What happened
Paradigm, the venture firm run by Matt Huang and Fred Ehrsam, and the Hamilton Policy Center filed comments urging US regulators to reconsider the scope of stablecoin provisions in the GENIUS Act, AMBCrypto reported Wednesday. The two groups say the bill, which passed Congress earlier this year and is now in the implementing-rule phase, contains definitions broad enough to capture decentralized stablecoin protocols that have no central issuer to register or license.
The filings specifically flag risk to overcollateralized, smart-contract-based designs - the category that includes MakerDAO's DAI and Liquity's LUSD - which operate without a legal entity controlling redemption. Paradigm's policy team has argued for months that lumping these protocols in with bank-issued stablecoins like Circle's USDC or Paxos's USDP would force compliance obligations onto code that no one technically administers. The comments published Wednesday formalize that position ahead of final Treasury and SEC rulemaking.
Why it matters
The GENIUS Act is the first US federal stablecoin framework to clear Congress, and the rulemaking phase is where the real definitions get locked in. If 'payment stablecoin issuer' is read broadly, DeFi protocols holding billions in collateral could face a binary choice: restructure into a licensed entity, or geofence US users.
The stakes aren't theoretical. DAI alone holds roughly $5B in circulating supply and is integrated into hundreds of DeFi protocols as a base trading pair. A US carve-out that excludes it from coverage validates a decade of permissionless stablecoin design. A reading that includes it forces a structural rewrite of the largest non-USD-backed stablecoin in the market.