Regulatory Reference  ·  Updated 2025–2026

U.S. Trust Company Regulation

Charter types · Fiduciary & non-fiduciary powers · Operating pain points · OCC approvals & policy activity · GENIUS Act impact

State nondepository trust cos. Bank trust departments National trust companies (OCC) GENIUS Act overlay

Four primary charter structures govern U.S. trust companies — each conferring distinct regulatory authority, supervisory relationships, and operational scope. The choice of charter is the single most consequential decision in structuring a trust institution.

Favorable / present Unfavorable / absent Conditional / varies Neutral fact

State-chartered

Nondepository Trust Company

State
Primary regulatorState banking dept.
Deposit authorityNone
FDIC insuredNo
CRA obligationsNone
Multi-state opsCSBS NCA or state license
Federal law anchorBSA, 31 USC 5312
Fiduciary lawState trust code
CIF authorityNo (state law varies)

Dominant vehicle for dynasty trusts and family offices. South Dakota, Delaware, Nevada, Wyoming, and Alaska offer the most favorable frameworks — no rule against perpetuities, directed trust statutes, and strong privacy protections.

State-chartered bank

Trust Department

State
Primary regulatorState + FDIC or Fed
Deposit authorityYes
FDIC insuredYes (deposits)
CRA obligationsYes
Multi-state opsInterstate branching + state approval
Federal law anchorFDI Act; BSA
Fiduciary lawState trust code + banking law
CIF authorityState law varies

Traditional vehicle for community and regional bank wealth management. Fiduciary powers separately approved by state regulator. Dual supervision under FDIC (state nonmember) or Federal Reserve (state member).

OCC-chartered (limited purpose)

National Trust Company

Federal
Primary regulatorOCC
Deposit authorityNone
FDIC insuredNo
CRA obligationsNone (typically)
Multi-state opsFederal preemption (partial)
Federal law anchor12 USC 92a; 12 CFR Pt. 9
Fiduciary lawFederal (preempts in part)
CIF authorityYes (12 CFR 9.18)

Increasingly attractive for digital asset custody and stablecoin issuance under the GENIUS Act. NBA preemption of state law is no longer categorical after Cantero v. Bank of America (2024), which requires a case-by-case Barnett Bank analysis. No CRA; no deposit insurance assessment.

OCC-chartered full bank

National Bank Trust Department

Federal
Primary regulatorOCC + FDIC
Deposit authorityYes
FDIC insuredYes (deposits)
CRA obligationsYes
Multi-state opsInterstate branching (IBBEA)
Federal law anchorNBA; 12 USC 92a; 12 CFR Pt. 9
Fiduciary lawFederal (broadly preempts)
CIF authorityYes (12 CFR 9.18)

The dominant structure for large-institution trust operations (BNY Mellon, JPMorgan Private Bank, State Street). Fiduciary powers separately approved; governed by 12 CFR Part 9. Broad federal preemption of conflicting state banking laws, though no longer categorical after Cantero (2024).

Attribute State-charteredNondepository Trust Co. State-chartered bankTrust Department OCC limited purposeNational Trust Co. OCC full bankNational Bank Trust Dept.
Primary regulator State banking dept. State + FDIC or Fed OCC OCC + FDIC
Deposit authority None Yes None Yes
FDIC insured No Yes (deposits) No Yes (deposits)
CRA obligations None Yes None (typically) Yes
Multi-state ops CSBS NCA or state license Interstate branching + state approval Federal preemption (partial) Interstate branching (IBBEA)
Federal law anchor BSA, 31 USC 5312 FDI Act; BSA 12 USC 92a; 12 CFR Pt. 9 NBA; 12 USC 92a; 12 CFR Pt. 9
Fiduciary law State trust code State trust code + banking law Federal (preempts in part) Federal (broadly preempts)
CIF authority No (state law varies) State law varies Yes (12 CFR 9.18) Yes (12 CFR 9.18)

CSBS Nationwide Cooperative Agreement (NCA)

State nondepository trust companies may use the CSBS NCA to obtain multi-state trust authority without individual state licensing in each host state. The NCA designates the home-state regulator as lead supervisor and streamlines exam coordination through CSBS. Not all states participate; individual licensing remains required in non-participating jurisdictions. The NCA is distinct from state MTL licensing frameworks that apply to money transmission.

