Key Highlights
- Paradigm filed a comment urging the NCUA to revise portions of its proposed GENIUS Act stablecoin rules.
- The firm argues the proposal extends beyond the law by broadening yield restrictions and limiting issuer flexibility.
- Paradigm also wants explicit protections for tokenized credit union share accounts and technology-neutral treatment of reserve assets.
Crypto investment firm Paradigm has called on the National Credit Union Administration (NCUA) to revise parts of its proposed stablecoin regulations, arguing that several provisions implementing the GENIUS Act exceed what Congress intended and could create unnecessary barriers for stablecoin issuers.
In a comment letter submitted on Friday, July 17, Paradigm said it generally supports the regulator’s effort to implement the landmark stablecoin legislation but warned that portions of the proposal introduce legal uncertainty, reduce operational flexibility, and risk slowing innovation in the U.S. digital asset industry.
The filing comes as U.S. regulators continue drafting detailed rules under the GENIUS Act following its enactment, with multiple banking agencies now collecting industry feedback.
Paradigm says NCUA proposal goes beyond Congress’s intent
While supporting much of the proposed framework, Paradigm argued that several provisions extend beyond the statutory language approved under the GENIUS Act.
One of the firm’s biggest concerns is the treatment of yield-bearing stablecoins.
Paradigm urged the NCUA not to broaden the Act’s prohibition on stablecoin yield by applying it to third-party providers or indirect arrangements, arguing the legislation only restricts yield distributed directly by issuers.
The company also opposed limiting issuers to a single stablecoin brand and recommended a simpler monthly reporting framework tied to clearly defined reporting categories instead of broader compliance obligations.
Paradigm seeks clear protection for tokenized credit union shares
A major portion of the filing focuses on tokenized credit union share accounts.
Paradigm backed the NCUA’s preliminary interpretation that tokenized member shares should continue to be treated as deposits rather than payment stablecoins simply because they exist on blockchain infrastructure.
However, the company urged the regulator to explicitly codify that interpretation in its final rule to avoid future legal uncertainty. “Clarity is not just a word for market structure; it must also be a guiding star in how the government structures all regulations.”
Reserve asset rules should stay technology neutral, firm says
Paradigm also called on the NCUA to apply technology-neutral standards when regulating reserve assets.
According to the firm, reserve assets should be evaluated based on the financial risk of the asset itself—not on whether ownership is recorded on a blockchain.
Paradigm therefore recommended allowing tokenized versions of eligible reserve assets to receive the same treatment as traditional reserves.
It also opposed any quantitative cap on tokenized reserves, arguing that such limits would unnecessarily restrict issuer flexibility without improving financial stability.
Crypto industry continues pushing to shape GENIUS Act rules
Other industry participants have also weighed in on the implementation process. Hyperliquid recently urged regulators to ensure that stablecoin rules do not unintentionally capture decentralized finance (DeFi) infrastructure or limit permissionless innovation.
Outside the federal government, regulators are also revisiting their own frameworks. Last month, New York proposed updated stablecoin rules designed to align the state’s regulatory regime with the GENIUS Act by introducing additional standards covering custody, reserve management, governance, and operational risk.
Internationally, lawmakers in the United Kingdom have also urged the Bank of England to reconsider proposed stablecoin restrictions, warning that overly conservative rules could discourage innovation in the sector.
Final GENIUS Act rules could shape the future of stablecoins
The NCUA’s proposal is one of several rulemaking processes now underway as U.S. regulators convert the GENIUS Act into operational regulations.
The agency will review public comments before publishing its final framework, alongside similar efforts by the OCC and FDIC.
For stablecoin issuers, those final rules will determine how reserves are managed, how tokenized deposits are treated, and how much flexibility companies retain when building regulated digital dollar products.
Paradigm’s latest comments underscore the broader debate surrounding the GENIUS Act: how regulators can strengthen oversight while avoiding requirements that industry participants believe extend beyond the law passed by Congress.
Also Read: Visa Debuts Stablecoin Platform With Initial OpenUSD Support
