A16z urges US Treasury to exempt decentralized stablecoins from GENIUS Act oversight
A16z crypto, the crypto-focused wing of Andreessen Horowitz, urged U.S. Treasury officials to clarify key definitions in new stablecoin regulations, arguing that decentralized digital assets should remain exempt from oversight to foster innovation.In a Nov. 4 letter to Treasury Secretary Scott Bessent, the firm responded to an advance notice of proposed rulemaking on implementing the GENIUS stablecoin act passed earlier this year. The law established a framework for "payment stablecoins" while requiring regulators to address consumer protection, illicit finance risks and financial stability.While a16z crypto praised the Genius Act as "a momentous step in advancing the future of digital finance," it called for more clarity on whether decentralized stablecoins fall outside the law's scope.The firm cited Ethereum collateral-backed LUSD as an example of a decentralized stablecoin that is issued through autonomous smart contracts without a central entity in control."Treasury should make clear that since decentralized stablecoins are not issued by a ‘person’ within the meaning of the Act, they are not covered by the prohibition in Section 3(a)," the letter stated. Section 3(a) limits payment stablecoin issuance in the U.S. to only permitted issuers, according to the letter.The company recommended adopting a control-based decentralization framework from the 2025 Digital Asset Market Clarity Act, which exempts activities like validating transactions, operating nodes, and developing non-custodial wallets from intermediary regulations.More broadly, a16z called for a level playing field for stablecoin issuers, as well as modernized anti-money laundering and know-your-customer rules to fight illicit finance without stifling innovation.Decentralized digital identityMichele Korver, head of regulatory at a16z crypto, stated that the company also responded to FinCEN's request for innovative approaches to combat illicit digital asset finance. A16z suggested decentralized digital identity as a solution."Decentralized digital identity — built with privacy-preserving cryptography — can both strengthen national security and protect civil liberties," Korver wrote. "Unlike traditional identity systems, decentralized digital identity empowers individuals to control their data, reduces cyber risks, and avoids surveillance pitfalls."Korver noted that the use of zero-knowledge proofs and multi-party computation technologies enable secure identity verification while preventing the overexposure of personal data.As digital credentials are reusable, it could help combat fraud and detect illicit activities while lowering costs for institutions, Korver added.Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.© 2025 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.