Our Take: financial services regulatory update – June 13, 2025

• What happened? On June 12^th, the Senate scheduled a vote on the GENIUS Act, which would provide a regulatory framework for stablecoins, for June 17^th. Further, on June 10^th, the House Financial Services Committee and the House Agriculture Committee voted to advance the CLARITY Act to the House floor following hearings on the CLARITY Act, which would establish a regulatory framework for digital assets. On June 10^th, both Committees voted to advance the bill to the House floor.
• What does the GENIUS Act contain? The GENIUS Act would create licensing and regulatory requirements for stablecoin issuers, specifying that banks issuing stablecoins would be overseen by their primary regulators, the OCC will oversee nonbank stablecoin issuers with a market cap of above $10 billion, and other entities with below $10 billion will be regulated by the states. It also contains requirements that stablecoins are backed 1:1 by US dollars or highly liquid assets; that issuers provide transparency on reserve composition and publish monthly liquidity reports; and requirements regarding consumer protection and anti-money laundering.
• What key changes were made to GENIUS Act in Committee? The Senate scheduled the vote following negotiations that led to updated language around areas such as consumer protection, nonbank issuance, AML requirements and bankruptcy. Notable changes include:
  • Consumer protection. The Act now specifies that federal consumer protection laws apply to stablecoins and that state consumer protection laws would not be preempted. It also would prohibit misrepresentation that stablecoins are covered by federal deposit insurance or otherwise backed by the US government.
  • Nonbank issuance. The Act specifies that nonbanks, including big tech firms, would not be authorized to issue stablecoins unless they meet strict criteria regarding financial risk, consumer data privacy, and fair business practices.
  • AML requirements. The Act would hold issuers to the same AML/BSA requirements as banks.
• What does the CLARITY Act contain? Notable provisions include:
  • Regulatory jurisdiction. Capital raising activities that offer investors an ownership stake in a digital asset project would be subject to SEC oversight, while most secondary exchanges of digital assets would be regulated by the CFTC.
  • Disclosure requirements. Developers would be required to disclose information related to the digital asset project’s operation, ownership, and structure. Exchanges and broker-dealers will be subject to registration requirements, including ongoing disclosures to customers.
  • Consumer protection. The Act specifies that digital asset firms would be subject to consumer protection laws and would be required to segregate customer funds.
• What happened at the CLARITY Act hearings? House Republicans supported the Act, stating that it would put an end to “regulation-by-enforcement” and foster innovation. While Democrats’ sentiment ranged from vehement opposition to a more moderate stance, they in general called for stronger provisions to prevent conflict of interest, corruption, tax evasion and financial crimes.
• What’s next? The GENIUS Act is scheduled to receive a vote on June 17^th. The CLARITY Act will move to consideration on the House floor, but the timing of which has yet to be set.

Our Take

Legislation advances, bringing regulatory framework into focus. After several false starts, the Senate’s upcoming vote on the GENIUS Act means that a regulatory framework for stablecoins is coming soon. Considering the new expectations in this revised version, firms looking to issue stablecoins should (1) carefully review how their planned activities will impact compliance with both federal and state consumer protection requirements; and (2) assess whether their AML programs can capture the unique risks associated with digital assets, including whether they can properly detect technology used to obfuscate transactions and whether they have appropriate geolocation tools.

While the CLARITY Act passed out of both Committees with bipartisan support, it is likely to receive a higher degree of Democratic scrutiny on the full House floor. With the Senate yet to consider similar legislation, Congress as a whole focused on the “Big Beautiful Bill” and the Presidential Working Group on Digital Asset Markets yet to recommend its own framework, the future of the CLARITY Act remains unclear.

What’s the bottom line? Regulatory clarity around digital assets is coming soon, with stablecoin legislation nearer than a broader digital assets framework.

