational, compliance,
and information technology risk management
standards, including Bank Secrecy Act and
sanctions compliance, tailored to the business
model and risk profile of the permitted payment
stablecoin issuer, consistent with other legal
authorities.
(B) Rule of construction.--Nothing in this
paragraph shall be construed to limit--
(i) the authority of the primary Federal
regulators, in prescribing standards under this
paragraph, to tailor or differentiate among
issuers on an individual basis or by category,
taking into consideration their capital
structure, riskiness, complexity, financial
activities (including financial activities of
their subsidiaries), size, and any other risk
related factors that the primary Federal
regulator determines appropriate; or
(ii) the supervisory, regulatory, or
enforcement authority of an appropriate Federal
banking agency to further the safe and sound
operation of an institution under the
supervision of the appropriate Federal banking
agency.
(C) Applicability of existing capital standards.--
With respect to the promulgation of rules under
subsection (a)(1)(A), section 171 of the Financial
Stability Act of 2010 (12 U.S.C. 5371(a)(1)(A)) shall
not apply.
(5) Treatment under the bank secrecy act.--A permitted
payment stablecoin issuer shall be treated as a financial
institution for purposes of the Bank Secrecy Act.
(6) Limitation on stablecoin activities.--
(A) In general.--A permitted payment stablecoin
issuer may only--
(i) issue payment stablecoins;
(ii) redeem payment stablecoins;
(iii) manage related reserves (including
purchasing and holding reserve assets);
(iv) provide custodial or safekeeping
services for payment stablecoins, required
reserves, or private keys of payment
stablecoins; and
(v) undertake other functions that directly
support the work of issuing and redeeming
payment stablecoins.
(B) Rule of construction.--Nothing in subparagraph
(A) shall prevent a permitted stablecoin issuer from
engaging in non-stablecoin activities that are
explicitly allowed by the relevant regulator.
(7) Regulation by the comptroller.--
(A) In general.--A Federal qualified nonbank
payment stablecoin issuer shall be regulated and
supervised exclusively by the Comptroller, which shall
have authority, in coordination with other relevant
regulators, to issue such regulations and orders as
necessary to ensure the safety and soundness of the
issuers, consistent with the provisions of this Act.
(B) Conforming amendment.--Section 324(b) of the
Revised Statutes (12 U.S.C. 1(b)) is amended by adding
at the end the following:
``(3) Regulation of federal qualified nonbank payment
stablecoin issuers.--The Comptroller of the Currency shall, in
coordination with other relevant regulators, issue such
regulations and orders as necessary to ensure the safety and
soundness of any nonbank entity approved by the Comptroller to
issue payment stablecoins.''.
(b) State-Level Regulatory Regimes.--
(1) Option for state-level regulatory regime.--
Notwithstanding the Federal regulatory framework established
under subsection (a), a stablecoin issuer with a total market
capitalization of not more than $10,000,000,000 may opt for
regulation under a State-level regulatory regime, provided that
the State-level regulatory regime is substantially similar to
the Federal regulatory framework under that subsection.
(2) Review.--State regulators shall review State-level
regulatory regimes according to criteria the State regulators
establish for determining whether a State-level regulatory
regime is substantially similar to the Federal regulatory
framework under subsection (a).
(3) Certification.--
(A) Initial certification.--Subject to subparagraph
(B), not later than 1 year after the date of enactment
of this Act, State regulators shall submit to the
Secretary of the Treasury an initial certification that
their State-level regulatory regime meets the criteria
for substantial similarity under paragraph (2).
(B) Form of certification.--The initial
certification required under subparagraph (A) shall
contain, in a form prescribed by the Secretary of the
Treasury, an attestation that the State-level
regulatory regime meets the criteria for substantial
similarity under paragraph (2).
(C) Annual recertification.--Not later than a date
to be determined by the Secretary each year, the State
shall submit to the Secretary of the Treasury an
additional certification that confirms the accuracy of
initial certification submitted under subparagraph (A).
(4) Not substantially similar.--
(A) In general.--If a State regulator does not
submit a certification under paragraph (3), then a
payment stablecoin issuer operating under this
subsection shall be subject to the Federal regulatory
framework as described in subsection (c),
notwithstanding the market capitalization threshold
therein.
(B) Treasury review.--The Secretary of the Treasury
may reject a certification under paragraph (3) if the
Secretary determines that the State-level regulatory
regime is not substantially similar to the Federal
regulatory framework under subsection (a), and the
payment stablecoin issuer shall be subject to the
Federal regulatory framework as described in subsection
(c), notwithstanding the market capitalization
threshold therein.
(C) Appellate review.--A payment stablecoin issuer
may challenge the determination of the State regulator
or the Secretary of the Treasury under this paragraph
in the United States District Court for the District of
Columbia.
