U.S. Treasury Proposes Secondary Market Sanctions Compliance Requirements for Stablecoin Issuers

The U.S. Treasury Department on April 8 issued a notice of proposed rulemaking requiring payment stablecoin issuers under the GENIUS Act to implement comprehensive anti-money laundering and sanctions compliance programs, including risk assessments, senior management oversight, and the technical capability to freeze funds in secondary markets. While FinCEN proposes exempting issuers from monitoring secondary market activity for suspicious transactions, OFAC requirements mandate that issuers prevent sanctioned parties and jurisdictions like Iran from using their stablecoins, with issuers potentially liable for prohibited conduct. The proposal comes amid debate over stablecoin yield, with the banking industry advocating for bans to protect deposits while the Council of Economic Advisers concludes such prohibition would increase bank lending by only 0.02% while costing consumers $800 million. Treasury Secretary Scott Bessent is urging Congress to pass the CLARITY Act before November 2026 midterm elections to establish U.S. leadership in digital assets, while Switzerland moves forward with a six-bank CHF stablecoin sandbox initiative launching in late 2026.

U.S. Treasury's Proposed Sanctions and AML Compliance Framework for Stablecoins

• ▪On April 8, the Treasury's Financial Crimes Enforcement Network and the Office of Foreign Assets Control jointly released a notice of proposed rulemaking detailing proposed requirements for permitted payment stablecoin issuers related to combatting illicit finance
• ▪The GENIUS Act regulatory regime will become fully operational from January 2027
• ▪The Treasury's notice of proposed rulemaking on stablecoin sanctions compliance will be open for comment from the public for 60 days from the date of its publication in the Federal Register
• ▪On April 7, the Federal Deposit Insurance Corporation issued a notice of proposed rulemaking setting out a prudential supervisory framework for permitted payment stablecoin issuers
• ▪On April 1, Treasury issued a notice of proposed rulemaking setting out proposed standards for evaluating whether state-level regulatory regimes are aligned with the GENIUS Act

White House Push for CLARITY Act Passage Amid Stablecoin Yield Debate

• ▪On April 9, US Securities and Exchange Commission Chairman Paul Atkins posted a statement on X supporting Scott Bessent's op-ed
• ▪The Senate Banking Committee has circulated draft language that would largely support the banks' perspective by prohibiting the offer of yield or interest on stablecoin holdings
• ▪On April 9, US Secretary of the Treasury Scott Bessent published an op-ed in the Wall Street Journal arguing that Congress must urgently work to pass the CLARITY Act ahead of the November 2026 mid-term elections
• ▪The Council of Economic Advisers stated that a yield prohibition would do very little to protect bank lending, while forgoing the consumer benefits of competitive returns on stablecoin holdings
• ▪The Council of Economic Advisers analysis concludes that a prohibition on stablecoin yield would impose a cost of $800 million on consumers in the form of lost opportunities to earn yield on stablecoins
• ▪The Council of Economic Advisers analysis concludes that a prohibition on stablecoin yield would only increase overall bank lending by approximately 0.02%
• ▪US Secretary of the Treasury Scott Bessent argued that Congress must pass the CLARITY Act if the US is to establish its position as the global leader in digital asset innovation
• ▪US Securities and Exchange Commission Chairman Paul Atkins indicated that the SEC is already preparing to implement the CLARITY Act once it is passed by Congress
• ▪On April 8, the White House published research from the Council of Economic Advisers on the effects of stablecoin yield on bank lending

Swiss Banks' Franc-Backed Stablecoin Sandbox Initiative

• ▪In July 2024, FINMA issued guidance on stablecoins that sets out strict standards of compliance for AML/CFT purposes
• ▪Six Swiss banks will undertake a sandbox initiative during the second half of 2026 to test the issuance and distribution of a CHF stablecoin
• ▪The Swiss franc stablecoin sandbox arrangement is subject to AML/CFT regulations through participation in a self-regulatory organization recognized by the Financial Markets Supervisory Authority
• ▪The Swiss franc stablecoin sandbox will be run by Swiss Stablecoin AG
• ▪The Swiss franc stablecoin sandbox environment will involve the use of a CHF-pegged stablecoin issued using the ERC-20 standard on the Ethereum blockchain
• ▪Swiss Stablecoin AG operates the CHF stablecoin platform and owns the subsidiary entity responsible for issuing and redeeming the stablecoin

Perspective of Council of Economic Advisers

• ▪The Council of Economic Advisers analysis concludes that a prohibition on stablecoin yield would impose a cost of $800 million on consumers in the form of lost opportunities to earn yield on stablecoins
• ▪The Council of Economic Advisers stated that a yield prohibition would do very little to protect bank lending, while forgoing the consumer benefits of competitive returns on stablecoin holdings
• ▪The Council of Economic Advisers analysis concludes that a prohibition on stablecoin yield would only increase overall bank lending by approximately 0.02%

Perspective of US Treasury Secretary Scott Bessent

• ▪US Secretary of the Treasury Scott Bessent argued that Congress must pass the CLARITY Act if the US is to establish its position as the global leader in digital asset innovation