The Conference of State Bank Supervisors (CSBS), a nationwide organization of state banking and financial regulators from all 50 states, the District of Columbia, and U.S. territories, has raised significant concerns regarding the current draft of the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act.

In an April 1 letter to the House Financial Services Committee, CSBS President and CEO Brandon Milhorn outlined the organization’s apprehensions and proposed critical changes. Primarily, CSBS argues that “while the federal government stood largely idle or in opposition,” states have provided innovative frameworks for digital asset regulation. But, according to the CSBS, the STABLE Act would change that by “effectively centraliz[ing] power over a nascent industry in a single federal agency.” According to CSBS, this approach would undermine the strategic advantage of cooperative federalism.

In a previous post, we discussed the legislative efforts to establish a regulatory framework for payment stablecoins through the STABLE Act of 2025 (introduced by House Financial Services Committee Chairman French Hill (R-AR) and Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee Chairman Bryan Steil (R-WI)) and the Senate’s Counterpart, the GENIUS Act. These proposals aim to create a clear and consistent regulatory environment for digital assets, with the STABLE Act being a key focus of recent legislative discussions.

While CSBS supports the establishment of a national framework for payment stablecoin issuers (PSIs), it argues that the STABLE Act, as drafted, requires substantial revisions to prevent regulatory arbitrage, protect consumers, and ensure market stability.

The key areas of concern highlighted by CSBS include:

  • Market Stability and Predictability: The original discussion drafts limited PSIs to activities directly related to issuing stablecoins. Federal regulators would not have been authorized to approve additional activities and CSBS largely supported this narrowly tailored approach. The current draft, according to CSBS, allows federal regulators to approve non-stablecoin-related activities, posing potential risks to market stability by allowing a PSI to “undertake such non-payment stablecoin activities that are allowed by the primary Federal payment stablecoin issuer.”
    • CSBS recommends removing § 4(a)(7)(G) to prevent these risks.
  • State Authority Preemption: The STABLE Act would expand federal preemption to the parent of a federal PSI, state authority over PSI subsidiaries of national banks, PSI subsidiaries of state-chartered banks, and other non-stablecoin activities approved by federal regulators. CSBS argues the Act’s broad preemption of state authority is an unprecedented expansion of federal power.
    • CSBS recommends Congress return to the original discussion drafts of the STABLE Act limited preemption, which it believes would allow federal PSIs to operate nationwide and avoid the OCC substituting its judgment for that of the states and Congress related to consumer protection and safety and soundness.
  • Parity for State PSIs: CSBS calls for genuine parity between state and federal PSIs, allowing state-regulated issuers to operate with the same rights and privileges as their federal counterparts. Without parity, CSBS argues that control of stablecoin activities will have been effectively consolidated into one federal agency, the Office of the Comptroller of the Currency (OCC), with broad authority to preempt state oversight.
    • CSBS recommends Congress amend § 7(g), which in the original discussion draft simply stated “the provisions of this section do not preempt any law of a State and do not supersede any State licensing requirement” but became more expansive in the STABLE Act introduced on March 26, so that state PSIs can engage in the same activities and operate with the same rights and privileges as federal PSIs.
  • Capital and Liquidity Requirements: CSBS argues the STABLE Act’s current capital requirements are insufficient to mitigate financial stability risks and regulators are prohibited from requiring leverage and risk-based capital.
    • CSBS suggests either holding reserves in off-balance-sheet trusts or ensuring capital requirements account for additional liquidity and counterparty exposures.
  • Consumer Protection in Bankruptcy: According to CSBS, the Act fails to provide adequate protection for consumers in the event of a PSI’s bankruptcy. CSBS argues that if a PSI fails and files for bankruptcy protection, consumers holding stablecoins would be subjected to myriad uncertainties with respect to their funds, including potentially long delays in attempting to access them.
    • The CSBS recommends holding reserves in off-balance-sheet trusts to ensure consumer funds are bankruptcy remote.

CSBS concludes by emphasizing that the meaningful balance of authority between state and federal regulators is vital for consumer protection, market stability, and industry innovation. “The STABLE Act provides an important opportunity to implement comprehensive and responsible national standards for stablecoin issuers. However, without the adoption of critical changes, the legislation will fall short of establishing the national framework necessary to promote American leadership in digital assets.”