(5) List.--The Secretary of the Treasury shall publish and
maintain in the Federal Register and on the website of the
Department of the Treasury a list of States that have submitted
initial certifications and recertifications under paragraph
(3).
(c) Transition to Federal Regulation.--
(1) Depository institution.--A State-regulated depository
institution that has been approved as a payment stablecoin
issuer with a market capitalization of more than
$10,000,000,000 shall--
(A) not later than 360 days after reaching such
market capitalization, transition to regulation under
the Federal regulatory framework of the Board; or
(B) beginning on the date of reaching such market
capitalization, cease issuing new stablecoins until the
State-regulated stablecoin issuer is under the
$10,000,000,000 market capitalization threshold.
(2) Other institutions.--A State qualified payment
stablecoin issuer not described in paragraph (1) with a market
capitalization of more than $10,000,000,000 shall--
(A) not later than 360 days after reaching such
market capitalization, transition to regulation under
the regulatory framework of the Comptroller; or
(B) beginning on the date of reaching such market
capitalization, cease issuing new stablecoins until the
State-regulated stablecoin issuer is under the
$10,000,000,000 market capitalization threshold.
(3) Conditional approval.--Upon filing an application with
the appropriate Federal regulator, a State qualified payment
stablecoin issuer shall be deemed conditionally approved,
pending final approval or denial of the application.
(4) Waiver.--The applicable Federal regulator may waive the
requirement under paragraph (1) or (2) to permit a State
qualified payment stablecoin issuer to remain under a State-
level regulatory regime.
(d) Rulemaking.--
(1) In general.--The primary Federal payment stablecoin
regulators and State payment stablecoin regulators may issue
such orders and regulations as may be necessary to administer
and carry out the requirements of this section, including to
establish conditions, and to prevent evasions thereof.
(2) Joint issuance of regulation.--All regulations issued
to carry out this section shall be issued jointly by the
primary Federal payment stablecoin regulators, if not issued by
a State payment stablecoin regulator.
(3) Rulemaking deadline.--Not later than the end of the
180-day period beginning on the date of enactment of this Act,
the Federal payment stablecoin regulators shall issue
regulations to carry out this section.
SEC. 5. APPROVAL OF SUBSIDIARIES OF INSURED DEPOSITORY INSTITUTIONS AND
FEDERAL QUALIFIED NONBANK PAYMENT STABLECOIN ISSUERS.
(a) Application.--
(1) In general.--The primary Federal payment stablecoin
regulator shall receive, review, and approve applications from
any insured depository institution that seeks to issue payment
stablecoins through a subsidiary and any nonbank entity that
seeks to issue payment stablecoins. The primary Federal payment
stablecoin regulator shall establish a process for the
licensing and regulation of these entities.
(2) Authority to issue regulations and process
applications.--The primary Federal payment stablecoin
regulators shall, before the effective date described in
section 16--
(A) issue regulations to carry out this section;
and
(B) pursuant to the regulations described in
subparagraph (A), accept and process applications under
this Act.
(3) Mandatory approval process.--The primary Federal
payment stablecoin regulator shall, upon receipt of a complete
application, evaluate and make a determination on each
application based on the criteria established under this Act.
(b) Evaluation of Applications.--A complete application received
under subsection (a) shall be evaluated by the primary Federal payment
stablecoin regulator using the factors described in subsection (c).
(c) Factors To Be Considered.--The factors described in this
subsection are the ability of the applicant (or, in the case of an
applicant that is an insured depository institution, the subsidiary of
the applicant), based on the financial condition and resources, to meet
the requirements set forth in section 4.
(d) Timing for Decision; Grounds for Denial.--
(1) Timing.--The primary Federal payment stablecoin
regulator shall render a decision on an application no later
than 120 days after informing the applicant that the
application is complete.
(2) Denial of application.--
(A) Grounds for denial.--The primary Federal
payment stablecoin regulator shall only deny a complete
application received under subsection (a) if the
regulator determines that the activities of the
applicant would be unsafe or unsound based on the
factors described in subsection (c).
(B) Explanation required.--If the primary Federal
payment stablecoin regulator denies a complete
application received under subsection (a), not later
than 30 days after the date of such denial, the
regulator shall provide the applicant with written
notice explaining the denial with specificity,
including all findings made by the regulator with
respect to all identified material shortcomings in the
application, including actionable recommendations on
how the applicant could address the identified material
shortcomings.
(C) Opportunity for hearing; final determination.--
(i) In general.--Not later than 30 days
after the date of receipt of any notice of the
denial of an application under this section,
the applicant may request, in writing, an
opportunity for a written or oral hearing
before the primary Federal payment stablecoin
regulator to appeal the denial.
(ii) Timing.--Upon receipt of a timely
request, the primary Federal payment stablecoin
regulator shall notice a time (not later than
30 days after the date of receipt of the
request) and place at which the applicant may
appear, personally or through counsel, to
submit written materials or provide oral
testimony and oral argument).
