Circle: Stablecoin Regulation Should Be Consistent

In the evolving landscape of digital finance, stablecoins have emerged as a critical bridge between traditional currency and the broader cryptocurrency ecosystem. As regulators globally grapple with how to best integrate and oversee these digital assets, industry leaders are actively engaging in the policy-making process. One such voice is Circle, a prominent issuer of the USDC stablecoin, which has put forth a clear stance on the upcoming GENIUS Act: “Same Activity, Same Rules” for payment stablecoins. This principle underscores a call for a consistent and robust regulatory framework that ensures consumer protection and market integrity, irrespective of a stablecoin’s label or marketing.

A Call for Uniformity in Stablecoin Regulation

Circle recently submitted a comprehensive comment letter to the U.S. Department of the Treasury, responding to an Advance Notice of Proposed Rulemaking concerning the implementation of the GENIUS Act. This filing outlines a proposed national framework for payment stablecoins, emphasizing how uniform requirements can significantly benefit users, issuers, and intermediaries across U.S. and international markets.

The core of Circle’s argument revolves around the “Same Activity, Same Rules” principle. They contend that any digital token designed to maintain a stable value in payments, functioning akin to a dollar, should be subject to the same obligations as a payment stablecoin under the GENIUS Act. This approach aims to eliminate loopholes where entities might attempt to bypass safeguards through mere labeling or marketing claims, ensuring that consumer protection and market integrity remain paramount.

Policy Principles and Robust Supervision

To achieve this level playing field, Circle has put forward several key recommendations for the GENIUS Act’s implementation:

• Full Backing and Segregation: Payment stablecoins, according to Circle, should be fully backed with cash and high-quality liquid assets. Crucially, these reserve assets must be kept entirely separate from company operating funds to protect user assets.
• Redeemability at Par: Users should have the assurance that their stablecoins are redeemable at par (1:1) on demand. This ensures liquidity and trust in the stablecoin’s value.
• Transparency and Verification: The framework should mandate independent monthly checks of reserves and clear, plain-language reports. These reports would enable both users and supervisory bodies to easily verify the backing of stablecoins.
• Level Playing Field: Circle advocates for a common prudential baseline that applies equally to both bank and non-bank issuers. This would foster fair competition while upholding consistent standards.
• Standalone Issuer Structure: The company suggests that stablecoin issuers operate with a standalone structure, equipped with the necessary staffing and controls to meet their obligations under the Act.
• Reciprocal Path for Foreign Regimes: Recognizing the global nature of stablecoins, Circle proposes a reciprocal path for foreign regulatory regimes that meet or exceed GENIUS standards and maintain ongoing supervision. The determinations for qualifying cross-border issuers should be transparently published.
• Predictable Penalties and Safe Harbors: The framework should include predictable penalties for non-compliance, alongside safe harbor protections for good-faith adherence to lawful orders. Furthermore, robust wind-down plans are essential to ensure the quick and fair return of customer funds across borders in unforeseen circumstances.

Facilitating Market Use and Global Interoperability

Beyond the foundational policy principles, Circle also addressed the practical implications for stablecoin adoption and functionality. They urged the Treasury Department to provide clarity on how permitted U.S. issuers can operate effectively on a global scale. This clarification is vital to ensure that the conversion between dollars and stablecoin tokens remains practical and efficient for businesses and platforms conducting transactions across different time zones.

This point is directly linked to liquidity management and the seamless interoperability with existing regulated financial infrastructure. Circle highlights the importance of preventing fragmentation of payment flows as they move between banks, brokers, and exchanges, thereby supporting a robust and integrated digital financial system.

Clarity in Accounting and Tax Treatment

For broader institutional adoption and clarity, Circle recommended that permitted payment stablecoins be treated as cash and cash equivalents for accounting and tax purposes. Such an alignment in financial reporting with the fully reserved model would significantly reduce ambiguity for treasurers and auditors, streamlining operations for businesses utilizing stablecoins.

Furthermore, the submission calls for clear guidance that extends GENIUS obligations to any token designed to maintain a stable value for payments. This includes products that might deny direct redemption but otherwise function in a manner similar to compliant payment stablecoins. This measure is crucial to ensure that consumer protection and market integrity are not undermined by technicalities or alternative labels.

Conclusion

Circle’s comprehensive recommendations for the GENIUS Act underscore a proactive industry effort to shape a regulatory environment that fosters innovation while prioritizing consumer protection and financial stability. The “Same Activity, Same Rules” principle is a compelling argument for a consistent, prudentially sound framework for U.S. dollar payment stablecoins. By advocating for transparent reserve requirements, robust supervision, and clear guidance on market use and accounting, Circle aims to contribute to the establishment of a secure and globally interoperable digital financial system, where the benefits of stablecoins can be fully realized with appropriate safeguards in place.