Introduction
On August 17, the U.S. Department of the Treasury issued a notice of proposed rulemaking (the “NPR”)[1] to implement provisions in Section 3 of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”) that prohibit the unlawful issuance, offer and sale of payment stablecoins.[2] In the NPR, the Treasury Department is proposing to clarify the circumstances in which these prohibitions will apply, including by proposing to define key terms not defined in the GENIUS Act, such as “issue,” “issuer” and “located in the United States.” By defining these terms and delineating the scope of the prohibitions, the proposed rule would also clarify the conditions for the lawful issuance, offer and sale of payment stablecoins under the regulatory framework established by the GENIUS Act.
Summary
Section 3 of the GENIUS Act
Section 3 of the GENIUS Act sets forth several restrictions related to the issuance, offer and sale of payment stablecoins in the United States and requires the Treasury Department to issue regulations to implement Section 3, including to define key terms. As a general matter, Section 3 provides that it is (1) as of the effective date of the GENIUS Act,[3] “unlawful for any person other than a permitted payment stablecoin issuer [(“PPSI”)] to issue a payment stablecoin in the United States,”[4] (2) as of July 18, 2028 (i.e., three years after the enactment of the GENIUS Act), “unlawful for a digital asset service provider [(“DASP”)] to offer or sell a payment stablecoin to a person in the United States, unless the payment stablecoin is issued by a [PPSI],”[5] and (3) as of the effective date of the GENIUS Act, “unlawful for any [DASP] to offer, sell, or otherwise make available in the United States a payment stablecoin issued by a foreign payment stablecoin issuer [(“FPSI”)] unless the [FPSI] has the technological capability to comply, and will comply, with the terms of any lawful order and any reciprocal arrangement pursuant to” Section 18 of the GENIUS Act.[6] The prohibition on issuance does not apply to the extent that the Treasury Secretary issues regulations providing safe harbors.[7]
The Treasury Department is proposing to confirm that the prohibition on issuance would not be applicable to an FPSI that meets the criteria set forth in Section 18(a):[8] the FPSI must be subject to regulation and supervision by a foreign payment stablecoin regulator that the Treasury Secretary determines, upon the recommendation of each other member of the Stablecoin Certification Review Committee, has a payment stablecoin regulatory and supervisory regime “comparable” to the regime applicable to PPSIs;[9] the FPSI must be registered with the OCC;[10] the FPSI must hold reserves in a U.S. financial institution sufficient to meet liquidity demands of U.S. customers, except as otherwise permitted under a reciprocal agreement entered into by the Treasury Secretary;[11] and the foreign country in which the FPSI is domiciled and regulated must not be subject to comprehensive U.S. sanctions or designated as a jurisdiction of primary money laundering concern.[12]
Consistent with the text of the GENIUS Act, the Treasury Department is also proposing to confirm that, as of the effective date of the Act, it generally would be unlawful for a DASP “to offer or sell to a person located in the United States, or otherwise offer, sell, or make available in the United States, a payment stablecoin issued by an [FPSI] unless the [FPSI] has the technological capability to comply with, and will comply, with the terms of any lawful order and any reciprocal arrangement pursuant to Section 18,”[13] and that, beginning on July 18, 2028, it generally would be unlawful for a DASP “to offer or sell a payment stablecoin to a person located in the United States unless the payment stablecoin is” issued by a PPSI, or by an FPSI that meets the criteria set forth in Section 18(a).[14]
Issuance of Payment Stablecoins
To implement the prohibition on the unlawful issuance of payment stablecoins in the United States, the Treasury Department proposes to define several terms that are relevant to the prohibition but which the GENIUS Act does not define, including “issue” and “issuer,” and to describe when a person will be considered to have “issued a payment stablecoin in the United States.”