(iii) Final determination.--Not later than
60 days after the date of a hearing under this
subparagraph, the primary Federal payment
stablecoin regulator shall notify the applicant
of the final determination of the Comptroller,
which shall contain a statement of the basis
for that determination, with specific findings.
(iv) Notice if no hearing.--If an applicant
does not make a timely request for a hearing
under this subparagraph, the primary Federal
payment stablecoin regulator shall notify the
applicant, not later than 10 days after the
date by which the applicant may request a
hearing under this subparagraph, in writing,
that the denial of the application is a final
determination of the primary Federal payment
stablecoin regulator.
(3) Failure to render a decision.--If the primary Federal
payment stablecoin regulator fails to render a decision on a
complete application within the time period specified in
paragraph (1), the application shall be deemed approved.
(4) Right to reapply.--The denial of an application under
this section shall not prohibit the applicant from filing a
subsequent application.
(e) Report on Pending Applications.--The Comptroller shall annually
report to Congress on the applications that have been pending for 6
months or longer since the date of the initial application filed under
subsection (a) where the applicant has been informed that the
application remains incomplete, including providing documentation on
the status of the application and why the application has not yet been
approved.
(f) Rulemaking.--The Comptroller shall issue rules necessary for
the regulation of the issuance of payment stablecoins, but may not
impose requirements inconsistent with the requirements specified under
section 4.
SEC. 6. SUPERVISION AND ENFORCEMENT WITH RESPECT TO SUBSIDIARIES OF
INSURED DEPOSITORY INSTITUTIONS AND COMPTROLLER-REGULATED
ENTITIES.
(a) Supervision.--
(1) Subsidiary of an insured depository institution.--
(A) In general.--Each permitted payment stablecoin
issuer that is a subsidiary of an insured depository
institution shall be subject to supervision by the
primary Federal payment stablecoin regulator in the
same manner as such insured depository institution.
(B) Gramm-Leach-Bliley act.--For purposes of title
V of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 et
seq.) each permitted payment stablecoin issuer that is
a subsidiary of an insured depository institution shall
be deemed a financial institution.
(2) Comptroller-regulated entities.--
(A) Submission of reports.--Each Comptroller-
regulated entity shall, upon request, submit reports to
the Comptroller as to--
(i) the financial condition of the
Comptroller-regulated entity, systems for
monitoring and controlling financial and
operating risks; and
(ii) compliance by the Comptroller-
regulated entity (and any subsidiary thereof)
with this Act.
(B) Examinations.--The Comptroller may make
examinations of a Comptroller-regulated entity and each
subsidiary of such entity in order to inform the
Comptroller of--
(i) the nature of the operations and
financial condition of the Comptroller-
regulated entity;
(ii) the financial, operational, and other
risks within the Comptroller-regulated entity
that may pose a threat to--
(I) the safety and soundness of the
Comptroller-regulated entity; or
(II) the stability of the financial
system of the United States; and
(iii) the systems of the Comptroller-
regulated entity for monitoring and controlling
the risks described in clause (ii).
(C) Requirements for efficiency.--
(i) Use of existing reports.--In
supervising and examining a Comptroller-
regulated entity, the Comptroller shall, to the
fullest extent possible, use existing reports
and other supervisory information.
(ii) Avoidance of duplication.--The
Comptroller shall, to the fullest extent
possible, avoid duplication of examination
activities, reporting requirements, and
requests for information in carrying out this
Act with respect to a Comptroller-regulated
entity.
(iii) Consideration of burden.--The
Comptroller shall, with respect to any
examination or request for the submission of a
report under this paragraph, only request
examinations and reports at a cadence and in a
format that is similar to those required for
similarly situated Comptroller-regulated
entities.
(b) Enforcement.--
(1) Suspension or revocation of registration.--The primary
Federal payment stablecoin regulator may prohibit a permitted
payment stablecoin issuer from issuing payment stablecoins, if
the primary Federal payment stablecoin regulator determines
that such permitted payment stablecoin issuer, or an
institution-affiliated party of the permitted payment
stablecoin issuer, is--
(A) materially violating or has materially violated
this Act or any regulation or order issued under this
Act; or
(B) materially violating or has materially violated
any condition imposed in writing by the primary Federal
payment stablecoin regulator in connection with a
written agreement entered into between the permitted
payment stablecoin issuer and the primary Federal
payment stablecoin regulator.
(2) Cease-and-desist proceedings.--If the primary Federal
payment stablecoin regulator has reasonable cause to believe
that a permitted payment stablecoin issuer or any institution-
affiliated party of a permitted payment stablecoin issuer is
violating, has violated, or is attempting to violate this Act,
any regulation or order issued under this Act, or any written
agreement entered into with the primary Federal payment
stablecoin regulator or condition imposed in writing by the
primary Federal payment stablecoin regulator in connection with
any application or other request, the primary Federal payment
stablecoin regulator may, by provisions that are mandatory or
otherwise, order the permitted payment stablecoin issuer or
institution-affiliated party of the permitted payment
stablecoin issuer to--
(A) cease and desist from such violation or
practice; or
(B) take affirmative action to correct the
conditions resulting from any such violation or
practice.
