U.S. Treasury Proposes GENIUS Act Rules for Stablecoin Issuers and Foreign Stablecoins

Treasury opens the next phase of implementation for the United States' first federal stablecoin regime, setting out how domestic issuance will be policed and when foreign-issued tokens may still reach American customers.

Overview

On 17 August 2026, the United States Treasury Department published a notice of proposed rulemaking that represents one of the most consequential steps yet in bringing the Guiding and Establishing National Innovation for U.S. Stablecoins Act, commonly known as the GENIUS Act, into operation. The proposal implements Section 3 of the Act and is concerned, at its core, with a deceptively simple question: when is a payment stablecoin issued, offered or sold “in the United States”. The answer determines which companies must obtain permitted-issuer status, which foreign tokens may lawfully continue to circulate among American customers, and which exchanges, custodians and payment platforms could face liability for facilitating unlawful issuance.

Treasury has opened a 60-day public comment period, with responses due by mid-October 2026. The rulemaking sits alongside parallel work by the Office of the Comptroller of the Currency, which has proposed its own regulations on reserves, redemption, custody and supervision, and by Treasury's Financial Crimes Enforcement Network and Office of Foreign Assets Control, which jointly proposed anti-money laundering and sanctions compliance requirements in April 2026. Taken together, these strands are converting a single piece of legislation into a working regulatory system.

Background: What the GENIUS Act Does

President Donald Trump signed the GENIUS Act into law on 18 July 2025, creating the first comprehensive federal framework specifically designed for payment stablecoins, meaning digital tokens pegged to a fiat currency such as the US dollar and intended for use in payments rather than as investment instruments. Section 3 of the Act sets out the fundamental architecture of the American stablecoin market, prescribing who may issue, offer, sell or otherwise make a payment stablecoin available to US persons. It is drafted with express extraterritorial intent: the Act is designed to apply wherever conduct involves the offer or sale of a payment stablecoin to a person located in the United States, regardless of where the issuer or platform is based.

The stakes attached to non-compliance are significant. Issuing a payment stablecoin in the United States without permitted-issuer status carries potential fines of up to one million dollars and prison terms of up to five years. Treasury has confirmed that the law is expected to become effective on 18 January 2027, eighteen months after enactment, although the statute allows for an earlier effective date if the primary federal payment stablecoin regulators finalise their implementing regulations sooner.

Drawing the Boundary Around Domestic Issuance

From the effective date onward, companies will generally be prohibited from issuing payment stablecoins in the United States unless they qualify as permitted payment stablecoin issuers under either a federal or an eligible state regulatory framework. The core difficulty Treasury's proposal seeks to resolve is establishing precisely when an issuer has crossed that regulatory boundary. This is far from straightforward in a blockchain context, where a token can be issued on a decentralised network, transferred instantly across borders and accessed through exchanges operating in dozens of jurisdictions simultaneously.

The proposal also opens the door to limited safe harbours. The GENIUS Act itself authorises exemptions for de minimis transaction volumes and, separately, for unusual and exigent circumstances, provided any such exceptions remain narrowly drawn and consistent with the statute's underlying objectives. Treasury is inviting comment on how these carve-outs should be calibrated in practice.

Beyond the jurisdictional test, permitted issuers will need to satisfy a broader set of prudential standards covering reserve assets, redemption rights, capital adequacy, risk management, independent audits and ongoing supervision. Much of this detail is being developed in parallel by other regulators rather than by Treasury alone. The OCC's proposed regulations address reserve requirements, redemption mechanics, custody arrangements and supervisory expectations for federally qualified issuers, while the joint FinCEN and OFAC proposal, published in April 2026, sets out anti-money laundering and sanctions compliance obligations that permitted issuers will be expected to build into their operations from the outset.

A Separate Test for Foreign-Issued Stablecoins

Foreign-issued tokens are treated as a distinct and, in some respects, more delicate problem. Under the GENIUS Act, digital asset service providers are generally barred from offering or selling stablecoins to US customers unless the token comes from an approved domestic issuer or otherwise qualifies under the Act's foreign-issuer framework. A foreign stablecoin can remain accessible to American customers only if Treasury determines that the issuer's home jurisdiction maintains a regulatory and supervisory regime comparable to the US framework, and the issuer separately satisfies additional statutory conditions.

Those conditions are demanding. A qualifying foreign issuer must demonstrate the technological capability to comply with lawful US orders, including orders relating to asset freezes, seizures, sanctions and anti-money laundering measures, and must commit to doing so. Comparable overseas regulation is therefore a necessary but not sufficient condition; the specific issuer and its home jurisdiction must both meet the standards the GENIUS Act establishes. This distinction matters most for the handful of globally distributed dollar stablecoins that already dominate trading volumes, since regulation abroad does not automatically translate into a right to continue serving the US market.

