The enactment of the GENIUS Act of 2025 established the first comprehensive federal framework for payment stablecoins,[1] which are digital assets pegged to fiat currency and backed by reserves such as U.S. dollars or short-term Treasuries.[2] Yet embedded within this landmark legislation lies a critical federalism provision: the explicit exclusion of state governments from federal regulatory requirements for stablecoin issuance.[3] This regulatory carve-out grants states what has been described as an “unburdened lane to innovate,”[4] creating a parallel regulatory universe where state sovereignty in monetary policy is being tested.
Few initiatives illustrate the promise and peril of this experiment better than the Bank of North Dakota’s (BND) announcement of the Roughrider coin[5] and Wyoming’s earlier launch of the Frontier Stable Token.[6] These two projects expose fundamental tensions in this digital federalism experiment. Their divergent approaches raise the specter of market fragmentation reminiscent of America’s pre-Civil War banking era.
The GENIUS Act’s State Exemption
The GENIUS Act requires private stablecoin issuers to meet stringent federal standards, including reserve requirements, regular audits, and supervisory oversight.[7] However, Congress carved out an exception for state-issued stablecoins, exempting them from these federal requirements.[8] This exemption reflects a deliberate policy choice to encourage state-level experimentation but creates regulatory asymmetry with profound implications.
Unlike traditional dual banking, where state-chartered banks can opt into federal supervision, the GENIUS Act’s state exemption creates “parallel monetary universes” with potentially incompatible technical and regulatory architectures.[9]
North Dakota’s Institutional Strategy: The Roughrider Coin
The Bank of North Dakota, the nation’s only state-owned bank, operating since 1919, announced in October 2025 its partnership with Fiserv to launch the Roughrider coin in 2026.[10] North Dakota’s approach is distinguished by its deliberately narrow, institutional focus.
BND President Don Morgan explained that the Roughrider coin “will enable financial institutions to move money more quickly, safely, and efficiently” and prepare the industry for “broader merchant adoption of stablecoin transactions.”[11]The coin is designed primarily as a wholesale asset for bank-to-bank settlement within North Dakota’s financial ecosystem, targeting the state’s community banks and credit unions.[12] By facilitating interbank transfers that previously required days to settle, the BND seeks to modernize payment rails while ensuring local financial institutions remain competitive.[13]
Critically, the Roughrider coin will operate on Fiserv’s proprietary digital asset platform rather than public blockchain networks.[14] Fiserv, which processes approximately 90 billion transactions annually, views North Dakota as a “live laboratory” for testing tokenized deposits (digital representations of bank deposits on distributed ledger technology) for the more than 10,000 community financial institutions nationwide that utilize its core banking services.[15]
Wyoming’s Retail Strategy: The Frontier Stable Token
Wyoming’s approach stands in stark contrast. In August 2025, the Wyoming Stable Token Commission launched the Frontier Stable Token (FRNT), marking Wyoming as “the first public entity in the United States to issue a blockchain-based stable token.”[16] Unlike North Dakota’s wholesale focus, FRNT is designed for broad public use in retail transactions and global digital commerce.
FRNT operates across seven public blockchain networks emphasizing interoperability across decentralized finance (DeFi) ecosystems. This multi-chain deployment reflects Wyoming’s decade-long strategy to position itself as America’s premier jurisdiction for blockchain innovation, having passed more than 45 pieces of digital-asset legislation since 2016.[17]
Wyoming’s reserve structure also differs. While both states fully back their tokens with U.S. dollars or equivalent assets, FRNT is overcollateralized at 102 percent and backed by U.S. dollars and short-duration Treasuries held in trust. Wyoming directs interest income from FRNT reserves to support the state’s public-school fund,[18] creating a direct fiscal linkage between monetary innovation and public goods provision, a feature absent from North Dakota’s design.
Governor Mark Gordon framed FRNT as cementing Wyoming’s position “at the forefront of digital finance and blockchain innovation” while offering “a modern, efficient, and secure means of transacting in the digital age.”[19]Wyoming’s vision extends beyond state borders, explicitly targeting global adoption and positioning FRNT as a mechanism for international access to dollar-denominated digital assets.
