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.
- Strengthen the prohibition on interest payments for payment stablecoins by extending it to brokers, dealers, exchanges and affiliates of payment stablecoin issuers.
- 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.
- 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.
Maintain a Deposit Insurance Fund that is stable and properly calibrated to risk. The FDIC should continue to use a risk-based approach when setting assessments and ensure its methodology is based on modern risk principles.
Make deposit insurance assessments tax-deductible. Congress should reverse the Tax Cuts and Jobs Act of 2017’s sliding-scale method for determining the deductibility of FDIC assessments.
Evaluate the potential costs and benefits of offering additional insurance for purchase by individual banks. Allowing banks to purchase excess deposit insurance would likely result in lower costs for banks relative to excess deposit insurance products provided by the private sector. The FDIC should evaluate the potential costs and benefits of such an approach.
Bank Resolutions
Broaden the scope of considerations applied in the determination of “least cost” to include potential contagion or other unwanted impacts. Congress should allow the FDIC to consider the cost of resolutions strategy on a wider range of banks or the industry, not just the deposit insurance fund.
Enhance community bank participation in resolutions to preserve essential banking services. Congress should allow the FDIC to consider the cost of resolutions strategy on communities and provide the FDIC with the power to balance the least cost test for community bank failures with options to mitigate negative impacts, such as loss of essential banking services, on the relevant communities.
Open resolution-associated asset auctions to a greater diversity of investors. This FDIC change would enhance fairness to the failed bank bidder qualification process, increasing the spectrum of institutions permitted to bid on failed institution franchises and assets.
Publicly release resolution approaches considered in a given case and their respective estimated costs. FDIC should release the resolution approaches considered and the estimated costs of each failure to improve the transparency and accountability associated with failed institution resolutions.
The Treasury has announced they are looking to reform Currency Transaction Reporting requirements.
Currently, only 3-6% of reports are ever viewed — the system is flooded with reports, making it hard to detect actual criminal activity. We are urging an increased threshold for reporting. The $10,000 threshold has been in effect since the origination of the requirement. If increased by inflation, it would be $73,000. We are asking for an increase and that the increase be indexed to more in accordance with inflation. We are also seeking streamlining of the exemption and reporting processes.
Bills have been introduced to increase regulatory asset thresholds and index them for inflationary growth.
Congressman Barr (R-KY) has a draft that increases the current $10 billion threshold to $50 billion. The Senate doesn’t appear eager to take the threshold that high. Congressman Barr is trying to find what increase would pass.
The Supervisory Modifications for Appropriate Risk-Based Testing Act of 2025 by Reps. Timmons (R-SC) and Foster (D-IL) would increase the threshold under for a limited-scope examination after an on-site, full-scope exam from $3 billion to $6 billion.
The Tailored Regulatory Updates for Supervisory Testing Act of 2025 (TRUST Act), sponsored by Reps. Moore (R-NC) and Torres (D-NY), would increase the total asset threshold under which institutions qualify for an 18-month exam cycle from $3 billion to $6 billion.
In Colorado, we just wrapped up a five-day special session called by Gov. Polis. The session addressed the budget shortfall and artificial intelligence. In 2024, Colorado passed the first AI law with 24-205. In his signing letter, Gov. Polis stated the structural flaws in the legislation would have to be addressed. During the 2025 General Session, legislation failed to pass committee to fix gaps in artificial intelligence law. During the special session, tech and business groups could not reach a consensus on language to fix the law. A bill was passed to extend the implementation deadline for the effective date of the AI law to June 30, 2026. We will now debate artificial intelligence during the 2026 General Session.
Despite the fast pace of change, we stand ready to defend the industry. If you have questions on these or any other issues, don’t hesitate to contact Alison at alison@coloradobankers.org or me at jenifer@coloraobankers.org.
