A couple of weeks ago, I joined a delegation of western bankers, participating with the Arizona Bankers Association, for a series of meetings in Washington, D.C. Our mission was clear: advocate for policies that strengthen financial stability, reduce regulatory friction, and support the essential role banks play in their communities.

Our schedule was packed. We met with Arizona’s congressional leaders and their staff: Rep. Paul Gosar, Rep. Andy Biggs and his legislative staff, Rep. Yassamin Ansari, Sen. Ruben Gallego, Sen. Mark Kelly, legislative staff from Rep. Eli Crane’s office, Rep. David Schweikert, and Rep. Greg Stanton. The conversations focused on bipartisan priorities such as passing the SAFER/SAFE Banking Act to enable banks to serve state-licensed cannabis businesses, reforming the CFPB’s Section 1071 rule to ease small business lending, supporting the ACRE Act to lower borrowing costs for rural borrowers, and opposing the Credit Card Competition Act, which threatens transaction security and consumer rewards. Deposit insurance modernization was front and center with targeted coverage increases, rather than blanket solutions.

Beyond Capitol Hill, our meetings with federal agencies were equally insightful. At the Federal Reserve, we discussed the impact of interchange fees, digital assets, and evolving capital requirements. Treasury officials shared perspectives on the economic outlook, trade tariffs, and the future of stablecoins.

Travis Hill: Regulatory Indexing and Modernization

Our session with FDIC Acting Chairman Travis Hill was especially impactful. Hill highlighted the urgent need for regulatory indexing, a mechanism to automatically adjust regulatory thresholds for inflation or other economic indicators. This is critical to ensure that rules remain relevant and don’t unintentionally stifle growth, especially for community banks.

Hill also emphasized deposit insurance modernization, specifically supporting reforms like the Hagerty-Alsobrooks amendment. This proposal would extend deposit insurance coverage for payroll and business transaction accounts up to $20 million, offering targeted protection for main street businesses without introducing broad moral hazard. Hill called this a “good start” and advocated for repealing Section 29 of the FDIC Act on brokered deposits to reduce unnecessary restrictions.

His broader agenda is equally forward-thinking:

• Modernizing CAMELS Ratings: Hill supports updating the CAMELS framework through an interagency process led by the FFIEC, incorporating contemporary risks like cybersecurity and BSA compliance.
• Streamlining Branch Approvals: He advocates for auto-approving most branch applications, reducing bureaucratic delays, and enabling banks to expand more efficiently.
• Encouraging De Novo Banks: Hill wants to make it easier to form new banks, fostering competition and innovation in the industry.
• Reopening the Community Bank Leverage Ratio: This would provide more flexibility for smaller institutions.
• Implementing Asset-Based Thresholds: Tailoring regulations based on bank size and complexity.
• Rescinding Outdated Merger Policies: Removing barriers to bank mergers that no longer serve the industry’s needs.
  
  

Hill’s priorities align with what the industry needs: efficiency, innovation, and a regulatory environment that supports growth rather than impedes it.

GENIUS Act: Why Banks Are Watching Closely

The GENIUS Act, signed into law this July, is the first federal framework for payment stablecoins, digital assets pegged to a fixed monetary value and intended for payments. For banks, this is a watershed moment. The Act defines who can issue stablecoins, how they must be backed, and which regulator oversees them. It replaces years of uncertainty with enforceable standards for reserve assets, redemption rights, disclosures, and custody. Critically, compliant stablecoins are neither securities nor commodities, but are regulated by banking authorities.

Banks are concerned for several reasons:

• Competition: The Act allows both banks and nonbanks to issue stablecoins, potentially eroding banks’ traditional deposit base and lending capacity if nonbanks capture significant market share.
• Compliance Burden: All issuers, including banks, must meet strict anti-money laundering (AML) and Bank Secrecy Act (BSA) requirements, including annual certifications and independent audits. This means new operational costs and risk management protocols tailored to crypto risk.
• Operational Readiness: Many banks lack the infrastructure and expertise to manage digital assets at scale, especially as stablecoins attract users away from traditional banking services.
• Foreign Issuer Risk: Foreign stablecoin issuers must comply with U.S. AML and sanctions laws or be barred from the U.S. market, raising competitive and compliance stakes.
  
  

The 16 Regulatory Actions: What’s Coming

The GENIUS Act mandates at least 11, and up to 16, separate regulatory actions by July 2026. These include:

• Defining de minimis safe harbors for small transactions
• Tailoring capital and liquidity standards for issuers
• Establishing BSA/AML compliance rules
• Setting interoperability standards for stablecoin ecosystems
• Rules for foreign issuer registration and equivalency assessments
• Consumer protection and disclosure requirements
• Prohibitions on misleading marketing and unauthorized issuance
• Tax treatment and reporting standards
• Reserve asset diversification and risk management principles
• Oversight of custody and safekeeping of stablecoin-related assets
• Coordination between federal and state regulators
• Additional rules as needed to address emerging risks and market developments
  
  

Banks are watching these rulemakings closely. Delays or gaps could expose community banks to competitive disadvantages or heightened compliance burdens. Regulatory indexing and modernized CAMELS ratings are critical to shield smaller institutions from rules meant for larger players. Bottom Line, the GENIUS Act is a turning point. It brings regulatory clarity, but also new risks and responsibilities for banks. As digital assets surge, banks must adapt quickly to upgrade compliance, technology, and risk management. Advocacy remains essential to ensure that regulations reflect real-world banking needs, not one-size-fits-all mandates.

Ultimately, policy is about empowering banks to drive economic growth from urban centers to rural communities. With sustained engagement and collaboration, I’m confident we can achieve reforms that benefit all stakeholders.

Industry Collaboration

A personal highlight of the trip was attending the American Bankers Association reception honoring Federal Reserve Board Vice Chair for Supervision Michelle W. Bowman. The event brought together industry leaders, regulators, and policymakers, reinforcing the collaborative spirit that is essential for advancing pro-growth policies and meaningful reform. These moments of connection are vital, they remind us that progress in banking policy is built on relationships and shared vision. Similar to what community banking is all about, relationship and shared vision.