Delaware Proposes Legislation to Regulate Stablecoins, First Major Update to Banking Laws in 40 Years

Delaware State Senator Spiros Mantzavinos and Representative Bill Bush submitted legislation on Monday: the “Delaware Banking Modernization Act” (SB 16) and the “Delaware Payment Stablecoin Act” (SB 19). SB 19 aims to establish a licensing framework for stablecoin issuers and digital asset service providers; SB 16 updates banking governance rules that have not undergone significant revisions in over 40 years.

Core Licensing Framework of SB 19

The Delaware Payment Stablecoin Act aligns closely with federal regulatory approaches, laying the foundation for Delaware’s stablecoin oversight system.

Main Protections in SB 19

• Reserve Shortage Remedies: Requires issuers to provide remediation plans when reserves are insufficient, ensuring redemption capability.
• Mandatory Redemption Time Standards: Clearly states the maximum wait time for holders to redeem stablecoins.
• Capital Adequacy Requirements: Sets minimum capital standards for stablecoin issuers to reduce systemic risk.
• Anti-Money Laundering (AML) Obligations: Requires issuers to comply with AML regulations, aligning with traditional financial institutions.

If passed, the State Banking Commissioner will be authorized to enforce these rules within specified timeframes and will oversee licensing approvals.

Policy Shift Following Crypto Companies’ Exodus

Delaware’s proposal is driven by urgent commercial reasons. Last year, several tech and crypto companies left the state known for its business-friendly laws, notably Coinbase, which, after expressing dissatisfaction with the Delaware Court of Chancery (a court specializing in corporate law disputes), officially re-registered in Texas.

Representative Bill Bush stated: “Our state’s banking laws haven’t been meaningfully updated in over forty years. During this time, banking practices and transaction methods have changed significantly. We need to ensure our laws keep pace.” Delaware is no stranger to cryptocurrency; as early as 2016, former Governor Jack Markell launched the Delaware Blockchain Initiative to attract blockchain companies. This legislation can be seen as a strategic move to reassert Delaware’s position amid regulatory competition.

National Regulatory Landscape: Delaware’s Actions and Federal Coordination

Delaware’s legislative moves occur against the backdrop of accelerating crypto regulation nationwide. On Monday, U.S. Senator Bill Cassidy announced plans to advance the Cryptocurrency Tax Modernization Act (co-sponsored with Senator Lummis), aiming to address double taxation of miners and stakers and establish a $300 minimum tax exemption for digital assets.

Meanwhile, the U.S. SEC submitted two proposed rules for review by the Office of Management and Budget, including a proposal that “most crypto assets on the market should not be considered securities.” If approved, this would transfer primary regulatory authority over cryptocurrencies to the CFTC. CFTC Chair Mike Selig expressed hope to prevent crypto from falling into “uncertainty” and to provide market clarity.

Delaware’s stablecoin legislation exemplifies state and federal regulatory coordination and is one of the most symbolic legislative actions in the trend toward regulatory clarity in the U.S.

Frequently Asked Questions

Q: Which entities are specifically regulated under Delaware’s SB 19 stablecoin law?
SB 19 targets stablecoin issuers and digital asset service providers operating in Delaware, requiring them to obtain licenses and comply with reserve requirements, redemption time standards, capital requirements, and AML obligations. The bill adopts language and definitions from the federal GENIUS Act to ensure compatibility between state and federal frameworks.

Q: Why is Delaware’s banking law reform called the “first in 40 years”?
Delaware’s current banking regulations have not undergone significant updates since 1981. Over the past 40+ years, financial innovations like digital banking, electronic payments, and crypto assets have transformed the industry, but state laws’ definitions and regulatory frameworks have not kept pace. This reform aims to bridge that gap.

Q: What is the current legislative progress of these two bills?
The bills have been formally introduced and will next be reviewed by the Senate Banking Committee. Upon approval, they will be debated by the full Delaware Senate. Additionally, another bill, the “Delaware Currency Transmission and Virtual Currency Modernization Act,” is expected to be introduced in the coming days, focusing on consumer protection and licensing regulations. It will still take some time before becoming law.