Blockchain Association urges Treasury to clarify DeFi and foreign issuer rules in GENIUS Act stablecoin framework

On October 19, 2026, the Blockchain Association submitted a 26-page comment letter urging the U.S. Department of the Treasury to narrow key definitions in its proposed Section 3 GENIUS Act rules. The crypto advocacy group requested explicit exemptions for self-custody software, validators, and secondary-market traders, while urging Treasury to replace open-ended due diligence on foreign stablecoin issuers with reliance on official regulatory lists.

Treasury rulemaking and public comments

• ▪The Blockchain Association filed a 26-page comment letter with the U.S. Department of the Treasury on October 19, 2026 regarding Section 3 of the GENIUS Act.
• ▪The public comment period for the U.S. Department of the Treasury's GENIUS Act stablecoin proposal closed on October 19, 2026 with 123 public submissions received.
• ▪The U.S. Department of the Treasury's proposed stablecoin rule implementing Section 3 of the GENIUS Act was published on August 18, 2026 under docket TREAS-DO-2026-0496.

Scope of digital asset service providers

• ▪The Blockchain Association requested that the term digital asset service provider be limited to customer-facing businesses and exclude self-custody software, validators, and proprietary trading firms.
• ▪The GENIUS Act statutory definition excludes underlying blockchain protocols, self-custody software, and participants whose activities are limited to validation or specified peer-to-peer liquidity functions.

Permissionless systems and self-custody

• ▪The U.S. Department of the Treasury's August 2026 proposed rule recognizes statutory exemptions for certain direct transfers between individuals and transactions using self-custody wallets.
• ▪The Blockchain Association argued that permissionless protocol participants should not face blanket identification or geolocation obligations when interacting only with public wallet addresses.

Foreign stablecoin issuer regulations

• ▪The U.S. Department of the Treasury's proposed rule establishes that qualifying foreign stablecoin issuers may use a statutory exception involving a comparable regulatory regime and OCC registration.
• ▪The Blockchain Association recommended that digital asset service providers be allowed to rely on publicly available regulatory lists from the Treasury and OCC rather than conducting open-ended due diligence on foreign stablecoin issuers.

Criminal liability under Section 3

• ▪Section 3 of the GENIUS Act provides criminal penalties for knowing participation in unauthorized stablecoin issuance, including fines up to $1 million per violation, imprisonment up to five years, or both.
• ▪The Blockchain Association proposed a safe harbor excluding ordinary secondary-market trading and liquidity provision from criminal liability for unlawful stablecoin issuance.
• ▪The Blockchain Association urged the U.S. Department of the Treasury to clarify that criminal liability for knowing participation in unlawful stablecoin issuance requires actual knowledge and affirmative, substantial assistance.

Counterparty location verification standards

• ▪The Blockchain Association urged the U.S. Department of the Treasury to replace its proposed reasonably believes standard for identifying U.S. counterparties with an actual knowledge standard based on ordinary business operations.
• ▪The U.S. Department of the Treasury proposed using customer information, geographic restrictions, device-location checks, and transaction monitoring to support its reasonably believes counterparty location assessment.

GENIUS Act statutory timeline

• ▪The U.S. Department of the Treasury's general distribution restriction under Section 3(b)(1) of the GENIUS Act is scheduled to become operative on July 18, 2028.
• ▪The GENIUS Act was signed into law on July 18, 2025 and is expected to take effect by January 18, 2027.