The Stablecoin Trap: Why Senators Are Fighting the Treasury Over $10 Billion

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By: Gavin Thorne

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This isn’t about consumer protection. It is a turf war disguised as compliance. Senators know the GENIUS Act shifts power away from Capitol Hill. They want states to keep the keys. Treasury holds the lock. Lummis leads the charge because federal oversight eats state budgets. Small issuers matter less than the precedent. If Washington wins, states become clerks. If states win, the dual banking system survives. The letter is a warning shot. Bessent needs to read it carefully. Ignoring this invites legislative backlash. The real currency here is authority.

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President Trump signed the GENIUS Act into law in July 2025. It created federal rules for payment stablecoins. Issuers holding stablecoins worth $10 billion or less qualify for state oversight. Tether, USDC, and USDS exceed this limit. They face federal treatment. States must maintain rules matching the federal framework. Treasury sought public input in April. The comment period closed on June 2. A final rule awaits publication in the Federal Register. Senators demand written guidance with timelines. They want procedural steps clarified now.

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State legislative calendars differ significantly across the union. Some operate on biennial cycles. Lawmakers say Treasury must allow ongoing certification requests. The GENIUS Act includes an annual recertification requirement. This structure supports a continuing partnership between regulators. Treasury should keep the state pathway open over time. The proposal did not explain the full certification process. States face uncertainty while drafting their own stablecoin laws. The group urged Treasury to issue written guidance. Flexibility is required for smaller issuers.

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Senator Cynthia Lummis led the bipartisan letter to Treasury Secretary Scott Bessent. A bipartisan group of lawmakers urged Treasury to protect state authority. They asked Treasury to clarify how states can qualify. The process must support state participation. Narrow limits are unacceptable. Lawmakers framed the issue around the United States dual banking system. Congress designed the GENIUS Act to preserve state banking authority. Treasury should not treat certification as a limited process. Several states are still weighing stablecoin laws. Pressure mounts on the department.

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The senators said Treasury must support responsible innovation. They also said a flexible process would protect competition. Their letter now places state authority at the center of the GENIUS Act rollout. Smaller firms could seek state charters if their states receive certification. That option depends on Treasury’s final rules. Implementation process remains unclear. Treasury faces pressure to clarify stablecoin certification rules. States seek a clear path to regulate smaller stablecoin issuers. Lawmakers seek flexible rules for state stablecoin regulation. The market threshold shapes oversight significantly.

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If Treasury finalizes rules that narrow state certification windows before biennial sessions align, the dual banking system fractures under regulatory arbitrage while smaller issuers flee to offshore jurisdictions leaving only the giants like Tether and USDC to dominate the domestic payment landscape under federal supervision without any genuine competitive pressure to lower fees or improve transparency for the average user who simply wants to send money without waiting for bureaucratic approval.

Author bio: Gavin Thorne, an investigative journalist tracking special interests and legislative affairs based in Washington, D.C.