- Key insight: Treasury's proposal would apply to entities beyond stablecoin issuers, potentially holding exchanges and other intermediaries responsible for aiding unlawful stablecoin issuance.
- Supporting data: The rule could apply to overseas activity involving U.S. customers and would require platforms to conduct "reasonable due diligence" on foreign stablecoin issuers.
- Forward look: Treasury is seeking comment on offshore safe harbors and an emergency mechanism for suspending the restrictions in unusual circumstances.
The Treasury Department Monday proposed a rule establishing that only authorized issuers that follow standards outlined under the GENIUS Act may issue payment stablecoins for the U.S. market.
The proposal also makes clear that the rules can extend to activity that occurs overseas in instances where U.S. residents buy a stablecoin. The
"President Trump and Congress delivered the GENIUS Act, establishing a landmark framework and clear rules of the road for payment stablecoins, and Treasury is moving quickly to implement that framework," Bessent said.
The notice of proposed rulemaking would establish liability for intermediaries beyond stablecoin issuers themselves, potentially meaning platforms would need to police how and where foreign-issued stablecoins are offered and traded.
Treasury says the proposed rules could extend to entities abroad if stablecoins are marketed to United States persons. The proposal also says intermediaries could participate in an unlawful issuance if they "convert, redeem, or repurchase" the stablecoin, coordinate with an issuer on key steps such as soliciting customers, minting tokens or making a newly issued stablecoin available for secondary-market trading.
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Treasury says the provisions are intended to apply to intermediaries that help distribute an unlawful stablecoin shortly after it is issued. The department says it would expect the rule to cover "a digital asset service provider making an initial listing of an unregistered payment stablecoin shortly after issuance," because such a listing could allow an unauthorized token to be widely distributed at scale. At the same time, Treasury says secondary market trading that does not have a "close temporal nexus to the initial issuance" likely would not trigger this designation.
The proposal also attempts to define when an offshore company is effectively selling a stablecoin to Americans. Directly soliciting U.S. customers or advertising in the United States, or even responding positively to an unsolicited U.S. buyer's inquiry could be enough to be considered an offer or sale under the proposal. The proposal would also consider geographic workarounds, including advising potential purchasers how to evade IP-address checks — used to detect location of a party for enforcement — as one of the "non-exhaustive" examples of actions that could be deemed an offer or sale.
Foreign-issued stablecoins would create a separate compliance burden for U.S. platforms. A digital asset service provider could rely on a foreign issuer's representation that it has the technological capability and will comply with U.S. standards, but that would only protect the provider if the platform conducts "reasonable due diligence regarding the representation."
The Treasury acknowledges within the rulemaking that compliance in this regard could be difficult for platforms.
"A digital asset service provider can never know with certainty whether a foreign payment stablecoin issuer 'will comply' at all times in the future with the terms of any lawful order or any reciprocal arrangement," the proposal said. "Thus, a strict reading of these provisions of the Act would effectively foreclose the offer or sale by digital asset service providers of payment stablecoins issued by foreign payment stablecoin issuers in all cases because it would be impossible for the digital asset service provider to meet these exacting standards."
The proposal would create an offshore safe harbor carve-out to distinguish between authentically foreign activity by foreign firms and activity meant to evade U.S. jurisdictional rules. A provider generally could avoid being treated as selling into the United States if it reasonably believes its customers are outside the country and keeps controls against sale or advertising to Americans.
The department is also considering whether to make that framework more explicit by adopting an approach modeled on the Securities and Exchange Commission's rules for determining when transactions are aimed solely at foreign investors.
Under the proposal, an offshore transaction could fall outside the U.S. rules if there are no "directed selling efforts" in the United States. Treasury asks commenters to weigh in on whether the carveout should be expanded to include certain advertising or platform integrations.
The proposal also raises the possibility that platforms could face technical scrutiny of stablecoins' underlying code, asking commenters for feedback on whether stablecoin providers should be required to "audit or examine smart contracts" linked to a payment stablecoin. They also pose questions as to whether providers should be required to verify the existence and effectiveness of functions designed to comply with legal orders, sometimes called "seize," "freeze," and "burn" functions.
The proposed rule also floats an emergency mechanism that would allow it to suspend the restrictions when "unusual and exigent circumstances exist." The department says it generally expects to provide such limited safe harbors by order, rather than through another full rulemaking.