Fiduciary powers require the trust company to act in the interests of another — beneficiaries, heirs, or plan participants — and carry heightened legal obligations: duty of loyalty, duty of care, prudent investor rule, and duty to inform and account. Authority must be explicitly granted by the chartering authority and is governed by state trust law (or 12 CFR Part 9 for national institutions).

Act as trustee under a trust instrument with discretionary authority over trust assets. Encompasses the full suite of trustee duties: investment management (subject to the Uniform Prudent Investor Act in adopting states), discretionary distribution decisions, trust administration, beneficiary accounting, and trust termination. Corporate trustees must maintain trust record systems separate from bank general ledger assets. Regulatory note: Collective Investment Funds (CIFs, 12 CFR §9.18) allow national trust company trustees to commingle assets of multiple trusts for investment purposes without registering as an investment company — a significant competitive advantage over state-chartered nondepositories in many states.
Court-supervised administration of a decedent's probate estate. Duties include: marshaling and inventorying estate assets, paying valid debts and claims, filing the decedent's final income tax returns and any estate tax return (Form 706), and distributing the net estate to heirs or legatees per the will or intestacy laws. Trust companies serving as executor are subject to state probate court jurisdiction in addition to their chartering regulator. The fiduciary duty runs to all interested parties, including creditors prior to distribution.
Court-appointed management of the person or property of an incapacitated individual. Conservatorship (property) is more common for corporate trust companies than guardianship (person). Subject to intensive court oversight, mandatory accountings, and best-interest standards that may be more stringent than the prudent investor rule. Many trust companies treat conservatorship as a niche capacity given the oversight burden and limited fee potential relative to trust administration.
Exercise of investment discretion over client assets as a fiduciary. Trust companies with these powers are generally exempt from SEC investment adviser registration under Advisers Act §202(a)(11)(A) (the "bank" exemption), provided they do not hold themselves out as investment advisers and their advisory services are solely incidental to their trust business. This exemption is a critical structural advantage — trust companies managing significant AUM avoid dual registration and attendant compliance costs. State-chartered institutions must confirm availability of analogous state RIA exemptions in each jurisdiction where they operate.
Act as trustee under a bond indenture, representing the collective interests of bondholders. Governed by the Trust Indenture Act of 1939 (TIA) for indenture-governed public debt; the small-issue exemption (TIA §304(a)(9) / Rule 4a-3) applies to issuances limited to $10M or less outstanding over a 36-month period. The indenture trustee's pre-default duties are largely ministerial (administering payments, maintaining records); post-default, the trustee assumes a more active fiduciary role. A trust company serving as indenture trustee must comply with TIA eligibility requirements, including minimum capital requirements and absence of conflicting interests with the issuer.
Hold and manage assets of ERISA-covered employee benefit plans as a named fiduciary or discretionary trustee. Subject to DOL oversight, ERISA's exclusive benefit rule, prohibited transaction restrictions (ERISA §406), and co-fiduciary liability. Trust companies holding plan assets must maintain segregated plan asset accounts. DOL's expanded fiduciary rule framework creates additional exposure for trust companies providing investment advice in connection with plan assets, even outside formal trustee arrangements.
Act as trustee under a directed trust structure, following the investment or distribution directions of an "investment trust advisor" or "distribution trust advisor" (trust protector in some state frameworks). The directed trustee's duties are limited — primarily the duty to follow directions unless they are "manifestly contrary" to the trust terms or would constitute a serious breach. However, the directed trustee retains fiduciary obligations for trust administration (custody, accounting, tax compliance) and cannot delegate these away. South Dakota's directed trust statute (SDCL Ch. 55-1B) is the most extensively developed, enabling bifurcation of trustee authority with the greatest clarity. Pain point: In states without directed trust statutes, the legal framework for limiting co-trustee liability is unsettled, creating uncertainty for national trust companies serving as directed trustees under trusts governed by those states' laws.
Available to national trust companies and national bank trust departments under 12 CFR §9.18. CIFs allow the commingling of trust assets from multiple accounts for investment management purposes. They are not registered as investment companies under the Investment Company Act, and participation interests are not "securities" for most purposes — a significant structural advantage. CIF participation is restricted to fiduciary accounts maintained by the bank. State law equivalents (common trust funds) vary widely; not all states authorize them for state nondepository trust companies, creating meaningful competitive disadvantage.

