US Stablecoin Regulation Moves Into the Rulemaking Phase
On October 20, 2026, The Block reported that the Blockchain Association had submitted comments to the US Treasury Department seeking clearer definitions and boundaries in proposed rules implementing Section 3 of the GENIUS Act. The provision concerns who may issue, offer, or sell payment stablecoins in the United States.
The Treasury published its proposed rule on August 17, 2026, and invited public comments. According to the department, the GENIUS Act is expected to take effect on January 18, 2027. The legislation establishes a regulatory framework for payment stablecoins, including issuer licensing and conditions governing the availability of certain foreign-issued stablecoins in US markets.
The Blockchain Association broadly supports a framework intended to make payment stablecoins safer and more trustworthy. However, it argues that some provisions require greater precision. Its central concern is that the final rules should distinguish customer-facing businesses from participants providing underlying technology, validating transactions, or operating self-custody software.
The association's submission represents an industry position, not a final regulatory decision. Its proposed exclusions and liability limitations should not be treated as established exemptions. Businesses must continue to assess their obligations under the law and applicable rules.
Disputes Over DeFi Infrastructure, Trading Activity, and Liability
The Blockchain Association wants the Treasury to clarify the definition of digital asset service providers, or DASPs. It argues that the rules should preserve statutory exclusions for certain underlying infrastructure, including self-custody software and transaction validation. It also opposes automatically treating firms as covered service providers simply because they trade stablecoins using their own assets.
Another issue concerns the standard for "knowing participation" in unlawful stablecoin issuance. The association argues that liability should require actual knowledge and substantial assistance to the issuer's unlawful activity. In its view, ordinary secondary-market trading should not, by itself, amount to participation in illegal issuance.
These questions matter particularly in decentralized finance. In permissionless blockchain environments, users may interact through smart contracts or wallet addresses without knowing the identity, location, or legal status of their counterparties. Requirements that depend on information unavailable to a service provider could create practical difficulties for exchanges, infrastructure operators, and other digital asset businesses.
Nevertheless, whether a particular obligation applies depends on the business model, statutory language, and final regulations. Using decentralized technology does not automatically exempt a business or individual from applicable law.
Foreign-Issuer Due Diligence and Compliance Preparation
The Blockchain Association also called for clearer requirements concerning due diligence on foreign payment stablecoin issuers. It argues that some service providers have no direct relationship with overseas issuers, making open-ended investigations difficult to conduct. The association suggested that providers should be able to rely, where appropriate, on publicly available official regulatory lists.
It also questioned the proposed "reasonably believes" standard for determining whether a counterparty is located in the United States. In permissionless environments, a provider may see only a wallet address and have no reliable way to independently establish the counterparty's location. The association's recommendations seek to align compliance requirements with information that providers can realistically obtain, but the Treasury has not yet adopted them as final rules.
Exchanges, custodians, and stablecoin service providers should map their activities across issuance, sales, trading, custody, and transfers. They should document their relationships with issuers and customers, maintain records of compliance assessments, and monitor subsequent regulatory guidance and effective dates. Policies should not rely solely on proposed industry interpretations.
From a KYT and AML perspective, blockchain analytics can help identify fund flows, address risk, and suspicious transaction patterns. However, transaction monitoring alone cannot resolve legal questions about licensing, service-provider classification, or jurisdiction. A robust compliance framework combines on-chain analysis with customer due diligence, legal review, and ongoing regulatory monitoring, helping businesses support innovation while understanding which activities may trigger specific obligations.