• What happened? On June 10^th, the Senate Agriculture Committee held a confirmation hearing for Brian Quintenz to serve as CFTC Chair. Quintenz served as a Commissioner at the agency from August 2017 to August 2021 and more recently worked in the private digital assets industry.
• What were the focus areas of the hearing?
  • Digital assets. Calling for “a comprehensive regulatory framework for crypto assets,” Quintenz pledged to provide clarity around token classification and regulatory jurisdiction. While he did not comment on whether he supports the CLARITY Act in its current form, he expressed support for Congress to “create an appropriate market regulatory regime” for digital assets
    • Some Democratic Senators expressed concerns around money laundering and other forms of illicit finance related to digital assets, and Quintenz responded that digital assets firms would be subject to FinCEN oversight.
  • Innovation and technology. Quintenz stressed that promoting responsible innovation will be one of his primary goals as CFTC Chair, including the use of blockchain and artificial intelligence. He also noted that he intends to enhance the agency’s technology – presumably through AI – to increase the efficiency of surveillance and oversight efforts.
  • 24/7 trading. Quintenz stated that he is open to 24/7 trading but it may not be appropriate for certain lower-volume markets such as agriculture contracts.
  • Prediction market regulation. Several Senators raised questions around the regulation of prediction markets, including whether such markets are contracts subject to CFTC jurisdiction or illegal gaming activity. Quintenz defended prediction markets as a “hedging tool” that can facilitate risk management and price discovery and noted that he has no near-term plans to issue prediction market regulation.
  • Enforcement. Quintenz called for an end to “regulation-by-enforcement” that stifles innovation while pledging that he will have “no tolerance for bad actors who defraud, manipulate or cheat” and stressing the importance of consumer protection.
• What’s next? The Senate Agriculture Committee will soon vote on whether to advance Quintenz’s nomination to the full Senate, which will vote on his confirmation. The two current CFTC Commissioners, Acting Chair Caroline Pham and Commissioner Kristin Johnson, have both announced that they will resign from the agency, potentially resulting in Quintenz as the sole member of the Commission.

Our Take

Back to the future. During his term as CFTC Commissioner, Quintenz called for clear regulation around digital assets, worked to simplify and clarify existing requirements (e.g., swap data reporting), promoted a regulatory sandbox for innovation, and argued for “principles-based regulation” as opposed to rigid prescriptive mandates. With the Administration’s momentum for deregulation and bipartisan support for a digital assets framework, Quintenz will be able to move quickly to advance his agenda. If Quintenz ends up leading a one-member Commission, we expect this will only accelerate rather than slow down the agenda: unlike the SEC, the CFTC does not have a minimum Commissioner threshold for a quorum.

Enforcement priorities will become more targeted. Quintenz’s comments reveal that while enforcement will shift away from prescriptive one-size-fits-all requirements and “regulation-by-enforcement,” the CFTC will remain dedicated to rooting out individual bad actors and preserving market integrity. We expect to see an increased focus on complex and retail fraud, a more targeted focus on violations of law, and a continued focus on sales and trading activity. As the CFTC is gearing up to enhance its surveillance through AI, firms should examine how they too can use AI technology to help identify and prevent market abuse as well as monitor for potential issues and compliance gaps.

What’s the bottom line? Quintenz is highly likely to be confirmed as CFTC Chair and will be able to quickly accelerate his innovation agenda.

• What happened? On June 12^th, the SEC formally withdrew 14 proposals issued under former Chair Gary Gensler.
• Which proposals were withdrawn? The withdrawn proposals fall into four topical categories:
  • Cybersecurity and technology risk. These proposals were aimed at enhancing operational resilience and technology risk management across SEC-supervised institutions: Cybersecurity Risk Management for Investment Advisers and Funds, Cybersecurity Risk Management for Broker-Dealers and Market Infrastructure.
  • Digital assets and market infrastructure. These proposals targeted crypto custody, decentralized markets and swaps oversight: DeFi Exchange Rule (Rule 3b-16 Expansion), Safeguarding Advisory Client Assets Rule (Digital Assets Custody), Security-Based Swaps: Anti-Manipulation and CCO Independence, and Safeguarding Client Assets Rule (206(4)-2 Custody Rule Update).
  • Market fairness and investor protection. These proposals were designed to enhance equity market transparency, execution competition and conflicts of interest: Regulation Best Execution, Order Competition Rule, and Volume-Based Exchange Transaction Pricing, Outsourcing by Investment Advisers, and Conflicts of Interest in the Use of Predictive Data Analytics and AI.
  • Environmental, social and governance (ESG). This rule would have required more transparency on ESG practices: Enhanced ESG Disclosures for Investment Advisers and Funds.

Our Take

A formal regulatory retreat – and a preview of future direction. The SEC’s decision to withdraw these 14 rules marks a clear shift away from the aggressive, forward-leaning regulatory posture of recent years. Many of the proposals raised significant industry concerns around legal authority, operational feasibility, or cost – and likely would have resulted in legal challenges by industry groups had they been finalized prior to the administration change. Some withdrawn proposals may return in revised form – particularly those concerning cybersecurity, data protection and safeguarding of client assets. Others, such as those addressing predictive analytics, outsourcing and ESG, are unlikely to be revived under current SEC leadership.

