Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—Treasury seeks comment on GENIUS Act rules for stablecoins, (Aug 17, 2026)

By Shashi Kant, BALLB, LLM

Treasury’s proposal would establish rules for stablecoin issuance, foreign issuers, U.S. offers and sales, and offshore transactions under the GENIUS Act.

The U.S. Department of the Treasury has proposed regulations implementing the GENIUS Act’s restrictions on the issuance, offer, sale, and availability of payment stablecoins in the United States, including rules governing foreign issued stablecoins and activities conducted outside the country.

Treasury issued the notice of proposed rulemaking. The proposal would add new 12 C.F.R. Part 1523 and is intended to implement Section 3 of the Guiding and Establishing National Innovation for U.S. Stablecoins Act. The notice is scheduled for publication in the Federal Register Aug. 18, and comments would be due 60 days after publication.

Background. The GENIUS Act, enacted July 18, 2025, establishes a federal framework for payment stablecoins. The Act generally prohibits a person from issuing a payment stablecoin in the United States unless the person is a permitted payment stablecoin issuer, subject to specified exemptions and provisions concerning qualifying foreign issuers (see Banking and Finance Law Daily, Sept. 18, 2025). Treasury’s proposal addresses only the portions of Section 3 concerning issuance, offers, sales, and making payment stablecoins available. Other provisions, including Section 3(g)’s treatment of payment stablecoins for accounting and margining purposes, are outside the proposal. Treasury also said potential penalties for unlawfully marketing a product as a payment stablecoin are outside the scope of the rulemaking. The proposed regulations follow Treasury’s September 2025 advance notice of proposed rulemaking. Treasury said it considered comments received through that earlier process in developing the new proposal.

Issuance requirements. Proposed §1523.2 would implement the Act’s restrictions on issuing payment stablecoins in the United States. The proposal would generally prohibit issuance unless the issuer is a permitted payment stablecoin issuer or is a foreign payment stablecoin issuer satisfying the criteria in Section 18(a) of the Act.

Treasury’s interpretation of foreign issuers is significant. Although Section 3(a) expressly refers to permitted payment stablecoin issuers, Treasury proposes to interpret Section 18(a), which exempts qualifying foreign issuers from the prohibitions in Section 3, as allowing qualifying foreign issuers to issue payment stablecoins in the United States. Treasury said that reading is supported by the statutory language and by Section 4(a)(12), which contemplates regulatory approval for certain companies not domiciled in the United States or its territories.

Treasury also proposes rules determining when an issuance is considered to occur in the United States. A person would generally be treated as issuing a payment stablecoin in the United States if, at the time of issuance, the person is located in the United States or issues the stablecoin to a person located in the United States.

The proposed definition of “located in the United States” would distinguish between individuals and entities. For individuals, the test would generally turn on physical presence, subject to an exception for certain non-U.S. residents whose presence in the United States is merely temporary.

Offers and sales. The proposal also addresses the activities of digital asset service providers. Section 3(b)(1) generally prohibits such providers, beginning July 18, 2028, from offering or selling a payment stablecoin to a person in the United States unless the stablecoin was issued by a permitted payment stablecoin issuer or a qualifying foreign issuer.

Proposed §1523.3 would provide examples of conduct constituting an offer or sale. These include directly soliciting a person located in the United States, advertising a payment stablecoin as available for purchase by persons in the United States, and advising prospective purchasers on how to evade generally applicable mechanisms designed to detect or restrict their location. Treasury said the examples are not exhaustive.

Treasury would also clarify the meaning of “offer.” The proposal would incorporate the statutory definition while expressly providing that an offer includes making an as-yet-unissued payment stablecoin available for purchase, sale, or exchange. The provision therefore would encompass presales of stablecoins before issuance.

Foreign-issued stablecoins and extraterritorial reach. The proposal would implement the Act’s express extraterritorial application where conduct involves offering or selling a payment stablecoin to a person located in the United States. Treasury said the proposed regulations are intended to make that extraterritorial effect clear. For certain offshore transactions, Treasury proposes a reasonable-belief standard. An issuer or digital asset service provider seeking protection under the proposed provisions generally would need to be outside the United States and reasonably believe that the person receiving the stablecoin is also outside the United States. Treasury said that standard would exclude circumstances in which the provider knows, has reason to know, or should know from available information that the recipient is in the United States.

Treasury is specifically seeking comment on the controls that should support such a reasonable belief, including customer-identification and due-diligence procedures, account-opening information, geographic access restrictions, device or network-location checks, contractual representations, and transaction monitoring.

Safe harbors. Proposed §1523.4 would establish exemptions and safe harbors and invite comment on whether additional safe harbors should be adopted. The GENIUS Act authorizes Treasury to establish limited safe harbors for transactions involving a de minimis volume and, separately, in unusual and exigent circumstances. Treasury considered, but did not propose, a broader safe harbor allowing unregistered foreign-issued stablecoins with a de minimis volume of U.S.-held capitalization to continue U.S. issuance. The agency said such an approach could delay consumer-protection benefits.

Treasury seeks comment. Treasury is seeking comments on every aspect of the proposed framework, including the definitions of key terms, the treatment of foreign issuers, the location tests, the relationship between issuance and offer or sale restrictions, due-diligence requirements, safe harbors, and the proposal’s regulatory-impact analysis.

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