- Issue. The proposed rule would define “issue” to mean “the first transfer of a payment stablecoin by the issuer, except as required by a lawful order, whether directly or indirectly, including by crediting an account, that results or will result in a person other than the issuer having the right to use or transfer the payment stablecoin or to have the payment stablecoin converted, redeemed, or repurchased.”[15] The definition would also clarify that reissuance of a payment stablecoin could constitute issuance for purposes of the regulatory framework. The Treasury Department explains that its proposed definition of issuance would not apply to a payment stablecoin that has been minted but not yet transferred to a third party, consistent with the treatment proposed by the OCC for payment stablecoins held in an issuer’s treasury.[16] The Treasury Department also notes that the definition is consistent with existing definitions of “issue” for other financial instruments, including for negotiable instruments under Article 3 of the Uniform Commercial Code, and would apply regardless of whether the first transfer from the issuer to another person is effected by the issuer itself or through an intermediary, whether the payment stablecoin remains in the issuer’s wallet (e.g., to be held in custody for the benefit of the other person), or whether the issuer’s obligation to redeem the payment stablecoin from the other person does not mature until some time after the transfer occurs (e.g., due to a “lockout” period).[17]
- Issuer. The proposed rule would define “issuer” as a person that “(i) is obligated to convert, redeem, or repurchase the payment stablecoin for a fixed amount of monetary value, and (ii) represents that the person will maintain, or creates the reasonable expectation that the person will maintain, a stable value relative to the value of a fixed amount of monetary value.”[18] This definition substantially mirrors the statute’s definition of “payment stablecoin.” The NPR notes that persons that participate in issuing payment stablecoins but that do not carry out the statutory functions of the issuer, such as persons who perform technical functions or provide branding in white-label arrangements, are not “issuers” but “may still be subject to criminal penalties if they knowingly participate in an unlawful issuance.”[19]
- Issuance in the United States. The proposed rule would consider a person to have issued a payment stablecoin in the United States if, at the time of issuance, the “person is located in the United States” or the “person issues the payment stablecoin to a person located in the United States.”[20] However, the proposal would provide an exception, under which a person would not be deemed to issue payment stablecoins in the United States if: (1) the person is not located in the United States; (2) the person reasonably believes that each person to whom the payment stablecoin is issued is not located in the United States; (3) the person has adopted and implemented policies, procedures and controls reasonably designed to avoid issuing the payment stablecoin to any person located in the United States; and (4) the person does not engage in advertising or solicitation activities that target, or could be reasonably expected to have the effect of targeting, any person located in the United States.[21]
Although these definitions would apply as a formal matter only to payment stablecoins, as defined in the GENIUS Act, the definitions may inform how regulators view similar activities in the context of other types of digital assets.
Offers and Sales of Payment Stablecoins
The proposed rule would generally codify the GENIUS Act’s prohibitions on unlawful offers and sales by DASPs of payment stablecoins (i.e., the offer or sale of payment stablecoins issued by persons other than either PPSIs or FPSIs that satisfy the GENIUS Act’s requirements).[22] The proposal would also clarify these prohibitions by including a non-exhaustive list of examples of what would constitute offers or sales of payment stablecoins to a person in the United States. For instance, the proposal would clarify that directly soliciting persons in the United States or advertising payment stablecoins as available for purchase in the United States would constitute an “offer” of payment stablecoins in the United States.[23]
Geographic Scope of the Proposed Prohibitions
As discussed above, under the proposed rule, a person would be deemed to have issued a payment stablecoin in the United States if the person issuing payment stablecoins, or the person to whom the payment stablecoin is issued, is “located in the United States.”[24] Similarly, the NPR’s prohibition on the unlawful offer or sale of payment stablecoins by a DASP would apply to an offer or sale to a person “located in the United States.”[25]
The NPR would include one definition of “located in the United States” for individuals and another definition for entities. An individual would be “located in the United States” if the individual is physically present in the United States, unless the individual is not a resident of the United States and their physical presence in the United States is “merely temporary.”[26] This definition would exclude both non-U.S. residents who are temporarily in the United States and U.S. residents who are abroad. An entity[27] would be viewed as “located in the United States” if the entity (1) is organized or incorporated under the laws of the United States or a U.S. state[28] or (2) has its principal place of business in the United States.[29]
The Treasury Department notes that the proposed approach to defining the scope of the GENIUS Act’s prohibitions, including their extraterritorial effect, differs in some ways from that of Regulation S, the rule issued by the Securities and Exchange Commission that implements a safe harbor from the registration requirements of Section 5 of the Securities Act of 1933 for qualifying offers and sales of securities that are deemed to occur outside of the United States.[30] The NPR indicates that the Treasury Department is contemplating whether to more closely align its proposed rule with Regulation S, while also noting that this approach “need not import Regulation S wholesale.”[31]
The Treasury Department requests comments on all aspects of the NPR, including on 87 specific questions. Comments on the NPR are due on October 19, 2026.
[1] Treasury Department, GENIUS Act Regulations on Payment Stablecoin Issuance, Offer, and Sale, 91 Fed. Reg. 53368 (Aug. 18, 2026). The NPR follows an advance notice of proposed rulemaking published in 2025. Treasury Department, GENIUS Act Implementation, 90 Fed. Reg. 45159 (Sept. 19, 2025).
