A16z Pushes for Clearer Stablecoin Rules, Urges Treasury to Exempt Decentralized Stablecoins Under GENIUS Act

Venture capital powerhouse has urged the U.S. Treasury Department to adopt a balanced approach to stablecoin regulation. The VC firm is calling for explicit exemptions for decentralized stablecoins under the new GENIUS Act. The firm argues that instead of restrictions, regulatory clarity is key to preserving U.S. leadership in digital asset innovation.

In a detailed policy letter submitted this week, a16z emphasized that decentralized, over-collateralized stablecoins differ fundamentally from centralized, fiat-backed options and should therefore be treated separately under the Treasury’s anti-money-laundering and compliance framework. The letter comes as policymakers weigh how to balance innovation incentives with concerns about illicit finance, consumer risk, and market stability.

A16z Says Decentralization Is a Feature, Not a Loophole

At the center of is the idea that decentralized stablecoins, especially those backed by on-chain collateral rather than bank reserves, are self-governing systems that operate transparently on public blockchains. The firm notes that these protocols cannot be issued or redeemed by any single party, making them structurally diverse from centralized stablecoins like USD Coin (USDC) or Tether (USDT).

According to a16z, subjecting such systems to the identical custodial obligations as centralized issuers could inadvertently drive innovation offshore. Instead, the firm urges the Treasury to recognize on-chain verifiability as an alternative compliance mechanism.

The request aims to shape how the GENIUS Act defines “issuer” responsibility. Under current systems, even algorithmic or smart-contract-based systems could fall within Treasury oversight if they create or maintain a stablecoin, which is a definition that a16z says risks overreach.

A16z Demands Regulatory Context Via the GENIUS Act 

Introduced earlier this year, the viewks to establish a unified federal framework for stablecoin supervision, including reserve standards, redemption rights, and registration requirements. It also grants the Treasury significant discretion to determine which stablecoin structures qualify as compliant.

Critics, however, argue that the bill’s broad language could encompass decentralized systems that have no identifiable operator, creating compliance complexities. A16z’s letter highlights that , especially those governed by decentralized autonomous organizations (DAOs), cannot realistically satisfy Know-Your-Customer (KYC) mandates intended for financial intermediaries.

Instead, the firm suggests the Treasury leverage on-chain analytics, wallet-risk scoring, and blockchain forensics to address illicit-finance risks without stifling decentralization.

Analysts note that the debate is not merely technical but strategic. With Europe’s Markets in Crypto-Assets Regulation (MiCA) framework already defining clear categories for e-money tokens and crypto-asset-backed stablecoins, the U.S. risks falling behind if it applies a one-size-fits-all regime.

Looking ahead, a16z’s policy push aligns with its broader efforts to influence U.S. crypto regulation through its a16z crypto policy lab, which has repeatedly called for clearer, principles-based frameworks. Whether the Treasury and lawmakers respond favorably remains to be viewn, but the submission shows the urgency of defining how decentralized systems fit into financial regulation.