onerror=”this.setAttribute('data-error', 1)” alt=”BlackRock urges OCC to drop tokenized reserve cap idea, expand eligible assets in GENIUS Act comment letter” loading=”eager” data-nuxt-img sizes=”33vw” srcset=”https://www.tbstat.com/cdn-cgi/image/f=avif,q=50/wp/uploads/2022/10/20221005_Blackrock2-1200×675.jpg 0w” image-component=”optimized-image” class=”absolute inset-0 h-full w-full object-cover” priority fetchpriority=”high” src=”https://www.tbstat.com/cdn-cgi/image/f=avif,q=50/wp/uploads/2022/10/20221005_Blackrock2-1200×675.jpg”>
BlackRock has submitted a formal comment letter to the Office of the Comptroller of the Currency (OCC), advocating for significant revisions to the proposed rules implementing the GENIUS Act. The world’s largest asset manager is specifically pushing to remove a proposed 20% cap on tokenized reserve assets and to broaden the scope of eligible reserve assets for regulated payment stablecoin issuers (PPSIs).
Key Takeaways
- BlackRock has formally requested the OCC to remove a proposed 20% limit on tokenized reserve assets within its GENIUS Act implementation rules.
- The asset manager argues that such a cap is “extraneous” and that risk should be assessed based on credit quality, duration, and liquidity, rather than the asset’s form (tokenized or traditional).
- BlackRock seeks explicit confirmation that Treasury Exchange Traded Funds (ETFs) are eligible reserve assets and requests the inclusion of two-year U.S. Treasury floating-rate notes.
- The firm supports the OCC’s “Option A” for reserve diversification, which combines a principles-based standard with an optional quantitative safe harbor, over the more rigid “Option B”.
- These recommendations aim to accommodate BlackRock’s existing tokenized products, such as its BUIDL fund, which plays a crucial role in backing stablecoins like Ethena’s USDtb and Jupiter’s JupUSD.
The comment letter, submitted on the final day of the OCC’s 60-day public comment period, addresses the agency’s draft rules concerning permitted payment stablecoin issuers (PPSIs). These entities are authorized under the GENIUS Act, signed into law last July, to issue stablecoins under federal charter. The OCC’s proposal includes over 200 questions covering various aspects of reserve composition, capital requirements, custody, and yield restrictions.
A central point of contention for BlackRock is the OCC’s consideration of a 20% threshold for tokenized reserve assets. BlackRock contends that this quantitative limit is unnecessary and does not align with the fundamental risk assessment criteria for reserve assets, which should primarily focus on credit quality, duration, and liquidity. The firm’s stance is particularly relevant given its significant involvement in the tokenization space. Its BUIDL fund, a prominent tokenized Treasury product with substantial assets under management, is a key reserve provider for several stablecoins. A 20% cap would significantly impede the growth and utility of such products within the proposed regulatory framework.
Furthermore, BlackRock is seeking clarity on the eligibility of Treasury ETFs as reserve assets. The company requests the OCC to explicitly confirm that ETFs composed solely of eligible reserve assets qualify under Section 4 of the GENIUS Act. BlackRock warns that any ambiguity could discourage PPSIs from utilizing ETFs in their reserve holdings and suggests that these ETFs should receive the same quantitative safe harbor treatment afforded to government money market funds.
In its commentary on reserve diversification, BlackRock endorses “Option A” of the OCC’s proposal. This option combines a flexible, principles-based standard with an optional quantitative safe harbor. BlackRock prefers this approach over “Option B,” which would mandate stricter quantitative requirements, including a 40% concentration limit for single institutions and a 20-day weighted average maturity ceiling, for all issuers. The firm also proposed specific adjustments to Option A’s safe harbor, advocating for the exclusion of self-custodied government money market fund shares from the concentration limit and suggesting that same-day-settlement government money market funds should count towards the weekly liquidity requirement.
Beyond these points, BlackRock has recommended the addition of U.S. Treasury floating-rate notes with up to two years of maturity to the list of eligible reserve assets, highlighting their low price volatility and frequent coupon resets. The company also urged the OCC to establish a formal and transparent process for evaluating and potentially adding new eligible assets in the future. This proactive engagement from a major financial institution like BlackRock signals its intention to operate within the evolving regulatory landscape for digital assets and stablecoins.
Potential Regulatory Precedent
BlackRock’s extensive feedback on the GENIUS Act rules could establish a significant regulatory precedent for the digital asset sector, particularly concerning the integration of tokenized assets and traditional financial instruments. By arguing against quantitative caps on tokenized reserves and advocating for broader asset eligibility, BlackRock is challenging the OCC to adopt a more technologically neutral and risk-based regulatory approach. If the OCC adopts BlackRock’s suggestions, it could signal a regulatory environment more amenable to the growth of tokenized securities and the use of blockchain technology in reserve management. This could influence how other regulatory bodies globally, such as those in the European Union with MiCA, approach similar issues. The OCC’s response will be closely watched as an indicator of how established financial institutions can shape the compliance frameworks for emerging digital asset activities.
The OCC’s proposed rules are part of a broader regulatory push to establish clear frameworks for digital assets by a January 2027 compliance deadline. Other federal agencies, including the FDIC, Treasury, FinCEN, and OFAC, are also advancing their own proposed regulations covering capital requirements, AML programs, and sanctions compliance, underscoring the increasing focus on comprehensive oversight in the cryptocurrency space.
Source: : www.theblock.co