Treasury Proposes GENIUS Act Rule Governing Offshore Stablecoins and U.S. Exchanges

The proposal sets when offshore issuers can reach American users, and puts a due diligence duty on the exchanges that list their tokens.

The U.S. Treasury Department proposed rules on Monday to implement section 3 of the GENIUS Act, the provision that decides who may issue a payment stablecoin in the United States and when a crypto platform may offer one built by a foreign issuer.

The proposal would add a new part 1523 to the department’s regulations and turns on two dates. From the law’s expected effective date of Jan. 18, 2027, issuing a payment stablecoin in the U.S. is unlawful unless the issuer holds a federal or state license, or, as Treasury reads the law, is a foreign issuer from a country whose stablecoin regime the department deems comparable and that has registered with the Office of the Comptroller of the Currency. From July 18, 2028, digital asset service providers may not offer or sell such a token to a person located in the U.S. unless a licensed U.S. issuer or a qualifying foreign issuer created it.

The Duty Landing on Exchanges

The requirement that bites first, on the effective date, is the foreign-issuer test: a platform cannot list an offshore issuer’s token unless that issuer can and will comply with any lawful order and any reciprocal arrangement under the Act. Treasury said reading that literally would block every such listing. Its fix is that a platform may rely on the issuer’s own representation, but only after “reasonable due diligence” that must at minimum confirm no secondary-trading ban is in force against that issuer, weigh whatever else is reasonably available, and stop where the platform has reason to doubt the issuer’s word.

No Securities Playbook

Treasury declined to model the rule on securities law, arguing that traditional investment rules “may frustrate” what payment stablecoins are built to do. It proposed a conduct test for offshore issuance instead: an issuer outside the U.S. is treated as not having issued here if it reasonably believes its buyers are abroad, keeps controls that, according to the proposal, “must not only be adopted on paper, but actually implemented in the issuer’s operations,” and does no marketing aimed at persons located in the U.S.

Criminal exposure reaches past the issuer. Acting as a market maker for a newly issued unlawful stablecoin, supplying a brand in a white-label deal, or coordinating minting or customer solicitation could each count as participating in an unlawful issuance, which, where the participation is knowing, carries a fine of up to $1 million for each violation, five years in prison, or both.

One softer path did not survive. Treasury weighed a longer runway, illustrated as “36 months,” alongside a carve-out for offshore tokens below a de minimis size it pegged at “less than $1 billion in U.S.-held capitalization,” then set the idea aside because the delayed consumer protection would cost more than the eased transition saved. Circle had urged Treasury to apply identical requirements regardless of issuer type, an argument live since Congress passed the law last year.

The department posed 87 questions and set a 60-day comment window from publication, scheduled for Tuesday. Treasury Secretary Scott Bessent said in the announcement that the department wants to “provide the regulatory certainty businesses need to innovate and grow in America, cement the role of the U.S. dollar as the world’s reserve currency, and keep America the crypto capital of the world.”

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