Bill needs significant improvements to balance innovation and consumer protections
WASHINGTON DC – Consumer Reports called on the Senate Banking Committee today to adopt a number of improvements to a bill it is considering that creates a regulatory framework for stablecoins – a type of digital asset pegged to the U.S. dollar or other fiat currencies. The Guiding and Establishing National Innovation for U.S. Stablecoins of 2025 (GENIUS) Act will be the subject of a hearing by the Committee today at 2:30pm EST, which will be livestreamed.
“Stablecoins have the potential to play an important role in the future of payments and financial innovation,” said Delicia Hand, senior director, digital marketplace, at Consumer Reports. “However, it is crucial that any regulatory framework for stablecoins prioritizes strong consumer protections and financial stability. The GENIUS Act falls far short of that and requires significant improvements to ensure proper guardrails are in place to protect consumers and our economy from stablecoin risks”
Consumer Reports highlighted a number of key concerns with the GENIUS Act:
- Insufficient Consumer Protection: While the bill includes some requirements for reserves and redemption policies, it lacks the robust consumer protections found in traditional banking. This includes clear mechanisms for dispute resolution, deposit insurance, and limitations on liability for unauthorized transactions.
- Regulatory Arbitrage: The bill creates a new category of “Federal qualified nonbank payment stablecoin issuers” which could allow firms to operate under a lighter regulatory touch than traditional banks, creating opportunities for regulatory arbitrage and potentially undermining the safety and soundness of the financial system.
- Big Tech Entry: The GENIUS Act could inadvertently create a pathway for large technology companies to enter the banking space without being subject to the same level of scrutiny and regulation as traditional banks. This raises concerns about data privacy, market concentration, and the potential for conflicts of interest.
- Limited Oversight: The bill gives considerable power to the Comptroller of the Currency, an agency that has historically been friendly to the banking industry. It is essential to ensure that all regulators involved in stablecoin oversight have the resources and expertise necessary to effectively monitor and enforce regulations.
Consumer Reports urged Senate Banking Committee members to adopt a number of improvements to the GENIUS Act:
- Stronger Consumer Protections: Incorporate provisions for deposit insurance (potentially through a tailored system), clear dispute resolution processes, and limitations on consumer liability for unauthorized transactions, mirroring protections in place for traditional payment methods.
- Level Playing Field: Ensure that stablecoin issuers are subject to regulatory requirements that are commensurate with the risks they pose, regardless of their corporate structure. This could involve requiring nonbank stablecoin issuers to obtain bank charters or be subject to consolidated supervision by the Federal Reserve.
- Data Privacy Safeguards: Include strong data privacy provisions that limit the collection, use, and sharing of consumer data by stablecoin issuers and related entities.
- Enhanced Regulatory Coordination: Foster greater coordination among federal and state regulators to ensure consistent and effective oversight of the stablecoin market.
- Clarity on Scope: Provide a clearer definition of “payment stablecoin” to prevent the bill from inadvertently capturing other types of digital assets or innovative payment systems.
Media Contact: Michael McCauley, michael.mccauley@consumer.org