Treasury’s GENIUS Act Proposal Sets New Tests for Stablecoin Issuers and U.S. Users

The U.S. Treasury proposed rules Monday that would determine when a payment stablecoin is treated as issued in the United States and when a crypto platform is considered to be offering or selling one to a U.S. person. The proposal turns some of the GENIUS Act’s broad market-access restrictions into operational tests based on where issuers and customers are located, how a token first leaves an issuer, and what controls platforms use around foreign-issued stablecoins.

For issuers and exchanges, those definitions could matter as much as the law’s licensing requirement itself. A token created on a blockchain would not necessarily count as “issued” when it is minted. A foreign issuer could avoid being treated as issuing in the United States if it meets proposed safeguards designed to keep initial recipients outside the country. Digital asset service providers, meanwhile, would get a due-diligence framework for deciding whether certain foreign-issued stablecoins can be made available to U.S. customers.

Treasury’s 87-page notice of proposed rulemaking implements Section 3 of the GENIUS Act, which governs issuance and the offer or sale of payment stablecoins. It does not replace separate rules covering matters such as state regulatory comparability or anti-money-laundering and sanctions programs. Treasury says the Act is expected to take effect on January 18, 2027, while a broader restriction on stablecoin sales by digital asset service providers begins July 18, 2028.

The proposal makes the first transfer, not minting, the key issuance event

Treasury proposes to define “issue” as the first transfer of a payment stablecoin by the issuer, directly or indirectly, that gives another person the right to use, transfer, convert, redeem or have the token repurchased. Crediting a customer account can qualify. By contrast, minting tokens and holding them in the issuer’s own treasury would not yet count as issuance because no third party has received rights in them.

That distinction gives issuers a clearer point at which the Section 3 licensing restriction attaches. It also prevents an issuer from avoiding the rule simply by delaying when a holder can move or redeem a token. Treasury’s definition covers a first transfer that “results or will result” in another person gaining the relevant rights, so a lockup period would not necessarily postpone the issuance event.

The next question is where that issuance occurs. Under the proposal, a payment stablecoin would be considered issued in the United States if the issuer is located in the United States or if the token is issued to a person located in the United States. For a business entity, being organized or incorporated under U.S. or state law, or having its principal place of business in the United States, would satisfy the location test.

For individuals, Treasury proposes a more physical test. A person would generally be located in the United States when physically present here, except for a nonresident whose presence is merely temporary. The proposal would also exclude a U.S. resident who is temporarily abroad from being treated as located in the United States for this purpose. Treasury uses the example of a U.S. resident traveling overseas, where stablecoins may be used for ordinary local transactions, to explain why citizenship or residency alone should not decide the issue.

Foreign issuers would receive an important protection against accidental U.S. issuance. A foreign issuer that is not itself located in the United States would not be treated as issuing here solely because a token inadvertently reaches a U.S.-located person if the issuer reasonably believes each initial recipient is outside the United States, maintains and updates policies and controls designed to prevent issuance to U.S.-located people, and does not target them with advertising or solicitation. That gives foreign issuers a compliance path based on reasonable controls rather than an absolute guarantee that no initial recipient is ever in the country.

The proposal also shows how the first-transfer rule could apply to distributions that do not look like a conventional sale. Treasury’s proposed interpretations say an airdrop to a person located in the United States can constitute issuance if it is the issuer’s first transfer and gives the recipient rights to use, transfer or redeem the token. Treasury has not, however, settled the separate question of whether an airdrop should also count as an “offer” for purposes of the platform restrictions. It specifically asks for public comment on that point.

Crypto platforms would take on a gatekeeping role for foreign stablecoins

The most immediate user-facing changes may come through exchanges and other digital asset service providers. From the Act’s expected January 18, 2027 effective date, such providers generally would not be allowed to offer, sell or otherwise make a foreign-issued payment stablecoin available in the United States unless the foreign issuer has the technological capability to comply with lawful orders and will comply with those orders and applicable reciprocal arrangements.

Treasury acknowledges a practical problem: a platform cannot know with certainty that a foreign issuer will comply with every future lawful order. The proposed solution is a reliance framework. A digital asset service provider could rely on the foreign issuer’s representation that it has the necessary capability and will comply, but only after conducting reasonable due diligence. At a minimum, Treasury says the platform should confirm that no Section 8 prohibition on secondary trading is in force against that issuer and should consider other reasonably available information. Reliance would not be allowed when the platform knows, has reason to know, or should know that the representation is false.

That approach would shift part of the compliance burden into listing and access decisions. A U.S.-facing platform that wants to support a foreign-issued stablecoin would need a defensible basis for believing the issuer satisfies the lawful-order requirements. The proposed rule does not prescribe one universal technical checklist for that review, and Treasury is asking for comments on how much evidence should be required. The core obligation, though, would no longer be satisfied by simply treating a token as available because it trades elsewhere.

Treasury also proposes a broad, non-exhaustive set of examples for what counts as offering or selling a stablecoin to someone located in the United States. Direct solicitation would qualify, as would advertising a token as available to U.S.-located buyers. A provider could also be treated as making an offer by responding to an unsolicited inquiry from a U.S.-located person and indicating a willingness to sell. Advising prospective buyers how to evade location-detection or restriction mechanisms, such as IP-address checks, is another example Treasury says would fall within the prohibition.

Starting July 18, 2028, the gate becomes wider. Digital asset service providers generally could not offer or sell any payment stablecoin to a person located in the United States unless it was issued by a permitted payment stablecoin issuer or by a qualifying foreign issuer that meets the Act’s Section 18 criteria. That later deadline means platforms have two related compliance questions to solve: whether foreign stablecoins can be made available under the lawful-order rules, and whether the issuer itself has the status required for continued U.S. access once the broader 2028 restriction applies.

Self-custody and direct transfers remain outside the Section 3 restrictions

The proposal does not turn every stablecoin transaction involving an American into a regulated platform sale. Treasury would carry forward three statutory exemptions. Section 3 would not apply to a direct transfer of digital assets between two individuals acting on their own behalf for lawful purposes without an intermediary. It also would not apply to certain transfers between an individual’s U.S. and foreign accounts when both accounts are offered by the same parent company, or to transactions made through software or hardware wallets that facilitate an individual’s own custody of digital assets.

For users, the more visible effect is therefore likely to be what centralized services choose to list, sell or make accessible. A platform that cannot establish the required basis for a foreign issuer’s compliance may have reason to restrict access for U.S.-located customers. Treasury itself identifies reduced product choice and switching costs as possible costs of implementing the regime, while arguing that the rule would also advance the consumer-protection, financial-stability and regulatory objectives Congress set out in the Act.

The location definition may create some unusual edge cases. A U.S. resident who is temporarily abroad would not be treated as located in the United States under the proposed rule, while a foreign resident who is only temporarily visiting the United States would also be carved out. Treasury says it chose that approach partly to avoid penalizing ordinary travel, but it is seeking comments on whether the test is too broad, too narrow or operationally difficult for issuers and platforms.

Companies pursuing a license may have limited transitional relief. The proposal allows an applicant to receive a waiver from its primary regulator for up to 12 months after the Act’s effective date while an application is pending. Treasury is asking whether additional safe harbors, including possible de minimis approaches, should be created, but those broader ideas are questions for commenters rather than protections already contained in the proposed rule.

The proposal remains subject to notice and comment. The Federal Register public-inspection notice lists the rule for publication on August 18, 2026, and Treasury says comments will be due within 60 days of publication. The final rule could change the tests now proposed, including the treatment of location controls, foreign-issuer diligence, airdrops and any additional safe harbors.