Key Highlights
- Consensys submitted formal comments to the FDIC regarding the GENIUS Act implementation proposal.
- The company raised concerns over expanded interpretations of stablecoin yield restrictions.
- Consensys requested regulatory clarity for non-custodial wallets interacting with DeFi protocols.
Consensys, a blockchain software company, on Monday submitted a formal comment letter to the Federal Deposit Insurance Corporation (FDIC) regarding the agency’s proposed rule to implement the GENIUS Act for FDIC-supervised payment stablecoin issuers.
According to the official release, the filing follows an earlier comment to the Office of the Comptroller of the Currency (OCC) on May 1 and a parallel submission to the Treasury Department on the substantial-similarity framework for state regulatory regimes.
Consensys identified four areas of the FDIC’s proposal that it believes should be refined to better align with the statute, support innovation, and avoid unintended consequences for consumers and developers.
Concern over yield restrictions and third parties
Consensys’s first concern was aimed at the FDIC’s proposed rebuttable presumption that extends the GENIUS Act’s yield prohibition to “related third parties” of an issuer. Section 4(a)(11) of the Act explicitly prohibits stablecoin issuers from paying yield to holders but doesn’t bar independent distribution partners from offering their own commercial benefits.
The FDIC’s wider interpretation might lead to the inclusion of ordinary business deals like brand licensing and distribution agreements. Congress considered amending the statute but declined to do so. Consensys appealed to the FDIC to refrain from expanding the regulation beyond its intended scope and suggested a four-point test based on the concept of agency in common law.
The second point included non-custodial software interfaces that permit users to interact with independent DeFi protocols. The GENIUS Act safeguards the self-custodial software carve-out. Consensys quotes set up precedents from FinCEN, federal courts, and international regulators, affirming that non-custodial wallet software does not function as a regulated intermediary.
The comment asked for clear confirmation that when users independently transfer stablecoins into DeFi protocols and earn protocol-native yield, the wallet provider is not considered to be paying yield on behalf of the user.
Focus on supervisory discretion and technical definitions
The third submission requested that the FDIC maintain various points where its proposal is more practical than the OCC’s approach, such as permissive treatment of multi-brand issuance and discretionary supervisory responses to reserve, redemption, and capital shortfalls.
The company further noted that the compulsory consequences create cliff-edge dynamics that harm holders, and supervisory discretion gives better results.
The last area focused on technical definitions. Consensys suggested adopting functional, technology-neutral definitions for terms like “distributed ledger” and “smart contract.” It further asked for addressing cross-chain stablecoin representations based on the legal character of the holder’s claim instead of just relying on technological mechanisms.
Beginning of the engagement
According to Consensys, the filing marks the beginning of their engagement with federal banking agencies concerning the GENIUS Act.
The firm emphasizes that stablecoins are becoming increasingly important as payment systems and infrastructures, implying that the decisions made at the beginning of the rulemaking process will have a lasting impact on the industry.
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