Historical Parallels: The Free Banking Era
The divergence between North Dakota’s proprietary-platform, institutional token and Wyoming’s public-blockchain, retail token evokes parallels to America’s Free Banking Era (1837-1863). During this period, state-chartered banks issued their own currencies backed by state bonds, resulting in thousands of different banknotes circulating simultaneously.[20] The lack of standardization created severe inefficiencies: notes traded at varying discounts depending on the issuing bank’s reputation and geographic distance, counterfeit detection was nearly impossible, and interstate commerce faced substantial friction costs.[21]
The National Banking Acts of 1863 and 1864 eventually imposed federal uniformity, creating nationally chartered banks and a uniform currency.[22] This federal intervention resolved fragmentation but required a Civil War and constitutional crisis to achieve.
Today’s state stablecoin experimentation risks recreating similar fragmentation dynamics in digital form. If state-issued stablecoins proliferate on incompatible technical platforms without mandated interoperability standards, the efficiency gains promised by blockchain technology may be undermined by technical and regulatory balkanization. A Wyoming business seeking to transact with a North Dakota counterparty might face conversion challenges if FRNT on the Solana or Polygon platform cannot seamlessly exchange with Roughrider coin on Fiserv’s proprietary platform.
The absence of federal interoperability mandates within the GENIUS Act’s state exemption means technical compatibility remains voluntary. While Fiserv has suggested the Roughrider coin may eventually support cross-border transactions,[23] the initial closed-platform design contrasts sharply with Wyoming’s open, multi-chain architecture.
Regulatory Divergence and Systemic Risk
Beyond technical fragmentation, regulatory divergence poses systemic risks. State stablecoins exempt from federal oversight may develop heterogeneous risk management practices, reserve standards, and redemption mechanisms. While both North Dakota and Wyoming have implemented dollar-backing requirements, future state entrants might adopt weaker standards or experimental reserve compositions.
The GENIUS Act’s state exemption implicitly assumes that state reputational concerns and market discipline will constrain excessive risk-taking. Yet competitive pressures among states could trigger a “race to the bottom” in reserve quality or oversight rigor, particularly as states seek to attract blockchain companies and cryptocurrency businesses.[24]
Furthermore, the fungibility of digital assets means that risks incubated in one state’s stablecoin ecosystem can rapidly transmit across state lines and into federally regulated financial institutions. If a state stablecoin experiences a de-pegging event or reserve shortfall, the interconnectedness of modern payment systems could amplify rather than contain the shock.
Conclusion
The GENIUS Act’s state exemption represents a deliberate federalism experiment, privileging innovation and state sovereignty over uniformity and federal control. North Dakota’s Roughrider coin and Wyoming’s FRNT demonstrate the creative potential of this approach, with each state tailoring its stablecoin design to distinct policy objectives.
Yet this diversity also underscores the act’s central tension: Without coordination mechanisms, interoperability mandates, or minimum technical standards, state-level innovation risks producing a fragmented digital-monetary landscape. The success of state stablecoins will ultimately depend on whether market forces, voluntary coordination, or eventual federal intervention can harmonize these parallel experiments into a coherent national payments infrastructure.
American monetary federalism has repeatedly oscillated between decentralization and uniformity, with each shift driven by crises that exposed the costs of fragmentation. The task ahead is to capture the benefits of state innovation while avoiding the inefficiencies and systemic risks that necessitated federal monetary unification in the 19th century.
ENDNOTES
[1] Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), Pub. L. No. 119-27, 139 Stat. 419 (2025).
[2] See WilmerHale, What the GENIUS Act Means for Payment Stablecoin Issuers, Banks, and Custodians (July 18, 2025), https://www.wilmerhale.com/en/insights/client-alerts/20250718-what-the-genius-act-means-for-payment-stablecoin-issuers-banks-and-custodians.
