Stablecoin News: Consensys Pushes Back on OCC Rules Under GENIUS Act

Key Insights:

• Stablecoin News: Consensys has rejected several provisions in the OCC’s proposed rules under the GENIUS Act.
• The company cited that these crypto regulations would pose risks to stablecoin issuers and DeFi platforms.
• Meanwhile, the CLARITY Act continues to face a delay with no Senate markup announced to date.

In stablecoin news today, Consensys, a blockchain software company, has shared its views on the US stablecoin framework. It urges changes in the proposed regulations suggested by the Office of the Comptroller of the Currency under the GENIUS Act.

Stablecoin News: Consensys Sends Letter to US Treasury

In a filing with the US Treasury Department, the company indicated that the regulator’s approach is generally good. However, Consensys noted that there are some areas in the proposal that seem to be excessive.

The interpretation of yield constraints is a major issue. The GENIUS Act literally prohibits stablecoin issuers from paying interest to keepers. This provision is to avoid the token acting as bank deposits, Consensys noted in stablecoin news today.

Consensys Sends Letter To US Treasury | Source: Consensys

Consensys indicated that it supports a boundary but claimed that the OCC draft extends its scope beyond lawmakers’ intentions. “Congress drew this line deliberately, and twice rejected amendments that would have extended the prohibition to non-issuers,” the firm wrote.

In its commentary, the company cited the language that defines “related third parties” under this framework. The company claims that such a definition can easily attract distributors that just offer access or branding. These organizations can collect charges for providing wallet services or interfaces.

If they later use some of those earnings for promotions, Consensys argued that it cannot be considered issuer-funded yield.

“A distributor that receives a commercial fee and independently decides to spend some of that fee on user incentives is not an issuer paying yield,” they added.

How is DeFi Act Risk Under the New Proposed Rules?

The company also dealt with the intersection of the rules with decentralized finance. It indicated activity from wallets like MetaMask, where users can transfer stablecoins to protocols such as Aave.

In such instances, lending markets provide returns rather than issuers, per the stablecoin news update today. “They are making an active investment decision that involves deploying their own assets into a protocol and accepting protocol risk,” Consensys clarified.

It also noted that the current statutory carve-outs on non-custodial software ought to obviously apply in this instance. The other issue is branding and distribution, according to today’s stablecoin news.

The OCC is considering restrictions on whether a single licensed issuer can issue multiple co-branded stablecoins. Consensys contended that the restriction would not be effective, whereas transparency would.

It implied that issuers would need to explicitly disclose reserve backing. Also, in certain cases, they would have to adopt segregated pools for various branded tokens rather than banning the model outright.

Stablecoin News: What’s Next for CLARITY Act?

Meanwhile, the legislative debate over crypto regulations continues in Washington. Lawmakers are now reviewing the CLARITY Act, which aims to establish the classification and jurisdiction of digital assets.

While the GENIUS Act addresses the payment of stablecoins, the CLARITY Act focuses on overall crypto regulations. However, its Senate markup is still delayed due to the stablecoin yield debate.

The Senate Banking Committee, led by Tim Scott, has suggested that Republicans are moving to progress the bill. However, not all the members are on board. John Kennedy has still not extended his support for the proposal, making it hard to proceed.

Meanwhile, Senator Thom Tillis has continued championing a markup when Congress comes back after recess. Also, in a related stablecoin news, Tillis revealed that the yield debate has almost reached a resolution.

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