Paradigm Urges U.S. Treasury to Revise GENIUS Act Regulatory Rules

The technology-focused investment firm Paradigm has formally submitted a comment letter to the U.S. Department of the Treasury regarding the proposed rulemaking for the GENIUS Act. While expressing support for the core architecture of the legislative proposal, the firm identified significant structural flaws in the state-level regulatory path. Paradigm argues that without specific revisions to the current framework, the state-level channel will remain ineffective for digital asset issuers and market participants, potentially stifling innovation within the domestic blockchain ecosystem.

Key Concerns Regarding OCC Alignment and Deadlines

A primary concern raised by the firm involves the premature anchoring of the federal framework to Office of the Comptroller of the Currency (OCC) regulations. Paradigm notes that these regulations are currently not yet finalized, creating a state of legal uncertainty for issuers who are expected to plan based on an unsettled benchmark. The investment firm recommends that the Treasury postpone finalizing its rules until the OCC's implementation guidelines are fully established. Furthermore, the proposal currently lacks a defined timeline for certification decisions, which could lead to indefinite delays for new market entrants.

Proposed Mechanisms for Regulatory Efficiency

To ensure the state-level path remains viable, Paradigm has proposed several procedural amendments designed to increase transparency and accountability. Under the current draft, the heads of the Treasury, Federal Reserve, and FDIC must provide unanimous consent for state-level systems, yet there is no mechanism to prevent a single official from blocking certification indefinitely. To address this, Paradigm suggests:

• Establishing a strict 180-day decision deadline for all certification applications.
• Implementing a formal modification procedure for supplementary submissions.
• Requiring detailed, specific denial explanations to prevent arbitrary rejections.
• Creating a framework to prevent a "pocket veto" by a single regulatory head.

Impact on the Crypto Market and Issuers

The GENIUS Act represents a significant step in defining the relationship between state and federal oversight for digital assets. However, Paradigm emphasizes that the lack of clear criteria for rejecting explanations or challenging denials could deter institutional participation. The firm’s intervention highlights the ongoing tension between federal oversight and the flexibility required by state-level regulators to foster emerging financial technologies.

The Treasury should not finalize this rule before the OCC's implementation rules are finalized, as it requires states and issuers to plan based on an unsettled benchmark, directly hindering market access.

The outcome of this rulemaking process will likely determine the ease with which cryptocurrency issuers can navigate the American regulatory landscape. By advocating for a more predictable and time-bound certification process, industry stakeholders aim to ensure that the U.S. Treasury provides a functional pathway for innovation rather than a bureaucratic bottleneck. As the comment period progresses, the industry awaits a response on whether these suggested guardrails will be integrated into the final regulatory text.