PRESIDENT’S MESSAGE Federally, the pace of legislative and regulatory change is overwhelming — some of it is good, some is not. This is always the case with a change in administration or political party control. When we have regulatory change versus Congressional action, banks are always susceptible to counteractions with the next administration. This whiplash effect can be challenging for banks. But let’s dive right in. D.C. has been busy. Let’s start with the GENIUS Act. Congress passed this legislation, and President Trump signed it into law on July 18. The law requires issuers to maintain a one-for-one reserve and disclose the redemption policy. The bill allows foreign issuers of stablecoins to offer, sell or make available in the United States stablecoins using digital asset service providers, subject to requirements, including a determination by the Department of the Treasury that they are subject to comparable foreign regulations. Issuers are subject to the Bank Secrecy Act for anti-money laundering and related purposes. Issuers are explicitly prohibited from paying interest or yield to holders of their stablecoins. This prohibition does not apply to affiliates. This is a significant loophole that we are seeking a correction in the market structure bill. 1. Strengthen the prohibition on interest payments for payment stablecoins by extending it to brokers, dealers, exchanges and affiliates of payment stablecoin issuers. 2. State Chartered Depositories: Repeal Section 16(d) of the GENIUS Act to restore state authority over out-of-state-chartered financial institutions. Many are acting as money transmitters. 3. Non-Financial Company Activity: Close loopholes in the prohibition on non-financial companies being payment stablecoin issuers by removing all approval pathways and prohibiting both public and private non-financial entities. Deposit insurance is ripe for reform. The best time to work on this is when there isn’t a banking crisis. Sen. Hagerty (R-TN) introduced an amendment to the National Defense Authorization Act (odd place for a DIF amendment), increasing insurance coverage for non-interest-bearing accounts up to $20,000,000 for banks under $250,000,000,000. The amendment is silent regarding the cost of the increase. The ABA DIF working group has recommended more comprehensive reforms outlined in the following. Emergency Actions and Authority Congressional pre-approval for enhanced FDIC coverage to mitigate severe stress events is needed. Congress should pre-approve authority for the FDIC to create a program similar to the transaction account guarantee program that would guarantee bank and holding company liabilities during times of severe stress. This step could help reduce the risk of contagion. Improve transparency of systemic risk determinations and special assessments. Congress should require the FDIC to develop guidelines on specific considerations that warrant a systemic risk determination and the methodology it will use to identify beneficiaries for purposes of a special assessment. Deposit Insurance Coverage, the Deposit Insurance Fund and Assessments Ensure the coverage limit and any modifications to it are empirically based and indexed to inflation. Any change in coverage should be data-driven, with significant input from the banking industry and other stakeholders. Once a limit is established, it should be indexed to inflation. Federal and State Legislative Update By Jenifer Waller, President and CEO, CBA Colorado Banker 4
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