(3) Removal and prohibition authority.--The primary Federal
payment stablecoin regulator may remove an institution-
affiliated party of a permitted payment stablecoin issuer from
their position or office or prohibit further participation in
the affairs of the permitted payment stablecoin issuer or all
permitted payment stablecoin issuers by such institution-
affiliated party, if the primary Federal payment stablecoin
regulator determines that--
(A) the institution-affiliated party has, directly
or indirectly, committed a violation or attempted
violation of this Act or any regulation or order issued
under this Act; or
(B) the institution-affiliated party has committed
a violation of any provision of subchapter II of
chapter 53 of title 31, United States Code.
(4) Procedures.--
(A) In general.--If the primary Federal payment
stablecoin regulator identifies a violation or
attempted violation of this Act or makes a
determination under paragraph (1), (2), or (3), the
primary Federal payment stablecoin regulator shall
comply with the procedures set forth in subsections (b)
and (e) of sections 8 of the Federal Deposit Insurance
Act (12 U.S.C. 1818).
(B) Judicial review.--A person aggrieved by a final
action under this subsection may obtain judicial review
of such action exclusively as provided in section 8(h)
of the Federal Deposit Insurance Act (12 U.S.C.
1818(h)).
(C) Injunction.--The primary Federal payment
stablecoin regulator may, in the discretion of the
regulator, follow the procedures provided in section
8(i)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1818(i)(1)) for judicial enforcement of any effective
and outstanding notice or order issued under this
subsection.
(D) Temporary cease-and-desist proceedings.--If the
primary Federal payment stablecoin regulator determines
that a violation or attempted violation of this Act or
an action with respect to which a determination was
made under paragraph (1), (2), or (3), or the
continuation thereof, is likely to cause insolvency or
significant dissipation of assets or earnings of a
permitted payment stablecoin issuer, or is likely to
weaken the condition of the permitted payment
stablecoin issuer or otherwise prejudice the interests
of the customers of the permitted payment stablecoin
issuer prior to the completion the proceedings
conducted under this paragraph, the primary Federal
payment stablecoin regulator may follow the procedures
provided in section 8(c) of the Federal Deposit
Insurance Act (12 U.S.C. 1818(c)) to issue a temporary
cease-and-desist order.
(5) Civil money penalties.--
(A) Failure to be approved.--Any person who issues
a United States dollar-denominated payment stablecoin
and who is not a permitted payment stablecoin issuer,
and any institution-affiliated party of such a person
who knowingly participates is issuing such a payment
stablecoin, shall be liable for a civil penalty of not
more than $100,000 for each day during which such
payment stablecoins are issued.
(B) First tier.--Except as provided in subparagraph
(A), a permitted payment stablecoin issuer or
institution-affiliated party of such permitted payment
stablecoin issuer that materially violates this Act or
any regulation or order issued under this Act, or that
materially violates any condition imposed in writing by
the primary Federal payment stablecoin regulator in
connection with a written agreement entered into
between the permitted payment stablecoin issuer and the
primary Federal payment stablecoin regulator, shall be
liable for a civil penalty of up to $100,000 for each
day during which the violation continues.
(C) Second tier.--Except as provided in
subparagraph (A), and in addition to the penalties
described under subparagraph (B), a permitted payment
stablecoin issuer or institution-affiliated party of
such permitted payment stablecoin issuer who knowingly
participates in a violation of any provision of this
Act, or any regulation or order issued thereunder, is
liable for a civil penalty of up to an additional
$100,000 for each day during which the violation
continues.
(D) Procedure.--Any penalty imposed under this
paragraph may be assessed and collected by the primary
Federal payment stablecoin regulator pursuant to the
procedures set forth in section 8(i)(2) of the Federal
Deposit Insurance Act (12 U.S.C. 1818(i)(2)).
(E) Notice and orders after separation from
service.--The resignation, termination of employment or
participation, or separation of an institution-
affiliated party (including a separation caused by the
closing of a permitted payment stablecoin issuer) shall
not affect the jurisdiction and authority of the
primary Federal payment stablecoin regulator to issue
any notice or order and proceed under this subsection
against any such party, if such notice or order is
served before the end of the 6-year period beginning on
the date such party ceased to be an institution-
affiliated party with respect to such permitted payment
stablecoin issuer.
(6) Non-applicability to a state qualified payment
stablecoin issuer.--This subsection shall not apply to a State
qualified payment stablecoin issuer.
