BlackRock has formally communicated its stance to the Office of the Comptroller of the Currency (OCC), advocating for significant modifications to the proposed regulations concerning permissible payment stablecoin issuers (PPSIs) under the GENIUS Act. The asset management giant’s comment letter, submitted on the final day of the public comment period, addresses several key aspects of the OCC’s draft rules, focusing on reserve asset restrictions and diversification requirements.
Key Takeaways
- BlackRock has urged the OCC to remove a proposed 20% cap on tokenized reserve assets within the GENIUS Act implementation rules.
- The firm believes such a cap is “extraneous” and that risk should be assessed based on credit quality, duration, and liquidity, not the ledger-based nature of an asset.
- BlackRock seeks confirmation that Treasury Exchange Trated Funds (ETFs) investing solely in eligible reserve assets are indeed considered qualifying reserves.
- The company also proposed adding U.S. Treasury floating-rate notes with up to two years maturity to the list of eligible reserve assets.
- These recommendations are crucial for BlackRock’s own tokenized products, such as its BUIDL fund, which serves as a significant reserve for major stablecoins.
The OCC’s draft rules, aimed at establishing a federal framework for stablecoin issuance, include provisions for reserve composition, capital adequacy, custody arrangements, and yield restrictions. BlackRock’s submission specifically targets the rules governing PPSIs, the federally chartered entities empowered to issue stablecoins under the legislation passed last July.
A central point of contention for BlackRock is the OCC’s consideration of a 20% cap on tokenized reserve assets. BlackRock argues that this quantitative limit is unnecessary and could hinder innovation and the adoption of digital assets in reserve management. The firm’s position is reinforced by the substantial role its BUIDL fund, a tokenized Treasury product with approximately $2.6 billion in assets, plays in backing prominent stablecoins like Ethena’s USDe and Jupiter’s USX. A strict cap would significantly impede the growth and utility of such products within the proposed regulatory structure.
Furthermore, BlackRock is requesting explicit clarification from the OCC that Treasury ETFs, which invest exclusively in assets deemed eligible for reserves, should be recognized as qualifying reserves under Section 4 of the GENIUS Act. The company has cautioned that any ambiguity on this matter could discourage PPSIs from utilizing ETFs in their reserve portfolios. BlackRock also advocates for extending the same quantitative safe harbor treatment currently afforded to government money market funds to qualifying Treasury ETFs.
Regarding reserve diversification, BlackRock expresses support for the OCC’s “Option A,” which combines a principles-based standard with an optional quantitative safe harbor. This approach is favored over “Option B,” which would mandate stricter daily requirements for all issuers, including a 40% concentration limit for a single institution and a 20-day weighted average maturity ceiling.
BlackRock also outlined several technical adjustments to Option A’s safe harbor. These include excluding self-custodied government money market fund shares from the 40% concentration limit, confirming that PPSIs do not need to scrutinize the underlying holdings of funds to apply this limit to custodians, and allowing same-day-settlement government money market funds to count towards the 30% weekly liquidity requirement.
Beyond these points, the firm proposed the inclusion of U.S. Treasury floating-rate notes with maturities up to two years as eligible reserve assets, highlighting their stability and regular coupon resets. BlackRock also called for the establishment of a formal and transparent process for evaluating and incorporating additional eligible reserve assets in the future.
This engagement from BlackRock underscores its strategic positioning to operate within the evolving stablecoin regulatory landscape. The firm has already adapted its Select Treasury Based Liquidity Fund (BSTBL) into a product designed to meet GENIUS Act compliance standards, featuring specific trading deadlines and a Treasury-centric investment mandate tailored for stablecoin reserves.
The OCC’s comprehensive proposal is part of a broader federal effort to regulate the digital asset space, with other agencies like the FDIC, Treasury, FinCEN, and OFAC also advancing their respective rulemakings concerning capital requirements, anti-money laundering, and sanctions compliance, all with an eye toward the January 2027 compliance deadline.
Potential Regulatory Precedent
BlackRock’s advocacy on the tokenized reserve cap and the eligibility of Treasury ETFs carries significant weight and could establish a crucial regulatory precedent for the broader digital asset industry. By directly challenging the proposed 20% cap on tokenized assets, BlackRock is implicitly arguing for a future where the underlying nature of an asset (tokenized vs. traditional) is less relevant than its fundamental risk characteristics. If the OCC adopts BlackRock’s view, it could signal a regulatory shift towards a more technologically neutral approach, fostering greater integration of tokenized assets within traditional financial infrastructure. This could pave the way for other financial institutions to leverage distributed ledger technology for reserve management without facing punitive quantitative restrictions, thereby promoting innovation in the stablecoin market and beyond. The successful inclusion of Treasury ETFs as qualifying reserves would further legitimize these instruments within regulatory frameworks, potentially increasing their adoption by stablecoin issuers and reinforcing the stability of the broader stablecoin ecosystem.
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