The National Cryptocurrency Association (NCA) recently submitted a proposal to the US Treasury, calling for clearer and more actionable regulatory frameworks concerning Section 3 of the GENIUS Act, specifically targeting the stablecoin market. The organization aims to ensure that individual investors are safeguarded through well-defined transition mechanisms during regulatory changes.
Stablecoin Reserve Requirements and Transitional Safety Nets
The document, signed by NCA President and Ripple‘s Chief Legal Officer Stuart Alderoty, outlines the association’s acceptance of a 100% reserve requirement for stablecoins aimed at payments. However, it emphasizes the need for measures that prevent the automatic freezing of user funds in the event of abrupt changes in the issuers’ legal status.
The NCA proposes a secure safe harbor mechanism to protect users’ assets, should companies miss the July 18, 2028 deadline or have their licenses revoked. This would allow users to liquidate, sell, or convert their stablecoin holdings without financial loss. Additionally, exchanges would also be shielded from illegal trading activities while providing technical support.
Stuart Alderoty stated the necessity of a practical framework to ensure that Americans are not left in limbo with their stablecoins due to shifting regulations.
Legal Framework for Asset Recovery and Custodial Clarifications
Another major concern for the NCA is to legalize the reissuance of stolen or misdirected payment stablecoins via court orders. This would provide a clearer mechanism for recovering lost assets, which the association suggests should fall under “lawful mandate” exceptions.
The NCA further recommended that the asset freezing process align with FinCEN standards, urging issuers to swiftly notify affected users during such operations. This could strengthen compliance and offer quicker recovery options for consumers.
FinCEN, the Financial Crimes Enforcement Network under the US Treasury, sets compliance standards to combat money laundering and illegal financing activities within financial institutions.
Distinctions Between Custodial Services and Software Development
In its filing, the NCA also calls for a clear distinction between custodial service providers and those who merely develop software interfaces. According to the association, developers of non-custodial wallets—which only display balances without access to private keys—should not be classified as intermediaries or dealers.
Furthermore, the NCA believes that direct peer-to-peer transfers, transactions between an individual’s accounts, and personal wallet movements should remain exempt from regulatory restrictions. This approach would safeguard both personal custodial rights and the freedom of peer-to-peer asset transfers.
The NCA argues that transactions within personal wallets and direct P2P transfers should be outside of institutional regulatory oversight.
This appeal represents a step towards more concrete discussions between the US crypto sector and regulatory bodies, although the final decision rests with the Treasury’s forthcoming regulations. Nonetheless, the industry seeks a clear definition of its role in ensuring stability within individual markets in the regulatory texts.