Operating a trust company in the United States involves navigating a fragmented, multi-layered regulatory environment. The following are the primary structural pain points — many of which have become more acute as digital asset activities and the GENIUS Act introduce new regulatory overlays.

A state-chartered nondepository trust company operating nationally faces three unsatisfying paths: (1) Individual state licensing — expensive, time-consuming, and subject to distinct capital, examination, and reporting requirements in each state; (2) CSBS Nationwide Cooperative Agreement — streamlines supervision but is not universally adopted and does not eliminate all host-state obligations; (3) OCC national trust charter — provides federal preemption, but that preemption is partial and no longer categorical after Cantero v. Bank of America (2024). In Cantero, a unanimous Supreme Court vacated and remanded the Second Circuit's categorical preemption ruling, holding that NBA preemption must be assessed through the Barnett Bank "prevents or significantly interferes with" standard via a nuanced, case-by-case comparative analysis rather than a bright-line rule — a framework generally read as preserving more room for state regulation than the categorical approach. Digital asset custody companies have found state-by-state MTL exposure analysis particularly burdensome, as trust activities and money transmission can overlap depending on structure and state law.
A trust company may simultaneously answer to multiple regulators with overlapping jurisdictions and no coordinating mechanism: (1) State banking/financial regulator (chartering authority); (2) FinCEN (BSA/AML compliance); (3) FDIC (if state-chartered with deposits); (4) Federal Reserve (if state member bank or BHC subsidiary); (5) SEC (if exercising investment discretion above RIA thresholds, or acting as transfer agent for public companies); (6) DOL (if managing ERISA plan assets); (7) CFTC (if digital asset activities implicate commodity interests); (8) OCC (if nationally chartered); (9) CFPB (if a larger participant). Exam cycles may overlap, conflict, or create coverage gaps. No single federal coordinator exists for trust-specific regulation — CSBS and the OCC each claim primacy in different contexts, and Congress has not resolved the tension.
There is no uniform minimum capital standard across trust company charter types. South Dakota allows trust company organization with as little as $200,000 in minimum capital for a limited-purpose trust company. OCC imposes risk-weighted capital requirements calibrated to the institution's activities under 12 CFR Part 3. State banks with trust departments are subject to full banking capital requirements regardless of the proportion of revenue from trust activities. Capital planning for a nondepository trust company is complicated by digital asset price volatility (which can generate operational risk losses without the institution holding the assets on its own balance sheet), and by the absence of FDIC deposit insurance, which removes access to FDIC's resolution mechanisms as a backstop.
Trust companies without deposit-taking authority — particularly nondepository national trust companies and state-chartered nondepository trust companies — are categorically ineligible for Tier 1 (automatic) access to Federal Reserve master accounts under the Fed's August 2022 Final Guidelines. Tier 3 (extensive discretionary review, no defined timeline) applies to non-insured institutions. Without a master account, a trust company must use a correspondent bank to access Fed payment rails — adding cost, credit risk to the correspondent, and operational complexity. The 10th Circuit upheld the Fed's discretionary authority to deny master accounts in Custodia Bank v. Federal Reserve Bank of Kansas City (2024), leaving nondepository trust companies with no legal entitlement to direct settlement access. The GENIUS Act did not resolve this: the Hagerty Amendment (Sec. 4(a)(13)) expressly provides that nothing in the Act shall be construed to expand or contract legal eligibility for a Federal Reserve master account. This directly affects the ability of national trust companies to compete in payment and settlement markets — an area where GENIUS Act stablecoin issuers need reliable settlement infrastructure.
