GENIUS Act: Blockchain Association Seeks Clearer Stablecoin Rules
When does a platform’s trading or liquidity service count as helping distribute an unlawfully issued stablecoin? The Blockchain Association says Treasury should draw that line carefully. Rules aimed at issuers should not also sweep in businesses and protocol participants who lack the relevant knowledge, control or relationship with the issuer.
- The association supports oversight of payment-stablecoin issuance but wants clearer limits on intermediary obligations.
- It argues that ordinary secondary-market trading should not, on its own, count as participation in unlawful issuance.
- Restrictions on foreign issuers and general distribution have different start dates.
- Treasury’s proposal is still under review. Final rules have not been settled.
Who counts as an intermediary?
The association submitted a 26-page comment letter on Treasury’s proposal to implement Section 3 of the GENIUS Act. The proposal covers who may issue, offer or sell payment stablecoins in the United States, and when digital asset service providers (DASPs) may make them available to U.S. users.
The association supports regulating payment-stablecoin issuance. It wants Treasury to clarify which businesses qualify as DASPs, a category that can include services such as exchanging or transferring digital assets for customers and providing custody. The concern is that unclear definitions could extend intermediary obligations to businesses or protocol participants that neither issue a stablecoin nor have a meaningful relationship with its issuer. Treasury’s proposed stablecoin rules will help determine how those obligations apply.
This is not a request to exempt anything labeled “decentralized.” What matters is what a business actually does, whether it controls customer assets, and whether it coordinates with an issuer or distributes newly created tokens. Treasury’s proposal also says an issuer may qualify as a DASP, so the categories can overlap.
These distinctions matter as decentralized software and conventional businesses meet. A company that runs a customer-facing service around a protocol may have different responsibilities from the software itself or someone who uses it directly. Treasury’s final definitions will determine how far those distinctions extend under the rules.
Issuance is not secondary-market trading
The association argues that third-party liability for knowingly participating in unlawful issuance should require actual knowledge of the violation and substantial, affirmative assistance coordinated with the issuer. That is the association’s proposed standard, not a settled legal test under final Treasury rules.
It also wants Treasury to clarify that buying, selling or providing liquidity for already-issued stablecoins does not, by itself, amount to participating in their original issuance. Market makers, for example, can help buyers and sellers find liquidity without agreeing to distribute tokens for an issuer.
The association recommends a safe harbor for independent secondary-market activity when there is no issuer-directed distribution obligation or knowing assistance with unlawful issuance. The statute authorizes Treasury to establish certain safe harbors, but limits them to a defined scope and a de minimis volume of transactions. It also provides for limited safe harbors in unusual and exigent circumstances. This authority does not create a broad, automatic exemption for market makers, and Treasury has not committed to adopting the association’s proposal.
The policy tension is clear: including ordinary trading in issuance rules could burden activity without improving oversight of issuers. But an overly broad exemption could weaken enforcement. The final rules will need to distinguish genuine distribution from independent market activity.
Foreign stablecoins face a separate test
Treasury’s proposal treats foreign-issued payment stablecoins under provisions that are related but distinct. Under Section 3(b)(2), the restriction for digital asset service providers on the Act’s effective date concerns making a foreign issuer’s stablecoin available in the United States. The statutory conditions include the issuer’s technological ability and willingness to comply with lawful orders, as well as a reciprocal-arrangement condition.
Separately, Section 18(a) provides a pathway for qualifying foreign issuers supervised under a regime Treasury considers comparable and registered with the Office of the Comptroller of the Currency (OCC). These provisions should not be treated as one rule. The comparable-regime and OCC-registration pathway is separate from the conditions attached to the Section 3(b)(2) restriction.
The Blockchain Association says exchanges and custodians may not have a direct contractual relationship with a foreign issuer or access to the information needed to assess its compliance. It recommends letting platforms rely on publicly available Treasury and OCC records, unless they actually know an issuer cannot or will not comply with lawful orders.
That approach makes the quality of official records important. If platforms are expected to assess foreign issuers, they need a practical way to determine which issuers qualify and whether their status has changed. The proposal’s regulatory implementation details remain an open question.
Wallet location and permissionless protocols
The association also opposes requiring developers or other participants in permissionless protocols to build new wallet-identification or geolocation systems simply because an unidentified wallet can interact with software. People can use permissionless protocols without handing a central operator control of their assets, though businesses may offer services around those protocols.
To assess whether someone is in the United States, the association proposes considering actual knowledge, information gathered through ordinary business operations and purposeful solicitation of U.S. users. It opposes a blanket duty to identify every wallet, especially when a service provider has no direct relationship with the wallet holder.
The association is not saying businesses can ignore information they already have. It argues that obligations should reflect a firm’s knowledge and role, rather than require every protocol participant to identify users they may never deal with directly.
The Act includes exemptions for certain direct transfers between individuals acting on their own behalf, transactions using software or hardware wallets that facilitate an individual’s own custody, and a specified transfer between an individual’s U.S. and foreign accounts offered by the same parent company. These exemptions help define the law’s scope, but do not automatically settle how the rules apply to businesses providing related services.
Two different compliance dates
Treasury published its proposed rule in the Federal Register on August 18, 2026, and the public comment period ended October 19, 2026. The Act’s effective date is anticipated to be January 18, 2027. The foreign-issuer restriction applies on that date, while the general restriction under Section 3(b)(1) on DASPs offering or selling payment stablecoins is scheduled to take effect on July 18, 2028.
Those dates apply to different provisions. The later start gives the general distribution restriction more time, but it does not delay the separate foreign-issuer provision until 2028.
Treasury has described payment stablecoins mainly as instruments for payment and settlement, rather than as securities or commodities. It has also asked whether rules like those in existing securities or commodities frameworks should apply. That leaves a broader policy question alongside the technical definitions: how to regulate a payment instrument without importing obligations designed for a different kind of financial product.
Key questions and answers
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Does the Blockchain Association oppose regulating stablecoin issuance?
No. It supports oversight of payment-stablecoin issuance and wants Treasury to clarify which intermediaries have obligations under the rules.
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Does ordinary trading make someone liable for unlawful issuance?
The association argues that trading or providing liquidity should not, by itself, establish participation in unlawful issuance. Its proposed actual-knowledge and substantial-assistance standard is a recommendation, not a settled rule.
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Does calling a service “decentralized” automatically exempt it?
No. The association focuses on what a business does, what it knows and whether it coordinates with an issuer, not on the label it uses.
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When do the restrictions take effect?
The foreign-issuer restriction applies on the Act’s anticipated effective date of January 18, 2027. The general DASP distribution restriction is scheduled for July 18, 2028.
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Are Treasury’s rules final?
No. The rules are still proposed, and Treasury’s final definitions and implementation choices may change.
The task now is to draw lines regulators can enforce and businesses can follow: between issuing and trading, between a protocol and a service built around it, and between a foreign issuer’s status and a platform’s ability to verify it. Clear rules could protect lawful market activity while keeping responsibility focused on those who issue or knowingly assist with unlawful distribution. Vague rules would leave firms guessing, and many would choose the bluntest option available.
