Paradigm Submits Comments on GENIUS Act State-Level Regulation Proposal

Paradigm has submitted a comment letter to the U.S. Treasury regarding the GENIUS Act state-level regulatory pathway proposal, according to ChainCatcher. While supporting the core framework of the proposal, Paradigm highlighted four issues that need addressing to ensure the state-level pathway effectively serves issuers. Firstly, the proposal anchors the federal framework to the yet-to-be-finalized OCC regulations, requiring states and issuers to plan against undefined benchmarks, which hinders market access. Paradigm suggests that the Treasury should not finalize the rule before the OCC's implementation rules are determined. Secondly, the proposal mandates unanimous agreement from the heads of the Treasury, Federal Reserve, and FDIC to certify state systems but lacks a decision timeline, veto explanation standards, or mechanisms to prevent indefinite blocking by a single member. Paradigm recommends a 180-day decision deadline, a procedure for resubmission amendments, and a requirement for specific veto explanations. Thirdly, the proposal requires state systems to mandate a 12-month operating expense reserve fund, which could disadvantage early-stage issuers. Paradigm suggests allowing states to adjust reserve fund requirements based on issuer size and risk profile. Lastly, the proposal does not adequately preempt hostile actions by individual states, a gap that must be addressed.