Comment from Tokenization Systems

Tokenization Systems, an independent research program, has commented on every parallel GENIUS Act rulemaking (OCC, the two FDIC rules, Treasury, both FinCEN rules, and the banking-agency joint AML/CFT rule); this completes that coverage. Several recommendations therefore address charter arbitrage: where the NCUA proposal and its siblings diverge, deliberate alignment is the stronger rule, and the agencies are finalizing all of these rules against the same July 18, 2026 deadline, the one window to align them before divergent finals take effect. 1. (Q58/68/69) Make the core diversification standards in Section 706.202(c) mandatory, not an optional safe harbor, at least for the single-institution concentration cap and the daily and weekly liquidity minimums. In March 2023, about 8 percent of USDC reserves at one bank coincided with a roughly 13 percent peg break; an optional 40 percent cap leaves concentration to be caught by examination, not rule. The FDIC's AG19 proposal makes the same cap mandatory, so an optional NCUA version invites IDI-versus-FICU arbitrage. 2. (Q83/86/87) Require the monthly public reserve report to name the institutions holding reserves and to split insured from uninsured amounts; the 2023 risk was reserve location, which unnamed "deposits at insured institutions" hides until it fails. 3. (Q173-176) Finalize the technology-neutral part 745 amendment (Section 745.2(f)) as proposed; a liability's character turns on substance, not recordkeeping substrate. 4. (Q39/167-172) Pair the no-pass-through determination with a mandatory three-category holder disclosure (legal nature of the claim; reserve composition; reserve location and custodian, with insured/uninsured split), and coordinate the pass-through posture with the FDIC, since IDI reserve deposits and FICU reserve Share Accounts are economically identical. 5. (Q180) Classify a digital asset that is only a claim on a Share Account as a payment stablecoin backed by tokenized shares, not as a tokenized share; otherwise the perimeter is escaped by one level of indirection. 6. (Q103) Require redemption for any holder who completes screening and onboarding, and disclose the count of accounts with direct redemption rights. Tether grants direct redemption to 882 accounts and Circle to 1,834; all others exit only through secondary markets untested under stress, which onboarding friction can reproduce under the proposed text. 7. (Q97/99/101/102) In the extended-redemption stress state, cap redemption fees at documented cost, send fee-change notices to all reachable holders, and unify the redemption, fee, and insurance disclosures; an unconstrained mid-run fee is a discretionary redemption limitation by pricing. Keep the seven-day extension's trigger and duration specified by rule. 8. (Q153/154) Add an objective variable capital floor scaled to Outstanding Issuance Value beneath the individualized requirement and the $5 million de novo floor. The state baseline the framework escapes implies about 0.54 percent of assets versus roughly 12 percent bank CET1, a gap near 22 to 1; coordinate the floor with the OCC and FDIC so it is common across charters. 9. (Q37/86/143/188) Adopt insolvency implementing rules and issuance-scaled resolution plans, require continuous reserve traceability, and disclose and reconsider permitting any waiver of the Section 10(c)(3) custodial priority. State how part 706 segregation maps onto the statutory priority in a resolution before the first failure, not after it. 10. (Q1/2/126/131; fn.160) Coordinate the quarterly report format and the primary-regulator designation interagency, before the first multi-regime application, since an applicant who can choose its regulator will pick the most permissive divergence. Resolve footnote 160 explicitly: Section 4(a)(1)(B)(i) does not list the NCUA among the regulators who may impose discretionary redemption limitations, so cure the omission by joint interpretation and a conforming amendment rather than leaving an inferred authority to be construed by a court during a run. 11. (Q194) Require size-scaled stress testing with a mandatory scenario on the March 2023 depeg channel (a single-custodian-failure shock on the issuer's actual reserve concentration, paired with the 10-percent-in-24-hours redemption trigger), with public summary results. Observation: the twelve-month operational backstop matches the FDIC AG19 calibration, the cross-agency consistency Recommendation 10 would extend. These recommendations support a final rule that protects holders, preserves credit-union safety and soundness, and avoids cross-charter divergence. Respectfully submitted, Zach Zukowski www.Tokenization.Systems.