[3] See Sullivan & Cromwell LLP, Stablecoin Legislation: The Senate Passes the GENIUS Act (June 17, 2025), https://www.sullcrom.com/insights/memo/2025/June/Stablecoin-Legislation-Senate-Passes-GENIUS-Act.
[4] David Krause, The GENIUS Act and State-Issued Stablecoins Raise Important Issues of Federalism, CLS Blue Sky Blog (Sept. 11, 2025), https://clsbluesky.law.columbia.edu/2025/09/11/the-genius-act-and-state-issued-stablecoins-raise-important-issues-of-federalism/.
[5] Press Release, N.D. Indus. Comm’n, Industrial Commission Applauds Roughrider Stablecoin Announcement (Oct. 8, 2025), https://bnd.nd.gov/industrial-commission-applauds-roughrider-stablecoin-announcement/.
[6] Press Release, Wyo. Stable Token Comm’n, Wyoming Launches Pioneering State-Issued Stable Tokens (Aug. 19, 2025), https://content.govdelivery.com/accounts/WYGOV/bulletins/3ee734a.
[7] See Morgan, Lewis & Bockius LLP, GENIUS Act Passes in US Congress: A Breakdown of the Landmark Stablecoin Law (July 17, 2025), https://www.morganlewis.com/pubs/2025/07/genius-act-passes-in-us-congress-a-breakdown-of-the-landmark-stablecoin-law.
[8] See Krause, supra note 4.
[9] David Krause, Do the Anti-CBDC Surveillance State Act and the GENIUS Act Jeopardize U.S. Digital Finance?, CLS Blue Sky Blog (Aug. 11, 2025), https://clsbluesky.law.columbia.edu/2025/08/11/do-the-anti-cbdc-surveillance-state-act-and-the-genius-act-jeopardize-u-s-digital-finance/.
[10] Press Release, N.D. Indus. Comm’n, supra note 5.
[11] Id.
[12] See Jacob Orledge, Bank of North Dakota to Launch State’s First Stablecoin Known as Roughrider Coin, N.D. Monitor (Oct. 8, 2025), https://northdakotamonitor.com/2025/10/08/bank-of-north-dakota-to-launch-states-first-stablecoin-known-as-roughrider-coin/.
[13] Press Release, N.D. Indus. Comm’n, supra note 5.
[14] See PYMNTS, State-Owned Bank of North Dakota Partners With Fiserv to Launch Stablecoin (Oct. 8, 2025), https://www.pymnts.com/partnerships/2025/state-owned-bank-of-north-dakota-partners-with-fiserv-to-launch-stablecoin/.
[15] Id.
[16] Press Release, Wyo. Stable Token Comm’n, supra note 6.
[17] Id.
[18] See Hannah Miller, Wyoming Launches First State-Issued Stable Token, Consumer Fin. & Fintech Blog (Aug. 28, 2025), https://www.consumerfinanceandfintechblog.com/2025/08/wyoming-launches-first-state-issued-stable-token/.
[19] Press Release, Wyo. Stable Token Comm’n, supra note 6.
[20] See Arthur J. Rolnick & Warren E. Weber, Free Banking, Wildcat Banking, and Shinplasters, Fed. Rᴇꜱ. Bᴀɴᴋ Mɪɴɴᴇᴀᴘᴏʟɪꜱ Q. Rev., Fall 1982, at 10.
[21] See Howard Bodenhorn, A History of Banking in Antebellum America: Financial Markets and Economic Development in an Era of Nation-Building 196-223 (2000).
[22] See National Currency Act, ch. 58, 12 Stat. 665 (1863); National Bank Act, ch. 106, 13 Stat. 99 (1864).
[23] Press Release, N.D. Indus. Comm’n, supra note 5.
[24] See David Krause, Stablecoins Get a Federal Framework: Will the US GENIUS Act Deliver Stability or Fragmentation?, Oxford Bus. L. Blog (Aug. 1, 2025), https://blogs.law.ox.ac.uk/oblb/blog-post/2025/08/stablecoins-get-federal-framework-will-us-genius-act-deliver-stability-or.
This post comes to us from David Krause, emeritus associate professor of finance at Marquette University.