[2] GENIUS Act, Pub. L. No. 119-27, 139 Stat. 419 (2025) (codified at 12 U.S.C. §§ 5901–5916).
[3] The NPR states: “The effective date of the GENIUS Act is expected to be January 18, 2027 (i.e., the date that is 18 months after the date of enactment of the GENIUS Act).” NPR at 53369 n.10. This statement appears to reflect an acknowledgement that the potentially more accelerated effective date provided for by statute (i.e., 120 days after the date on which the primary federal payment stablecoin regulators issue any final regulations implementing the GENIUS Act) is infeasible as a practical matter in light of the significant rulemaking activity that still needs to be completed. See 12 U.S.C. § 5901 note.
[6] Id. § 5902(b)(2). None of these prohibitions apply to certain transactions that are expressly excluded by the GENIUS Act (e.g., non-intermediated transfers). Id. § 5902(h)(1).
[8] NPR at 53376 (“Treasury believes that the best reading of the Act, considered as a whole, is that [FPSIs] that meet the criteria set out in section 18(a) of the Act may issue payment stablecoins in the United States.”) (citation omitted); see 12 U.S.C. § 5916(a).
[9] 12 U.S.C. § 5916(a)(1), (b). The other members of the Stablecoin Certification Review Committee are the Chair of the Board of Governors of the Federal Reserve System (or the Vice Chair for Supervision, as delegated by the Chair) and the Chair of the Federal Deposit Insurance Corporation. Id. § 5901(27).
[10] Id. § 5916(a)(2). In so doing, the FPSI must become subject to reporting, supervision and examination by the OCC and consent to U.S. jurisdiction with respect to enforcement of the statute. Id. § 5916(c).
[11] Id. § 5916(a)(3). The Treasury Secretary may create and implement reciprocal arrangements or other bilateral agreements between the United States and jurisdictions with payment stablecoin regulatory regimes that are “comparable” to the requirements established under the statute. Id. § 5916(d).
[12] 12 U.S.C. § 5916(a)(4).
[13] NPR at 53390, Proposed § 1523.3(b). The NPR states that the Treasury Department does not view the terms “offer,” “sell” and “make available” as “mutually exclusive” and that they “may significantly overlap.” Id. at 53380.
[14] Id., Proposed § 1523.3(a). The NPR clarifies that an FPSI that meets the criteria set forth in Section 18(a) would remain obligated to comply with lawful orders and reciprocal arrangements. Id. at 53381 (“Treasury believes that sections 18(a) and 3(b), when read together, relieve [FPSIs] meeting the criteria of section 18(a) of the Act from the general prohibition on offers and sales of their payment stablecoins, while retaining the obligations to comply with lawful orders and reciprocal arrangements.”) (citation omitted).
[15] Id. at 53389, Proposed § 1523.1(c) (“Issue”).
[17] NPR at 53372, 53391, Proposed Appendix A to Part 1523.
[18] Id. at 53389, Proposed § 1523.1(c) (“Issuer”).
[20] Id. at 53389, Proposed § 1523.2(b).
[21] Id. at 53389–90, Proposed § 1523.2(c).
[22] Id. at 53390, Proposed § 1523.3(a)–(b). The proposed rule would define DASP based on the GENIUS Act’s definition and clarify that a “person that, for compensation or profit, engages in the business in the United States of issuing payment stablecoins” is a DASP. Id. at 53389, Proposed § 1523.1(c) (“Digital asset service provider”); see 12 U.S.C. § 5901(7).
[23] NPR at 53390, Proposed § 1523.3(d).
[24] Id. at 53389, Proposed § 1523.2(b).
[25] Id. at 53390, Proposed § 1523.3(a).
[26] Id. at 53389, Proposed § 1523.1(c) (“Located in the United States”).
[27] For purposes of the NPR, entities include partnerships, companies, corporations, associations, trusts, estates, cooperative organizations and other business entities. Id.
[28] For this purpose, a state would include, as provided in the GENIUS Act, each of the several states of the United States, the District of Columbia and each territory of the United States. Id. at 53389, Proposed § 1523.1(c) (“State”); see 12 U.S.C. § 5901(28).
[29] NPR at 53389, Proposed § 1523.1(c) (“Located in the United States”).
[31] NPR at 53380, 53385.