The restriction on digital asset service providers offering non-qualifying stablecoins to persons in the United States is scheduled to become applicable on 18 July 2028, three years after the Act's enactment. That gives the industry a longer runway to adjust on the foreign side than on the domestic licensing side, but it also means platforms will need to begin due diligence on which tokens they support well before the deadline arrives.

Extraterritorial Reach and Intermediary Liability

One of the more striking features of the August proposal is how far Treasury is prepared to extend its reach. The rulemaking indicates that liability could attach to entities based entirely outside the United States where their stablecoin activity is marketed to US persons, and it suggests that intermediaries, not just issuers, could be treated as participants in unlawful issuance where they convert, redeem or repurchase non-compliant tokens on behalf of customers. Exchanges and other digital asset service providers would, under this approach, be expected to carry out reasonable due diligence on the foreign issuers whose tokens they list, rather than relying solely on Treasury's own determinations.

This broadens the practical compliance burden considerably. Rather than a licensing regime that concerns only issuers, the proposal points towards a market-wide gatekeeping function in which exchanges, brokers, custodians and payment platforms all carry some responsibility for verifying the provenance and regulatory status of the stablecoins they support.

Timeline

Where Implementation Stands

Treasury's own one-year target for having implementing rules in place, measured from the Act's enactment, has already passed without being met, and it now looks unlikely that every element of the framework will be finalised before the January 2027 effective date. Regulators in comparable rulemakings have historically allowed transition periods once final rules are signed off, so some further slippage in practical compliance deadlines would not be unusual, even if the statutory effective date itself does not move.

The rulemaking process is also unfolding against a backdrop of continuing legislative activity. The proposed Digital Asset Market Clarity Act, which would revise parts of the GENIUS Act, remains under consideration in the Senate, and its outcome could yet reshape elements of the framework Treasury is currently building out through rulemaking rather than statute.

Why It Matters

●       Stablecoin issuers operating or planning to operate in the United States need to determine early whether their structures fall within the federal or an eligible state licensing pathway, and whether any safe harbour provisions might apply to their transaction volumes.

●       Exchanges and other digital asset service providers face a widening compliance perimeter, with the proposal signalling that reasonable due diligence on foreign-issued tokens may become a standing obligation rather than a one-off check.

●       Globally distributed dollar stablecoins, including those already dominant in trading volumes, cannot assume continuity of US market access simply because their issuer is regulated in another jurisdiction; both the issuer and its home regime must meet the GENIUS Act's comparability standard.

●       Firms should track the 60-day comment window, due to close in mid-October 2026, as an opportunity to influence how ambiguous statutory terms, including de minimis and comparable regulation, are ultimately defined in the final rule.

Conclusion

Treasury's proposal is best understood as more than a licensing exercise for American stablecoin companies. It is the point at which the GENIUS Act begins to acquire its practical shape, defining the regulatory perimeter around the entire US stablecoin market rather than any single participant within it. With domestic licensing standards, reserve and redemption rules, anti-money laundering requirements and a foreign-issuer comparability test all now moving through parallel rulemakings, the Act is shifting from legislative text into an operating regulatory system.

The coming months, running through the close of the comment period in mid-October 2026 and on towards the January 2027 effective date, will determine which digital dollars can lawfully be issued on American soil and which overseas stablecoins US platforms will ultimately be permitted to continue offering. For issuers, exchanges and the wider digital asset industry, the practical answers to those questions are still being written, and firms with an interest in the outcome have a limited window in which to help shape them.

Prepared for informational purposes based on Treasury's notice of proposed rulemaking and related public reporting as at 18 August 2026.

DISCLAIMER

Nothing in this report constitutes legal advice, financial advice, investment advice, or a recommendation to adopt, implement, or refrain from any particular course of action. Readers should not rely on this report as a substitute for independent legal, regulatory, tax, financial, or technical advice tailored to their specific circumstances and jurisdiction. The Digital Commonwealth (DCW) accepts no liability for any loss, damage, or consequence arising directly or indirectly from reliance on the contents of this report.

The regulatory landscape for extended trading hours, settlement reform and tokenised markets is evolving rapidly across all jurisdictions referenced herein. Whilst reasonable care has been taken to reflect the state of regulation, legislation and market practice as at August 2026, this report does not purport to be a comprehensive or definitive statement of the law or regulatory position in any jurisdiction. It may not reflect developments occurring after the date of publication. Readers operating in regulated activities should conduct their own legal and compliance review and seek appropriate professional advice.

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Eric Williamson, Director of Compliance and Risk

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