Dear Majority Leader Thune, Speaker Johnson, Minority Leader Schumer, and Minority Leader Jeffries:
On behalf of the National Conference of State Legislatures, the bipartisan organization representing the legislatures of our nation's states, territories, commonwealths and Washington, D.C., we are writing to express our opposition to Section 16(d) of the GENIUS Act and our support for an amendment striking the provision in its entirety. The provision would preempt a state's authority to prohibit an uninsured depository institution, such as a Special Purpose Depository Institution chartered by another state, from operating within its borders.
NCSL respects and works to protect the long-standing right of each state to determine which financial entities may lawfully operate within their jurisdictions. Section 16(d) undermines states' authority in this regard. Under the provision, an uninsured depository institution could engage in a wide range of financial activities—including custodial services, digital asset custody, fiduciary services, securities and commodities transactions and wholesale banking—without the consent of the host state's banking commissioner or approval by the state legislature.
A few key concerns:
- States have the constitutional and practical responsibility to protect their residents by establishing licensing and oversight requirements for financial institutions.
- Multiple states have reviewed and ultimately rejected authorizing uninsured depository institutions, reflecting a deliberate and thoughtful approach to local economic and consumer protection concerns.
- This provision is disconnected from any federal regulatory framework, including the stablecoin standards in the broader bill and appears wholly unrelated to the bill's primary policy objectives.
We urge you to oppose Section 16(d) and support state authority to regulate financial services in a manner that reflects local conditions, priorities and risk tolerances. Preserving the dual banking system and respecting state autonomy is essential to the safety, soundness and diversity of our nation's financial sector.
Thank you for your attention to this matter. For additional information or questions, you may contact me directly or NCSL's State-Federal Affairs team.
Sincerely,
Tim Storey
Chief Executive Officer
National Conference of State Legislatures
Cc: Members of the United States Senate