The  GENIUS Act, enacted in July 2025, provides a federal regulatory framework for stablecoin issuers, including a carveout that, under certain conditions, allows states to oversee  issuers of less than $10 billion. After the law went into effect, the Bank of North Dakota (BND)  announced it will partner with fintech company Fiserv to issue a North Dakota stablecoin, RoughriderCoin, for use across state financial institutions.

As the nation’s only state-owned or “public” financial institution, BND has long enjoyed a reputation for financial innovation. As the public banking movement grows nationally, however, it is worth examining whether stablecoins can and should be integrated into modern American public-bank models.

Public banking’s core value proposition is one of local management: In theory, the residents of the founding jurisdiction may tell the bank what products to offer and on what terms, and what should be done with any surplus profits. Local governance of services, then, is critical.

But GENIUS would seem to implicitly override that governance, at least for the BND coin. The act requires a stablecoin to be a “payment stablecoin,” meaning i) a digital asset, ii) used for payment or settlement, iii) representing and convertible to a fixed monetary value, and iv) not a national currency, deposit, or security. That is, stablecoins are payments that move value and require continuity rather than discretion. The exclusion of national currency, deposits, and securities from the definition suggests the stablecoin may not be used to execute monetary policy goals or banking protection—two areas fundamental to public banking’s purpose.

Public banks theoretically absorb and distribute risk in a countercyclical fashion, lending when the private market pulls back. Deposits, treated as public liabilities and used for credit creation, allow for this, as do securities, which can be quite volatile. Stablecoins do not.

Explicit prohibition of “interest” or “yield” to stablecoin holders likely prohibits experimental mechanisms for credit allocation or community reinvestment under strict interpretations. This is presumably an anti-shadow banking tool that is useful in most contexts. It may be less useful, though, in the immediate term with RoughriderCoin, which is meant to be a non-retail coin with no profit-generating purpose. While a public bank can—and perhaps, in this era of digital innovation, should—use stablecoins, it is worth considering how these tools may limit a public bank’s mission compared with other bank products

A public bank may separate its traditional banking activities from its stablecoins, but this raises questions about capacity. Public banks, to the extent they are hyperlocal, may not be in a position to manage the higher administrative burden of this separation—compliance staff, GENIUS monthly reporting requirements, legal review—the way their private counterparts may be. The higher burden could further detract from the institutional mission.

Financial experimentation and innovation are at the heart of public banking. For example, BND proactively helps community banks use fintech. Canadian public bank ATB Financial made one of the world’s first blockchain-based cross-border payments in 2016. But the GENIUS prescription offers little room to experiment with stablecoins as payments, which, again, may be useful to prevent shadow banking and antisocial market practices, but hinders the development of payments systems and regulation. States routinely experiment with payments across consumer contexts—Florida has considered prohibiting merchants from only accepting digital payments, while Ohio has imposed requirements for payments on payday loans. Given that stablecoins are a relatively new tool, perhaps they should be used more liberally in the short term to fully realize their constraints and potential. Public banks, comparatively insulated market entities that assume some degree of loss as part of their prosocial mandates, could be useful vehicles for this experimentation.

The key philosophical complication of a public bank-issued stablecoin is the implicit tension between public banking’s mandate for local, democratic oversight and the more rigid, universal regulation required of stablecoins. Where public banking naturally invites discretion, stablecoin on the balance sheet necessitates technical compliance even for cases falling under the GENIUS carveout for state oversight. This carveout, though described as an “unburdened lane to innovate,” does not offer unlimited flexibility: An issuer must cease issuing new coins until its market capitalization falls below $10 billion, and the basic requirements for all stablecoins regarding redemption rights, reserves, and more still apply. Indeed, the regulation mandates that state and federal regulatory schema be “substantially similar.”

Uniformity and reliability make sense in the payments universe due to network spillover risk. But public banking is at the mercy of local conditions, and models must be adaptable. Implicit in public banking’s mode of local governance is the idea that stakeholders may, to some extent, hold bank overseers accountable at the ballot box. This is a unique and powerful form of accountability, and it does not align neatly with additional state or federal stablecoin regulators.

Stablecoins can allow financial institutions to integrate digital services more seamlessly, but they do not necessarily advance core functions of public banks. As a result, these banks must exercise caution when entering the stablecoin market in any meaningful way. The Bank of North Dakota’s RoughriderCoin pilot will serve as a critical test for how public banks can engage with stablecoins without diluting their institutional functions.

Geeta Minocha is a lawyer, public banking advocate and founder of the Ohio Public Banking Coalition.