Trust companies are "financial institutions" under the BSA (31 USC 5312(a)(2)) and subject to FinCEN's full AML/CFT compliance framework. AML/CFT Program Rule status: FinCEN's July 3, 2024 AML/CFT Program Rule NPRM was withdrawn and superseded by a re-proposed rule published April 10, 2026 (91 Fed. Reg. 18704), with comments due June 9, 2026 and a proposed 12-month implementation period after a final rule. As of mid-2026 there is no final Program Rule in effect. The 2026 re-proposal would require risk-based programs that incorporate FinCEN's AML/CFT Priorities, but — unlike the withdrawn 2024 version, which proposed a standalone "sixth pillar" — it folds the risk-assessment requirement into the internal-controls pillar. (Separately, the investment-adviser AML rule has been delayed to January 1, 2028.) For trust companies, two areas create particular complexity: (1) Beneficial ownership identification — identifying the natural persons who ultimately control or benefit from trust accounts requires careful case-by-case analysis. (2) Corporate Transparency Act (CTA) — FinCEN's March 26, 2025 interim final rule narrowed the BOI reporting requirement to foreign reporting companies; entities formed in the U.S. ("domestic reporting companies") and U.S. persons are now exempt, materially reducing the trust company's practical information-gathering burden for domestic trust-held entities while leaving foreign-entity exposure in place.
State trust law is not uniform. As of 2025, approximately 35 states have adopted the Uniform Trust Code (UTC); others operate under distinct common law or statutory frameworks. Louisiana's civil law tradition creates particular divergence. The Uniform Prudent Investor Act (UPIA) has broad but not universal adoption. Directed trust statutes — which allow bifurcation of trustee duties from investment authority — vary dramatically: South Dakota's framework (SDCL §55-1B-2 et seq.) is the most permissive and explicitly delineates directed trustee liability; not all states have adopted directed trust frameworks. A trust company operating across multiple jurisdictions must calibrate its fiduciary compliance to the applicable law of each trust — which may be the law of the trust situs, the law of the trustee's principal office, or the law designated in the trust instrument (to the extent the choice-of-law designation is valid in the governing jurisdiction).
Despite OCC IL 1183 (2025) and the rescission of SEC SAB 121, significant legal uncertainty persists: (1) State law characterization of digital assets — how do digital assets fit within the UCC framework for investment property, negotiable instruments, or general intangibles? Several states (Wyoming, Texas, Utah, California) have enacted digital asset-specific UCC amendments, but uniform treatment is absent. (2) Bankruptcy treatment — in a trust company insolvency, are client digital assets "entrusted" property belonging to clients, or estate property? The answer depends on how the custody relationship is characterized under applicable state law. (3) Qualified custodian status under the Investment Advisers Act — the SEC has not issued definitive guidance on digital asset custody by trust companies. (4) Insurance — no FDIC-equivalent backstop exists for digital assets held in trust custody; private insurance markets are limited and expensive.
For trust companies seeking PPSI authorization, the GENIUS Act creates an entirely new compliance layer on top of existing trust regulation. Key friction points: (1) Reserve asset management — the requirement to maintain 1:1 reserves while operating as a fiduciary raises questions about whether trust company investment staff can manage reserve assets without creating conflicts with fiduciary clients; (2) No yield prohibition — prohibiting interest or yield payments to stablecoin holders limits product design flexibility and creates competitive pressure from offshore issuers and DeFi protocols; (3) Insolvency priority — GENIUS Act bankruptcy protections for reserve assets must be reconciled with state trust law concepts of beneficial ownership; (4) Dual oversight — for state-chartered trust companies above $10B in stablecoins outstanding, the Act imposes federal oversight in addition to state supervision; (5) Preemption scope — GENIUS Act preemption of state stablecoin laws "to the extent inconsistent" with federal requirements leaves significant interpretive space and potential for state-level litigation.
Collective Investment Funds (CIFs) — available to national trust companies under 12 CFR §9.18 — allow commingled management of trust assets without registration under the Investment Company Act. This is a major competitive advantage: CIFs can replicate mutual fund-like investment efficiency while avoiding full SEC registration, disclosure, and governance requirements. State-chartered nondepository trust companies generally cannot access CIFs; they must use individually managed accounts (costly at lower AUM levels) or registered common trust funds (subject to state securities law). The inability to offer CIF-equivalent vehicles disadvantages state trust companies in institutional and pension trust markets and creates pressure toward obtaining national trust charters solely for CIF access — even where state law would otherwise be preferable.

OCC trust company chartering activity has followed the broader arc of federal crypto policy — expansive in 2021, cautious in 2022–2024, and sharply permissive under the post-January 2025 administration. The GENIUS Act and OCC Interpretive Letters 1183 (March 2025) and 1184 (May 2025) mark the current frontier.

