MIT DCI's Comment in Response to the Department of Treasury's ANPRM on the GENIUS Act
The MIT DCI participated in the Department of Treasury's Advanced Notice of Proposed Rulemaking on the GENIUS Act. We submitted our letter alongside nearly 400 other industry participants who are interested in advancing stablecoin regulation in the United States. We aimed to highlight a few key risks of stablecoins that warrant deeper consideration and that we plan to expand upon during the subsequent NPRM.
Key risks identified in our research
Primary vs. secondary market asymmetries can create uneven redemption mechanics and exacerbate stress during potential runs [Article]
Stablecoins differ fundamentally from existing instruments such as money market mutual funds, commercial banks, and Eurodollars. Applying frameworks from these analogous, but ultimately distinct models will create critical gaps [Article]
Concentration in the short-term Treasury market introduces a new risk-vector for Treasury market stability during periods of stress [Article]
The GENIUS Act underweights technical specifications for PPSIs and for related infrastructure components essential to maintaining resilience [Article]
Forthcoming MIT DCI Stablecoin Risk Paper
Our upcoming paper explores several questions raised directly in the ANPRM:
Lack of Federal Reserve access is a structural source of liquidity risk for stablecoin issuers, even when the reserve assets are high-quality. We are not advocating that stablecoin issuers should have Fed access, but rather noting risks its absence can create.
Redemption bottlenecks in the Treasury markets could emerge with even small sell-offs, because of the Supplementary Leverage Ratio (SLR) constraints on broker-dealer banks.
Technological resilience is fundamental to maintaining par. If the systems underlying the stablecoin issuer’s operations fail, financial mechanisms to hold the peg might not be adequate to ensure par-value exchange.
Area for further clarification
We encourage the Treasury to clarify the distinction between payment and non-payment stablecoins. The GENIUS Act appears to categorize “endogenously collateralized payment stablecoins” as non-payment stablecoins, which creates uncertainty. As stablecoin models continue to evolve, clear guidance on classification and applicable regulatory requirements will be essential.
We appreciate the Treasury’s leadership and openness in launching this ANPRM on the GENIUS Act. The MIT DCI looks forward to publishing our policy paper in the coming months and to engaging in the NPRM process to help ensure that financial stability aligns with technological capability.