a16z Clarifies Stablecoin Rules Under GENIUS Act
Andreessen Horowitz (a16z) submitted feedback to the U.S. Treasury on the GENIUS Act, a bipartisan law for stablecoins. In its November 4 letter, a16z called for clear, innovation-friendly rules that protect consumers and foster competition. The firm urged regulators to differentiate between centralized fiat-backed stablecoins and fully decentralized stablecoins.
a16z emphasized that only centralized stablecoins with real issuers should follow GENIUS regulations. Decentralized stablecoins, which operate via smart contracts without control by any person, should be treated differently. The firm highlighted that the term “person” in the law does not apply to decentralized stablecoin issuers. It also recommended that foreign and state frameworks meet or exceed federal standards to ensure fair competition and consumer protection.
Modernizing AML and Privacy Protections
The firm advised updating anti-money laundering (AML) and know-your-customer (KYC) rules using digital identity solutions. a16z supports decentralized, privacy-preserving digital IDs that allow transaction verification without exposing personal data. Technologies like zero-knowledge proofs and multi-party computation could help achieve this balance.
a16z stressed that payment stablecoin transactions should remain traceable and auditable. It suggested Treasury provide guidance to network validators and custodians on meeting AML obligations without disrupting normal operations.
Tax and Reporting Recommendations for Stablecoins
a16z flagged that current IRS guidelines may impose excessive reporting burdens on routine stablecoin use. The firm proposed exempting small, routine transactions from taxable events to reflect real-world usage better. At the same time, significant transactions would remain subject to oversight.
Coinbase made similar recommendations, urging that payment stablecoins be treated like cash for tax and accounting purposes. Coinbase called for practical, low-burden rules to avoid overwhelming authorities with unnecessary data. Circle also recommended clear and uniform stablecoin rules to protect consumers and support sector growth.
How the GENIUS Act is implemented will shape the U.S. stablecoin market. a16z and others want clear distinctions between centralized and decentralized stablecoins, encouraging innovation while safeguarding users and competition.