Anchorage Digital Bank

Conditional National Trust Bank Charter · January 2021

National Trust Bank

First federal charter granted to a crypto-native institution. Anchorage received a conditional national trust bank charter — a limited-purpose national bank organized under 12 USC 92a with fiduciary and trust powers but without general deposit-taking authority. The charter authorizes digital asset custody, settlement, and staking services in a trust capacity. The conditional approval was subject to OCC's ongoing supervisory review and fulfillment of capital and operational requirements. Anchorage converted from a South Dakota state trust charter to pursue the federal charter — demonstrating the pull of OCC preemption and national trust bank powers even for institutions already holding favorable state charters.

Digital asset custodyStaking servicesLimited-purpose national trust bankNo general deposit authority

Protego Trust Company

Preliminary Conditional Approval — National Trust Charter · February 2021

Trust-Only

OCC issued a preliminary conditional approval for Protego to operate as a national trust company focused on digital asset custody and settlement services for institutional clients. The approval was subject to an 18-month organizational period to satisfy all conditions. Protego's conditional approval ultimately lapsed without the institution achieving final charter approval — an outcome that illustrated the significant operational gap between a preliminary conditional approval and a fully operational charter under the OCC's phased framework. The lapse also reflected the broader supervisory cooling that followed the 2022 crypto market disruptions.

Digital asset custodySettlementConditional approval lapsed

Paxos National Trust

Preliminary Conditional Approval — National Trust Charter · April 2021

Trust-Only

OCC issued a preliminary conditional approval for Paxos — operator of PAX stablecoin and BUSD — to operate as a national trust company for digital asset custody and stablecoin issuance. Paxos operated under its New York state trust charter (NYDFS) while pursuing the federal application. The January 2023 NYDFS enforcement action requiring Paxos to cease minting BUSD raised additional questions about the federal application's trajectory. Paxos subsequently announced intent to renew pursuit of the federal charter under the more permissive Gould-era OCC, positioning the national trust charter as its GENIUS Act PPSI pathway.

Stablecoin issuanceDigital asset custodyStatus: renewed pursuit (2025)

OCC Chartering Process — Key Phases

The OCC's trust company chartering process involves: (1) Prefiling meeting; (2) Formal application; (3) Preliminary conditional approval — sets conditions and an 18-month organizational period; (4) Interim charter (allows organization); (5) Final charter upon satisfaction of all conditions. The gap between preliminary conditional approval and an operational charter can be substantial — requiring capital raising, management hires, and OCC supervisory verification at each stage. Multiple 2021-era applicants never bridged this gap.

Interagency Crypto Risk Statements

Joint OCC / FDIC / Fed Guidance · 2022–2023

Policy

The OCC, FDIC, and Federal Reserve issued a series of interagency statements — including the January 2023 Joint Statement on Crypto-Asset Risks to Banking Organizations and February 2023 Joint Statement on Liquidity Risks from Crypto-Asset Market Vulnerabilities — that effectively communicated supervisory skepticism about bank and trust company engagement with crypto markets. The supervisory non-objection process became a de facto moratorium on new charter approvals and restricted expansion of existing institutions' digital asset activities. Trust company applicants received no movement on pending applications during this period.

De facto chartering pauseHeightened supervisory scrutiny

SEC Staff Accounting Bulletin 121

SEC · March 2022 — Rescinded January 2025 (SAB 122)

Capital Constraint

Though issued by the SEC (not OCC), SAB 121's requirement that banks and trust companies record digital assets held in custody as balance sheet liabilities — with corresponding regulatory capital requirements — effectively made digital asset custody economically unviable for most large regulated institutions. SAB 121 applied to all entities registered with the SEC, including bank holding companies subject to consolidated capital requirements. The Biden-era SEC veto of a congressional resolution to rescind SAB 121 prolonged its effect through 2024. Rescinded and replaced by SAB 122 (January 2025), which restored general off-balance-sheet accounting treatment for custodied digital assets subject to existing GAAP guidance.