SEC. 7. STATE QUALIFIED PAYMENT STABLECOIN ISSUERS.
(a) In General.--A State payment stablecoin regulator shall have
supervisory, examination, and enforcement authority over a State
qualified payment stablecoin issuer of such State.
(b) Authority To Enter Into Agreements With the Board.--A State
payment stablecoin regulator may enter into a memorandum of
understanding with the Board, by mutual agreement, under which the
Board may carry out the supervision, examination, and enforcement
authority with respect to the State qualified payment stablecoin
issuers of such State.
(c) Sharing of Information.--A State payment stablecoin regulator
and the Board shall share information on an ongoing basis with respect
to a State qualified payment stablecoin issuer of such State, including
a copy of the initial application and any accompanying documents.
(d) Rulemaking.--A State payment stablecoin regulator may issue
orders and rules under section 4 applicable to State qualified payment
stablecoin issuers to the same extent as the primary Federal payment
stablecoin regulators issue orders and rules under section 4 applicable
to permitted payment stablecoin issuers that are not a State qualified
payment stablecoin issuers.
(e) Enforcement Authority in Exigent Circumstances.--
(1) Board.--
(A) In general.--Subject to subparagraph (C), in
exigent circumstances, the Board may, after not less
than 5 days prior written notice to the applicable
State payment stablecoin regulator, take an enforcement
action against a State qualified payment stablecoin
issuer or an institution-affiliated party of such
issuer for violations of this Act that are exigent in
nature.
(B) Rulemaking.--Not later than the end of the 180-
day period beginning on the date of enactment of this
Act, the Board shall issue rules to set forth those
exigent circumstances in which the Board may act under
this paragraph.
(C) Limitations.--If the Board determines that
there is reasonable cause to believe that the
continuation by a State qualified payment stablecoin
issuer of any activity constitutes a serious risk to
the financial safety, soundness, or stability of the
stablecoin issuer, the Board may impose such
restrictions as the Board determines to be necessary to
address such risk. Such restrictions shall be issued in
the form of a directive, with the effect of a cease and
desist order that has become final, to the State
qualified payment stablecoin issuer and any of its
affiliates, limiting--
(i) the payment of dividends by the State
qualified payment stablecoin issuer;
(ii) transactions between the State
qualified payment stablecoin issuer, a holding
company, and the subsidiaries or affiliates of
either the State qualified payment stablecoin
issuer or the holding company; and
(iii) any activities of the State qualified
payment stablecoin issuer that might create a
serious risk that the liabilities of a holding
company and the affiliates of the holding
company may be imposed on the State qualified
payment stablecoin issuer.
(D) Review of directive.--
(i) Administrative review.--
(I) In general.--After a directive
described in subparagraph (C) is
issued, the State qualified payment
stablecoin issuer, or any affiliate of
the State qualified payment stablecoin
issuer subject to the directive, may
object and present to the Board, in
writing, the reasons why the directive
should be modified or rescinded.
(II) Automatic lapse of
directive.--If, after 10 days after the
receipt of a response described in
subclause (I), the Board does not
affirm, modify, or rescind the
directive, the directive shall
automatically lapse.
(ii) Judicial review.--
(I) In general.--If the Board
affirms or modifies a directive
pursuant to clause (i), any affected
party may immediately thereafter
petition the United States district
court for the district in which the
main office of the affected party is
located or in the United States
District Court for the District of
Columbia to stay, modify, terminate, or
set aside the directive.
(II) Relief for extraordinary
cause.--Upon a showing of extraordinary
cause, an affected party may petition
for relief under subclause (I) without
first pursuing or exhausting the
administrative remedies under clause
(i).
(2) Comptroller.--
(A) In general.--Subject to subparagraph (C), in
exigent circumstances, the Comptroller shall, after not
less than 5 days prior written notice to the applicable
State payment stablecoin regulator, take an enforcement
action against a Comptroller-regulated entity or an
institution-affiliated party of such entity for
violations of this Act.
(B) Rulemaking.--Not later than the end of the 180-
day period beginning on the date of enactment of this
Act, the Comptroller shall issue rules to set forth
those exigent circumstances in which the Comptroller
may act under this paragraph.
(C) Limitations.--If the Comptroller determines
that there is reasonable cause to believe that the
continuation by a Comptroller-regulated entity of any
activity constitutes a serious risk to the financial
safety, soundness, or stability of the stablecoin
issuer, the Comptroller shall impose such restrictions
as the Comptroller determines to be necessary to
address such risk. Such restrictions shall be issued in
the form of a directive, with the effect of a cease and
desist order that has become final, to the State
qualified payment stablecoin issuer and any of its
affiliates, limiting--
(i) the payment of dividends by the
Comptroller-regulated entity;
(ii) transactions between the Comptroller-
regulated entity, a holding company, and the
subsidiaries or affiliates of either the
Comptroller-regulated entity or the holding
company; and
(iii) any activities of the Comptroller-
regulated entity that might create a serious
risk that the liabilities of a holding company
and the affiliates of the holding company may
be imposed on the Comptroller-regulated entity.
