Regulatory Clarity and the Role of Trust Charters

Stablecoin regulation is entering a defining moment. As federal oversight increases and multiple pieces of legislation, including the GENIUS Act, are being debated, companies using stablecoins need to assess whether their compliance strategy is built for the future—or stuck in outdated licensing frameworks. Propositions like the GENIUS Act could underscore the role of state-regulated trust companies—particularly those under New York’s Department of Financial Services (DFS)—while likely limiting the ability of money transmitter license (MTL) holders to engage in stablecoin issuance.

As regulatory expectations shift, businesses integrating stablecoins may want to consider compliance and operational continuity. Working with a highly regulated stablecoin issuer operating under a trust charter provides greater long-term stability and regulatory certainty.

What is a Trust Charter?

A trust charter is a license issued by a state regulatory authority, such as the New York Department of Financial Services (NYDFS), allowing a company to issue stablecoins, act as a qualified custodian, and manage customer funds in a highly regulated environment. This means the company is authorized to hold, manage, and transfer assets on behalf of its customers while meeting stringent financial and compliance requirements.

Key features of a trust charter include:

• Regulated Custodianship – Trust companies operate as fiduciaries, meaning they have a legal obligation to act in the best interests of their clients. This provides enterprises with a secure and compliant framework for managing and safeguarding assets.
• Exclusive Authority to Issue Stablecoins – Under the GENIUS Act, only trust-chartered institutions operating under certified regulatory frameworks or federally recognized issuers will be permitted to issue stablecoins. This reinforces trust charters as a requirement for stablecoin issuance.
• Higher Regulatory Standards – Trust companies must meet strict compliance requirements, including capital adequacy rules, regular audits, and risk management oversight. These standards ensure stablecoin operations maintain the highest levels of regulatory scrutiny and operational integrity.

NYDFS has long upheld regulatory standards, and its framework is widely regarded as one of the most rigorous in stablecoin oversight. If the GENIUS Act passes, it could further reinforce NYDFS’s role in shaping stablecoin compliance.

What is an MTL?

A money transmitter license (MTL) is a state-issued license that authorizes businesses to facilitate payments and the movement of funds on behalf of customers. Historically, MTLs have been pursued by fintech companies as a more accessible regulatory path for entering the payments space. Some digital asset businesses have also attempted to use MTLs to facilitate stablecoin-related activities before clear federal oversight was in place.

However, MTLs were built for money transmission, not for stablecoin issuance, and do not address key regulatory considerations such as reserve management and investment oversight. The GENIUS Act explicitly clarifies this distinction, reinforcing that MTLs are intended for facilitating payments, remittances, and fund transfers—not for issuing or managing reserves associated with stablecoins.

Key reasons MTLs are not suitable for stablecoins:

• Limited Scope – MTLs are designed for payments and money movement, not for issuing financial instruments like stablecoins or managing reserves.
• Fragmented State-by-State Regulation – MTL holders must obtain separate licenses in each state where they operate, making compliance complex and inconsistent across jurisdictions.
• Prohibition Under the GENIUS Act – If passed, the GENIUS Act will explicitly prohibit MTL holders from issuing stablecoins unless they transition to a trust charter or obtain federal approval.

MTLs Will Survive—Just Not for Stablecoins. The window for relying on MTLs for stablecoin issuance is closing. While MTLs will still have a place in payments and remittances, businesses that want to use stablecoins for treasury management or customer transactions need to ensure they’re working with a trust-chartered issuer. Waiting too long to transition could create operational and compliance roadblocks down the line. Companies focused on stablecoins should consider working with trust-chartered issuers like Bastion, while those facilitating payments without reserve-backed assets may still find MTLs relevant.

What Companies Should Do Now

For businesses looking to integrate stablecoins into their financial operations, understanding the regulatory landscape is critical. An MTL remains appropriate for companies facilitating payments, but not for those issuing or managing stablecoins. Businesses seeking to leverage stablecoins for payments, treasury management, or customer engagement should work with a regulated trust-chartered issuer like Bastion, ensuring compliance without taking on direct licensing burdens.

As stablecoin regulation moves toward greater federal oversight, trust-chartered entities—especially those under NYDFS—are positioned to offer regulatory continuity and institutional-grade compliance. Here are the points your team should consider:

• Assess your stablecoin provider. Is your issuer operating under a trust charter, or are they relying on MTLs that could soon be obsolete?
• Stay ahead of regulatory changes. With multiple stablecoin bills in play, ensuring compliance now avoids last-minute pivots.
• Think long-term. The future of stablecoins is moving toward fully regulated environments—working with a trust-chartered issuer today could provide long-term stability.

The GENIUS Act reinforces why trust charters—not MTLs—are the future of stablecoin issuance. With stricter federal requirements on the horizon, businesses must work with issuers who meet the highest regulatory standards. Companies relying on MTLs for stablecoin issuance may need to reassess their approach, while those operating under a trust charter—particularly NYDFS—are best positioned to navigate the evolving regulatory landscape.

For enterprises adopting stablecoins for payments, settlements, or treasury operations, regulatory certainty is key. Choosing a trust-chartered stablecoin issuer ensures long-term stability and compliance in an increasingly structured regulatory environment.