On-balance-sheet liability requirementRescinded January 2025 (SAB 122)

Custodia Bank v. Federal Reserve Bank of Kansas City

10th Circuit · 2024 — Master Account Denial Upheld

Adverse Precedent

The 10th Circuit upheld the Federal Reserve Bank of Kansas City's denial of a master account to Custodia Bank (a Wyoming Special Purpose Depository Institution), affirming that the Federal Reserve retains broad discretionary authority to deny master account access to non-federally-insured institutions. Although Custodia is a state-chartered depository institution rather than a trust company, the decision directly affects nondepository national trust companies seeking master account access — confirming that Tier 3 institutions have no legally enforceable entitlement to a master account and that the Fed's discretion is effectively unreviewable on the merits.

No legal entitlement to master accountTier 3 review discretionary

OCC Interpretive Letter 1183

OCC · March 7, 2025 (Acting Comptroller Rodney Hood) — Crypto Activities for National Banks & Trust Companies

Landmark

IL 1183 rescinded IL 1179 and reaffirmed that national banks and federal savings associations — including national trust companies — may engage in certain crypto-asset activities without obtaining a prior supervisory non-objection: (1) cryptocurrency custody (IL 1170); (2) holding deposits backing stablecoin reserves (IL 1172); (3) participation in independent node verification / DLT payment networks (IL 1174). The letter eliminated the advance-approval requirement that had functioned as a de facto barrier. The OCC simultaneously withdrew from the January 2023 and February 2023 interagency crypto-risk joint statements as applied to national banks.

No prior supervisory approval requiredCustody permissibleStablecoin reserves permissibleNode validation permissible
Source: OCC Bulletin 2025-2 / IL 1183

OCC Interpretive Letter 1184

OCC · May 7, 2025 — Scope of Crypto Custody & Buy/Sell at Customer Direction

Landmark

IL 1184 further delineated the scope of national bank and national trust company crypto-custody authority, confirming that OCC-regulated institutions may buy and sell crypto-assets held in custody on a customer's behalf at the direction of the customer, and may use sub-custodians. Together with IL 1183, it rounds out the post-2025 framework: 1183 removed the advance-approval gate; 1184 clarified what custodians may operationally do.

Custody scope clarifiedCustomer-directed buy/sellSub-custody permissible

Withdrawal from Interagency Crypto Statements

OCC · March 2025

Policy Reversal

The OCC withdrew from the January 2023 interagency joint statement on crypto-asset risks and the February 2023 joint statement on liquidity risks from crypto markets, effectively rescinding its participation in the regulatory communications that had signaled institutional skepticism toward digital asset activities. The FDIC simultaneously rescinded its own restrictive crypto guidance. The practical effect: OCC examiners are no longer directed to treat digital asset activities at national trust companies with heightened skepticism or to require advance approval before institutions engage in activities permissible under IL 1183.

Prior risk statements rescindedExaminer guidance updated

Renewed Trust Charter Application Pipeline

Multiple Applicants · 2025–2026

In Process

The permissive OCC posture — established under Acting Comptroller Rodney Hood in early 2025 (IL 1183) and continued by Comptroller Jonathan Gould (nominated February 11, 2025; confirmed by the Senate July 10, 2025, 50–45) — has prompted a new wave of national trust company and national bank charter applications from crypto-native institutions, stablecoin issuers, and fintech companies seeking federal preemption and OCC's PPSI approval pathway under the GENIUS Act. The OCC has confirmed restoration of an active prefiling meeting process for trust charter applicants — a process that had been effectively suspended during 2022–2024. The GENIUS Act creates an additional structural incentive: PPSI authorization requires OCC approval for federally chartered entities, directing a new category of applicants toward the national trust charter pathway rather than the state-chartered alternatives.

Applications filedActive prefiling discussionsPPSI pathway as primary driver

The Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act, S. 1582) was signed into law on July 18, 2025 — the Senate passed it 68–30 on June 17, 2025, and the House passed the same text 308–122 on July 17, 2025 — creating the first comprehensive federal framework for payment stablecoins. The Act takes effect on the earlier of 18 months after enactment or 120 days after the primary federal stablecoin regulators issue final implementing rules, so much of the operative detail remains in active rulemaking. For trust companies, it represents the most significant legislative change to permissible trust company activities in decades — and the greatest source of new regulatory complexity.

