Key Highlights
- a16z says only centralized, fiat-backed stablecoins with a real issuer should follow GENIUS rules, while fully decentralized stablecoins are treated differently.
- The firm urges fair rules needed; foreign and state frameworks should meet or exceed federal standards.
- A16z supports modernizing AML/KYC rules with privacy-focused digital IDs that keeps transactions traceable without exposing data.
Andreessen Horowitz (a16z) has shared its first-round feedback with the U.S. Treasury on implementing the GENIUS (Guiding and Establishing National Innovation for U.S. Stablecoins) Act, a bipartisan law for stablecoins.
In the feedback letter dated November 4, the firm called for clear, innovation-friendly rules that protect consumers, support competition, and distinguish between centralized “payment stablecoins” and fully decentralized crypto systems.
The firm responded to two requests for feedback from the Treasury: one in August on methods to detect illicit activity and another in September on implementing the GENIUS Act. The letters were addressed to Julie Lascar, Director of the Office of Strategic Policy, and Treasury Secretary Scott Bessent.
Clarifying stablecoin definitions
a16z emphasized the need to clearly define which stablecoins are covered under the GENIUS Act. Not all stablecoins are considered “payment stablecoins,” and decentralized stablecoins should be treated differently.
The letter noted that decentralized stablecoins do not fall within the GENIUS framework. “They are issued through the automatic and programmatic operations of smart contracts that are not controlled by any person.”
The term “person” in the law, a16z argued, does not apply to decentralized stablecoins. Therefore, only centralized, fiat-backed stablecoins with an actual issuer should be subject to GENIUS rules.
a16z also stressed the need for a level playing field among stablecoin issuers. The suggestion included that foreign and state-level frameworks needed to meet or exceed federal standards to guarantee fair competition while protecting U.S. consumers.
Combating illicit finance
The GENIUS Act also addresses anti-money laundering (AML) and sanctions compliance for payment stablecoins. The letter references a16z’s recommendation to modernize AML/KYC rules using digital identity solutions, including decentralized, privacy-preserving systems.
As a16z noted, “Decentralized digital identity—built with privacy-preserving cryptography—can both strengthen national security and protect civil liberties.” Technologies like zero-knowledge proofs and multi-party computation could allow verification without exposing personal data.
The firm highlighted that all payment stablecoin transactions should remain traceable and auditable. Treasury may provide guidance on how network participants, including validators and custodians, can meet AML obligations without interfering with normal operations.
Tax and accounting considerations
a16z also highlighted that current IRS guidance could create burdensome reporting for routine stablecoin transactions, even when gains or losses are negligible. They suggested rules that reflect real-world usage, exempting minor transactions from taxable events while preserving oversight for significant deviations.
Similarly, Coinbase also submitted a letter which stated payment stablecoins should be treated like cash for tax and accounting purposes since their value stays stable. The exchange urged the Treasury and IRS to adopt a practical, low-burden approach to avoid overwhelming authorities with unnecessary data.
Apart from these two firms, even Circle, recommended clear and uniform guidelines to protect consumers while supporting growth in the stablecoin sector.
Future outlook for stablecoins
How the GENIUS Act is put into practice will greatly affect the U.S. stablecoin market. a16z, among others, has called for a distinction in the treatment of centralized and decentralized stablecoins, with the creation of rules that make sense in the real world.
Clear and fair rules can boost innovation, protect users, and keep competition healthy. However, if the rules are too strict or unclear, adoption, especially of decentralized stablecoins, may slow down, limiting market growth.
Also Read: Brazil Central Bank Tightens Crypto and Stablecoin Rules