(D) Review of directive.--
(i) Administrative review.--
(I) In general.--After a directive
described in subparagraph (C) is
issued, the Comptroller-regulated
entity, or any affiliate of the
Comptroller-regulated entity subject to
the directive, may object and present
to the Comptroller, in writing, the
reasons why the directive should be
modified or rescinded.
(II) Automatic lapse of
directive.--If, after 10 days after the
receipt of a response described in
subclause (I), the Comptroller does not
affirm, modify, or rescind the
directive, the directive shall
automatically lapse.
(ii) Judicial review.--
(I) In general.--If the Comptroller
affirms or modifies a directive
pursuant to clause (i), any affected
party may immediately thereafter
petition the United States district
court for the district in which the
main office of the affected party is
located or in the United States
District Court for the District of
Columbia to stay, modify, terminate, or
set aside the directive.
(II) Relief for extraordinary
cause.--Upon a showing of extraordinary
cause, an affected party may petition
for relief under subclause (I) without
first pursuing or exhausting the
administrative remedies under clause
(i).
(f) Gramm-Leach-Bliley Act.--For purposes of title V of the Gramm-
Leach-Bliley Act (15 U.S.C. 6801 et seq.) a State qualified payment
stablecoin issuer is deemed a financial institution.
(g) Effect on State Law.--
(1) Host state law.--The consumer protection laws that
generally apply to the operation of a payment stablecoin issuer
of the Host State apply to the activities conducted in the Host
State by an out-of-State State qualified payment stablecoin
issuer to the same extent as those requirements apply to the
activities conducted in the Host State by an out-of-State
Federal qualified nonbank payment stablecoin issuer.
(2) Home state law.--If any Host State law is determined
not to apply under paragraph (1), the laws of the Home State of
the payment stablecoin issuer shall govern the activities of
the payment stablecoin issuer conducted in the Host State.
SEC. 8. CUSTOMER PROTECTION.
(a) In General.--A person may only engage in the business of
providing custodial or safekeeping services for permitted payment
stablecoins or private keys of permitted payment stablecoins, if the
person--
(1) is subject to--
(A) supervision or regulation by a primary Federal
payment stablecoin regulator or a primary financial
regulatory agency described under subparagraph (B) or
(C) of section 2(12) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (12 U.S.C.
5301(12)); or
(B) supervision by a State bank supervisor, as
defined under section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813) or a State credit union
supervisor, as defined under section 6003 of the Anti-
Money Laundering Act of 2020, and such state bank
supervisor or state credit union supervisor makes
available to the Board such information as the Board
determines necessary and relevant to the categories of
information under subsection (d); and
(2) complies with the segregation requirements under
subsection (b), unless such person complies with similar
requirements as required by a primary Federal payment
stablecoin regulator, the Securities and Exchange Commission,
or the Commodity Futures Trading Commission.
(b) Segregation Requirement.--A person described in subsection (a)
shall--
(1) treat and deal with the payment stablecoins, private
keys, cash, and other property of a person for whom or on whose
behalf the person receives, acquires, or holds payment
stablecoins, private keys, cash, and other property
(hereinafter in this section referred to as the ``customer'')
as belonging to such customer; and
(2) take such steps as are appropriate to protect the
payment stablecoins, private keys, cash, and other property of
a customer from the claims of creditors of the person.
(c) Commingling Prohibited.--
(1) In general.--Payment stablecoins, cash, and other
property of a customer shall be separately accounted for by a
person described in subsection (a) and shall not be commingled
with the funds of the person.
(2) Exception.--Notwithstanding paragraph (1)--
(A) the payment stablecoins, cash, and other
property of a customer may, for convenience, be
commingled and deposited in an omnibus account holding
the payment stablecoins, cash, and other property of
more than 1 customer at an insured depository
institution or trust company;
(B) such share of the payment stablecoins, cash,
and other property of the customer that shall be
necessary to transfer, adjust, or settle a transaction
or transfer of assets may be withdrawn and applied to
such purposes, including the payment of commissions,
taxes, storage, and other charges lawfully accruing in
connection with the provision of services by a person
described in subsection (a); and
(C) in accordance with such terms and conditions as
the Board may prescribe by rule, regulation, or order,
any customer payment stablecoin, cash, and other
property described in this subsection may be commingled
and deposited in customer accounts with payment
stablecoins, cash, and other property received by the
person and required by the Board to be separately
accounted for, treated, and dealt with as belonging to
customers.
(d) Regulatory Information.--A person described under subsection
(a) shall submit to the applicable primary regulator information
concerning the person's business operations and processes to protect
customer assets, in such form and manner as the primary regulator shall
determine.