1:1

Reserve backing required

$10B

Threshold for federal oversight of state issuers

3

Issuer pathways (federal, large state, small state)

How the GENIUS Act structures trust company participation

Permitted Payment Stablecoin Issuer (PPSI) — Trust Company Pathway

A national trust company may apply to the OCC for authorization as a PPSI. A state-chartered trust company issuing stablecoins above $10B in outstanding supply requires both state authorization and a federal examination/oversight regime administered by the applicable federal banking agency. State-chartered trust companies below the $10B threshold may operate under state oversight alone, subject to state stablecoin laws meeting minimum GENIUS Act standards. This tiered structure mirrors — but is not identical to — the dual banking system's state-federal architecture, creating a new supervisory dynamic that CSBS has engaged closely on behalf of state regulators.

Reserve Requirements

PPSIs must maintain 1:1 reserves in approved high-quality liquid assets: U.S. Treasury securities with maturities of 93 days or less; Federal Reserve deposits; overnight reverse repurchase agreements collateralized by Treasuries; FDIC-insured deposits; and (with limitations) other approved instruments. Reserves must be segregated from the PPSI's operational funds. Commingling is prohibited. Monthly reserve attestation by management is required; annual independent audit for issuers with more than $50 billion in outstanding stablecoins.

No Yield to Holders

The GENIUS Act prohibits PPSIs from paying interest, yield, or any form of return to stablecoin holders. This provision — intended to prevent payment stablecoins from functioning as deposit substitutes attracting depositors away from insured banks — is among the most contested. It limits product design flexibility and creates competitive asymmetry with offshore issuers and DeFi protocols that distribute yield to token holders. Trust companies that manage reserves as a fiduciary (e.g., investing in Treasuries) may retain reserve income, but cannot pass it through to holders.

Bankruptcy Protections and Holder Priority

Reserve assets must be structured to achieve bankruptcy remoteness — stablecoin holders have priority claims over reserve assets in a PPSI insolvency. The statute requires that reserve assets not be available to general creditors. For trust companies, the intersection of the GENIUS Act's bankruptcy framework with state trust law concepts of beneficial ownership and fiduciary administration requires careful structural analysis: reserve assets held in trust for stablecoin holders (a potential structure) would be governed by state trust law, while GENIUS Act priority rights apply as a matter of federal law — and the interaction is not clearly addressed by either framework.

Preemption of State Stablecoin Laws

The GENIUS Act preempts state stablecoin laws "to the extent inconsistent" with its requirements — a formulation that leaves significant interpretive space. States with their own digital-asset frameworks (including Wyoming, which authorized a state-issued stable token under the Wyoming Stable Token Act, separate from its SPDI and custody statutes) will need to evaluate whether their laws conflict. The preemption provision is likely to generate litigation from states asserting that their frameworks provide additional consumer protections that survive the preemption standard. CSBS has monitored the legislation closely; the final preemption scope and the definition of "inconsistent" will significantly affect state supervisory authority over state-chartered trust company stablecoin issuers above $10B.

Unresolved Tensions with Trust Law Doctrine

The GENIUS Act was drafted with deposit-taking banks as the primary institutional reference — its provisions do not clearly account for the trust law framework governing trust company operations. Key unresolved questions: (1) Can a trust company's investment discretion over reserve assets create fiduciary conflicts with stablecoin holder interests? (2) Where reserve assets are managed by the same institution acting as trustee for unrelated trust accounts, what segregation and conflict management requirements apply? (3) Does the prohibition on yield to stablecoin holders conflict with a trustee's duty to make trust property productive where the stablecoin trust is structured as a trust for the benefit of holders? These questions will require OCC regulatory guidance, state regulatory interpretation, and — almost certainly — litigation to resolve.

Implementation Status (as of mid-2026)

Because the Act delegates substantial detail to rulemaking, the operative compliance picture is still forming. Notably, on April 10, 2026, FinCEN issued a proposed rule setting AML/CFT and sanctions program requirements specifically for permitted payment stablecoin issuers, designed to be consistent with its broader (also re-proposed) AML/CFT Program Rule. Treasury, the OCC, the federal banking agencies, and state regulators each have implementing work outstanding; PPSI applicants should treat current requirements as a moving target until final rules issue and the Act's effective date is triggered.