But risks aren’t going away. While the formal rule proposals have been withdrawn, the risks they sought to address — particularly in cybersecurity and digital assets — continue to escalate. Financial institutions remain exposed to increasingly complex cyber threats tied to AI, cloud integration, and third-party access, and regulators are unlikely to ignore operational failures that compromise client data or market stability. Even without detailed rules, firms should maintain strong cybersecurity programs grounded in threat-informed practices, clear accountability and tested incident response.

What’s the bottom line? Withdrawing these proposals makes a clean break with the Gensler-era SEC – narrowing the agency’s scope, reordering priorities, and abandoning rules that lacked political backing or legal durability.

• What happened? On June 9^th, the OCC released a letter stating that the agency will "continue to vigorously support and defend federal preemption." The letter is in response to a request from the Conference of State Bank Supervisors (CSBS) that the OCC rescind its preemption regulation to avoid "inappropriately shielding national banks from state consumer financial laws that apply to similarly situated state-chartered banks."
• What is federal preemption? Federal preemption is the principle that federal banking regulations take precedence over conflicting state requirements. Certain areas of preemption are codified under the National Bank Act and Dodd-Frank Act, which prohibit state laws and regulations from “significantly interfer(ing)” with banks’ abilities to “carry on the business of banking” when they conflict with federal requirements. Other areas such as mortgage lending standards are interpreted under the Supremacy Clause of the Constitution.
• What did the OCC’s letter say? The letter explains that the agency reviewed its preemption regulation and determined that they are consistent with national law. It also defends preemption as a “powerful enabler of…prosperity and growth,” noting that a uniform set of rules across states fosters the development of national products and services and removes barriers to conduct business on a national level.
• What’s next? We expect that federal courts, including the Supreme Court, will eventually provide clarity around when federal requirements preempt state rules.

Our Take

The OCC and CSBS letters set the stage for a legal battle. As federal regulators move in a deregulatory direction, regulators and policymakers in states including New York and California have vowed to continue to set a high bar for areas such as consumer protection, data privacy and climate risk management. These state regulators continue to be on a potential collision course with OCC, especially regarding the issuance of special purpose charters for fintechs, crypto firms and payments firms, many of which are currently regulated by the states as "money services businesses." It also will likely impact issues such as who the "true lender" is when bank-fintech partnerships issue loans and whether state interest caps apply when loans are transferred across state lines.

The Supreme Court has recently refused to set a clear line around preemption, instead explaining that courts must conduct a “nuanced comparative analysis” around whether a state requirement “significantly interferes with the national bank’s exercise of its powers.” In the meantime, clarity around which state requirements create a “significant interference” and rise to the level of being preempted will only come as litigation weaves its way through the court system. Firms should remain vigilant to understand and comply with the patchwork of state and federal requirements as upcoming legal battles play out.

What’s the bottom line? With the OCC and state regulators taking opposing views on federal preemption, expect to see litigation around areas such as state regulation of digital assets firms, fintech-bank partnerships, and state overdraft requirements.

These notable developments hit our radar recently:

SEC delayed Form PF amendment deadline. On June 12th, the SEC issued a second extension of the compliance date for amendments to Form PF – the confidential reporting form used by private fund advisers. The new compliance date is March 31st, 2026.

SEC requested comments on definition of new private issuer. On June 7^th, the SEC issued a request for comment on whether to revise the definition of “foreign private issuer” for the purposes of determining eligibility for scaled U.S. disclosure requirements based on shareholder base, governance, and business operations. Comments are due by August 6th.

FDIC sent SLR and TLAC proposal to OIRA. On June 6^th, the FDIC sent a proposal titled "Modifications to Supplementary Leverage Capital Requirements for Large Banking Organizations; Total Loss-Absorbing Capacity Requirements for U.S. Global Systemically Important Bank Holding Companies" to the Office of Information and Regulatory Affairs (OIRA) for review.

Acting Comptroller outlined regulatory agenda. On June 3^rd, Acting Comptroller Rodney Hood spoke on the agency’s agenda, outlining four priorities: (1) accelerating bank-fintech partnerships; (2) expanding responsible engagement with digital assets; (3) advancing financial inclusion; and (4) modernizing regulation.

Armen Meyer appointed to protect California consumers. On May 21^st, Armen Meyer was appointed by Governor Gavin Newsom as Senior Deputy Commissioner for the Division of Consumer Financial Protection and Innovation. Prior to his appointment, he served as the co-founder of the American Fintech Council and Director of Regulatory Strategy at PwC.

Fed stress test results coming June 27^th. On June 27^th at 4:30 pm EDT, the Fed will release the results of its 2025 stress tests that applied to 22 large banks.