(e) Exclusion.--The requirements of this section shall not apply to
any person solely on the basis that such person engages in the business
of providing hardware or software to facilitate a customer's own
custody or safekeeping of the customer's payment stablecoins or private
keys.
SEC. 9. TREATMENT OF INSOLVENT PAYMENT STABLECOIN ISSUERS.
(a) In General.--In any insolvency proceeding, including any
proceeding under title 11, United States Code, or any insolvency
proceeding by a primary Federal payment stablecoin regulator or a State
banking supervisor with respect to a payment stablecoin issuer, the
claim of a person holding payment stablecoins issued by the payment
stablecoin issuer shall have priority over all other claims against the
payment stablecoin issuer.
(b) Priority in Bankruptcy Proceedings.--Section 507 of title 11,
United States Code, is amended--
(1) in subsection (a), by striking ``The following'' and
inserting ``Subject to subsection (e), the following''; and
(2) by adding at the end the following:
``(e) Notwithstanding subsection (a), any claim of a person holding
payment stablecoins, as defined in section 2 of the Guiding and
Establishing National Innovation for U.S. Stablecoins of 2025, issued
by a debtor shall have first priority over any other claim against the
debtor under this title.''.
(c) Debtor.--A payment stablecoin issuer that is not a depository
institution (as defined in section 3 of the Federal Deposit Insurance
Act (12 U.S.C. 1813)) may be considered a debtor under title 11, United
States Code.
SEC. 10. INTEROPERABILITY STANDARDS.
The primary Federal payment stablecoin regulators, in consultation
with the National Institute of Standards and Technology, other relevant
standard setting organizations, and State governments, shall assess
and, if necessary, may, pursuant to section 553 of title 5 and in a
manner consistent with the National Technology Transfer and Advancement
Act of 1995 (Public Law 104-113), prescribe standards for payment
stablecoin issuers to promote compatibility and interoperability.
SEC. 11. STUDY ON ENDOGENOUSLY COLLATERALIZED STABLECOINS.
(a) Study by Treasury.--
(1) Study.--The Secretary of the Treasury, in consultation
with the Board, the Comptroller, the Corporation, and the
Securities and Exchange Commission, shall carry out a study of
endogenously collateralized stablecoins.
(2) Report.--Not later than 365 days after the date of the
enactment of this Act, the Secretary shall provide to the
Committee on Financial Services of the House of Representatives
and the Committee on Banking, Housing, and Urban Affairs of the
Senate a report that contains all findings made in carrying out
the study under paragraph (1), including an analysis of--
(A) the categories of non-payment stablecoins,
including the benefits and risks of technological
design features;
(B) the participants in non-payment stablecoin
arrangements;
(C) utilization and potential utilization of non-
payment stablecoins;
(D) nature of reserve compositions;
(E) types of algorithms being employed;
(F) governance structure, including aspects of
decentralization;
(G) nature of public promotion and advertising; and
(H) clarity and availability of consumer notices
disclosures.
(b) Endogenously Collateralized Stablecoin Defined.--In this
section, the term ``endogenously collateralized stablecoin'' means any
digital asset--
(1) in which its originator has represented will be
converted, redeemed, or repurchased for a fixed amount of
monetary value; and
(2) that relies solely on the value of another digital
asset created or maintained by the same originator to maintain
the fixed price.
SEC. 12. REPORTS.
(a) Rulemaking Status.--Not later than 6 months after the date of
enactment of this Act, the primary Federal payment stablecoin
regulators shall provide a status update on the development of the
rulemaking under this Act to the Committee on Financial Services of the
House of Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate.
(b) Annual Reporting Requirement.--Beginning on the date that is 1
year after the date of enactment of this Act, and annually thereafter,
the Board and Comptroller shall submit to the Committee on Banking,
Housing, and Urban Affairs of the Senate, the Committee on Financial
Services of the House of Representatives, and the Director of the
Office of Financial Research a report on the status of the payment
stablecoin industry, including--
(1) an overview of trends in payment stablecoin activities;
(2) a summary of the number of applications for permitted
payment stablecoin issuer under section 5, including aggregate
approvals and rejections of applications; and
(3) a description of the potential financial stability
risks posed to the safety and soundness of the broader
financial system by payment stablecoin activities.
(c) FSOC Report.--The Financial Stability Oversight Council shall
incorporate the findings in the report under subsection (b) into the
annual report of the Council required under section 112(a)(2)(N) of the
Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C.
5322).
SEC. 13. AUTHORITY OF BANKING INSTITUTIONS.
(a) Rule of Construction.--Nothing in this Act may be construed to
limit the authority of a depository institution, Federal credit union,
State credit union, or trust company to engage in activities
permissible pursuant to applicable State and Federal law, including--
(1) accepting or receiving deposits and issuing digital
assets that represent deposits;
(2) utilizing a distributed ledger for the books and
records of the entity and to affect intrabank transfers; and
(3) providing custodial services for payment stablecoins,
private keys of payment stablecoins, or reserves backing
payment stablecoins.
