U.S. Treasury proposes rules to implement GENIUS Act stablecoin regulation

Aug 17, 2026

The U.S. Treasury Department has proposed draft rules to implement Section 3 of the GENIUS Act, establishing a regulatory framework for payment stablecoins ahead of the January 18, 2027 effective date. The proposal asserts broad extraterritorial jurisdiction, requiring offshore issuers serving U.S. customers to secure federal or state licenses and comply with U.S. regulatory orders. It also mandates that digital asset exchanges perform due diligence on listed tokens, threatening severe criminal penalties for non-compliance. Treasury Secretary Scott Bessent emphasized that the rules aim to provide regulatory certainty and cement the U.S. dollar's status as the world's reserve currency.

Treasury GENIUS Act implementation rule

▪The U.S. Department of the Treasury declined to model the stablecoin rule on traditional securities laws, arguing that applying traditional investment rules to payment stablecoins may frustrate their use for payment and settlement.
▪The U.S. Department of the Treasury's proposed rule would add a new Part 1523 to the department's regulations to define who can issue, offer, or sell payment stablecoins in the United States.
▪The U.S. Department of the Treasury opened a 60-day public comment period on the proposed stablecoin rule, posing 87 specific questions to industry stakeholders.
▪The U.S. Department of the Treasury proposed a rule on August 17, 2026, to implement Section 3 of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.

Extraterritorial jurisdiction scope

▪Under the proposed rule, an offshore stablecoin issuer is treated as not operating in the United States if it reasonably believes its buyers are abroad, implements operational controls to prevent U.S. access, and avoids marketing to U.S. persons.
▪The proposed rule establishes that Section 3 of the GENIUS Act applies extraterritorially whenever conduct involves the offer or sale of a payment stablecoin to a person located in the United States.
▪Knowing participation in an unlawful stablecoin issuance, including acting as a market maker, supplying a brand in a white-label deal, or coordinating minting, carries criminal penalties of up to a $1 million fine and five years in prison.

Offshore issuer compliance requirements

▪Starting July 18, 2028, digital asset service providers are prohibited from offering or selling payment stablecoins to U.S. users unless the tokens are issued by a licensed U.S. issuer or a foreign issuer with a Treasury reciprocity determination.
▪Tether launched a separate, U.S.-focused stablecoin called USAT in January 2026 through federally chartered Anchorage Digital Bank to comply with the GENIUS Act from its inception.
▪Tether faces compliance challenges under the GENIUS Act because approximately 25 percent of its USDT reserves, representing roughly $47 billion in assets like gold and Bitcoin, do not consist of the high-liquidity assets required by the law.

Exchange due diligence obligations

▪Starting January 18, 2027, digital asset service providers cannot list an offshore issuer's token unless the issuer has the technological capability to comply with lawful freeze or block orders and applicable cross-border reciprocity arrangements.
▪The proposed rule requires digital asset service providers to perform 'reasonable due diligence' to verify an offshore issuer's representations, which must at minimum confirm that no secondary-trading ban is in force against the issuer.
▪The U.S. Department of the Treasury rejected a proposed 36-month transition runway and a $1 billion de minimis carve-out for offshore tokens, concluding that delayed consumer protection would outweigh the benefits of an eased transition.

January 2027 implementation deadline

▪The GENIUS Act, signed into law on July 18, 2025, is scheduled to take full effect on January 18, 2027, requiring all domestic payment stablecoin issuers to hold a federal or state license.
▪U.S. regulators, including banking and markets regulators, missed the statutory one-year deadline in July 2026 to have all implementing rules for the GENIUS Act in place.

Dollar dominance policy goals

▪Treasury Secretary Scott Bessent stated that the swift implementation of the GENIUS Act rules is intended to provide regulatory certainty, support business innovation, and cement the U.S. dollar as the world's reserve currency.
▪Treasury Secretary Scott Bessent declared that the Trump administration and Congress delivered the GENIUS Act to establish clear rules of the road and keep America the crypto capital of the world.