(b) Treatment of Custody Activities.--The appropriate Federal
banking agency (as defined under section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813)), the National Credit Union
Administration (in the case of a credit union), and the Securities and
Exchange Commission may not require a depository institution, national
bank, Federal credit union, State credit union, or trust company, or
any affiliate thereof--
(1) to include assets held in custody as a liability on any
financial statement or balance sheet, including payment
stablecoin custody or safekeeping activities;
(2) to hold additional regulatory capital against assets in
custody or safekeeping, except as necessary to mitigate against
operational risks inherent with the custody or safekeeping
services, as determined by--
(A) the appropriate Federal banking agency;
(B) the National Credit Union Administration (in
the case of a credit union);
(C) a State bank supervisor (as defined under
section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813)); or
(D) a State credit union supervisor (as defined
under section 6003 of the Anti-Money Laundering Act of
2020);
(3) to recognize a liability for any obligations related to
activities or services performed for digital assets that the
entity does not own if that liability would exceed the expense
recognized in the income statement as a result of the
corresponding obligation.
(c) Definitions.--In this section:
(1) Depository institution.--The term ``depository
institution'' has the meaning given that term under section 3
of the Federal Deposit Insurance Act (12 U.S.C. 1813).
(2) Credit union terms.--The terms ``Federal credit union''
and ``State credit union'' have the meaning given those terms,
respectively, under section 101 of the Federal Credit Union
Act.
SEC. 14. AMENDMENTS TO CLARIFY THAT PAYMENT STABLECOINS ARE NOT
SECURITIES OR COMMODITIES.
(a) Investment Advisers Act of 1940.--Section 202(a)(18) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(18)) is amended by
adding at the end the following: ``The term `security' does not include
a payment stablecoin issued by a permitted payment stablecoin issuer,
as such terms are defined, respectively, in section 2 of the Clarity
for Payment Stablecoins Act of 2023.''.
(b) Investment Company Act of 1940.--Section 2(a)(36) of the
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(36)) is amended by
adding at the end the following: ``The term `security' does not include
a payment stablecoin issued by a permitted payment stablecoin issuer,
as such terms are defined, respectively, in section 2 of the Clarity
for Payment Stablecoins Act of 2023.''.
(c) Securities Act of 1933.--Section 2(a)(1) of the Securities Act
of 1933 (15 U.S.C. 77b(a)(1)) is amended by adding at the end the
following: ``The term `security' does not include a payment stablecoin
issued by a permitted payment stablecoin issuer, as such terms are
defined, respectively, in section 2 of the Clarity for Payment
Stablecoins Act of 2023.''.
(d) Securities Exchange Act of 1934.--Section 3(a)(10) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(10)) is amended by
adding at the end the following: ``The term `security' does not include
a payment stablecoin issued by a permitted payment stablecoin issuer,
as such terms are defined, respectively, in section 2 of the Clarity
for Payment Stablecoins Act of 2023.''.
(e) Securities Investor Protection Act of 1970.--Section 16(14) of
the Securities Investor Protection Act of 1970 (15 U.S.C. 78lll(14)) is
amended by adding at the end the following: ``The term `security' does
not include a payment stablecoin issued by a permitted payment
stablecoin issuer, as such terms are defined, respectively, in section
2 of the Clarity for Payment Stablecoins Act of 2023.''.
SEC. 15. RECIPROCITY FOR STABLECOINS ISSUED IN OVERSEAS JURISDICTIONS.
The Federal Reserve, in collaboration with the Secretary of the
Treasury, shall create and implement reciprocal arrangements or other
bilateral agreements between the United States and jurisdictions with
substantially similar payment stablecoin regulatory regimes to
facilitate international transactions and interoperability with United
States dollar-denominated stablecoins issued overseas.
SEC. 16. EFFECTIVE DATE.
(a) In General.--This Act shall take effect on the earlier of--
(1) 18 months after the date of enactment of this Act; or
(2) the date that is 120 days after the date on which the
primary Federal payment stablecoin regulators issue any final
regulations implementing this Act.
(b) Notice to Congress.--The primary Federal payment stablecoin
regulators shall notify Congress upon beginning to process applications
under this Act.
(c) Safe Harbor for Pending Applications.--The primary Federal
payment stablecoin regulators may waive the application of the
requirements of this Act for a period not to exceed 12 months beginning
on the effective date described under subsection (a), with respect to--
(1) a subsidiary of an insured depository institution, if
the insured depository institution has an application pending
for the subsidiary to become a permitted payment stablecoin
issuer on that effective date; or
(2) a nonbank entity with an application pending to become
a Comptroller-regulated entity on that effective date.
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