The U.S. Department of Treasury published a notice of proposed rulemaking in August 2026 that would reshape how payment stablecoins operate across American financial markets. The proposal implements Section 3 of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, enacted in July 2025. At stake is whether digital assets like Tether’s USDT can continue serving U.S. businesses and retail customers through domestic exchanges and custodial platforms. The regulatory framework draws a sharp line between domestically licensed stablecoin issuers and foreign-issued alternatives, with significant consequences for USDT. Any business evaluating stablecoin infrastructure needs to understand what this rule changes, when compliance deadlines arrive, and how prohibited offerings are defined under the new statute. For companies building payment rails around stable assets, the genius act treasury proposed rule august NPRM establishes guardrails that determine which tokens remain listable on U.S. trading venues and which face mandatory delisting.
What the Proposed Rule Covers
Treasury’s NPRM proposes adding Part 1523 to Subchapter C of Chapter XV in Title 12 of the Code of Federal Regulations. This new regulatory section defines key terms and codifies the prohibitions set out in the GENIUS Act regarding who may issue, offer, sell, or make available payment stablecoins within U.S. jurisdiction. The proposed rule carries extraterritorial effect whenever conduct involves offering or selling a payment stablecoin to a person located in the United States.
A payment stablecoin is a digital asset designed to function as a means of payment or settlement, where the issuer commits to maintaining a stable value relative to a fixed monetary amount, typically the U.S. dollar. The proposed rule treats the issuing entity as obligated to convert, redeem, or repurchase the token at par value upon request. These definitions directly impact whether widely circulated tokens like USDT fall within the regulated category.
The scope extends beyond issuance to cover the entire distribution chain. Digital asset service providers — including exchanges, custodians, transfer agents, and platforms engaged in financial services related to digital asset issuance — face separate restrictions on what they can offer or sell to U.S. persons. Both the issuer and every intermediary handling the token bear compliance responsibility.
Key Definitions That Determine Compliance
Treasury’s proposal introduces precise definitions that determine when a stablecoin transaction triggers regulatory prohibitions. Understanding these terms is essential for any business processing stablecoin payments or listing tokens on a trading platform.
Issue — A person issues a payment stablecoin in the United States if, at the time of issuance, either the issuer is located in the United States or the recipient is located in the United States. Issuance includes the first transfer giving a non-issuer party the right to redeem the token. Minting and airdropping tokens to U.S. residents counts as issuance.
Located in the United States — For individuals, this means physical presence within U.S. borders. For entities, it means being organized or incorporated under U.S. or state law, or having principal place of business in the United States. A U.S. resident vacationing abroad is not considered located in the United States at that moment, though solicitation while physically in the U.S. still triggers obligations.
Digital Asset Service Provider — This encompasses any person engaged in the business of exchanging digital assets for monetary value or other digital assets, transferring digital assets to third parties, acting as custodian, or participating in financial services tied to digital asset issuance — all conducted in the United States or on behalf of customers located there.
These definitions close potential loopholes that issuers might exploit through geographic arbitrage or structural separation between issuance and distribution functions.
Prohibitions on Stablecoin Issuance
Section 3(a) of the GENIUS Act makes it unlawful for anyone other than a permitted payment stablecoin issuer to issue a payment stablecoin in the United States. Permitted issuers are entities holding appropriate federal or state licenses authorizing them to issue payment stablecoins. Foreign payment stablecoin issuers may also qualify if they register with the Office of the Comptroller of the Currency under Section 18 of the Act.
Criminal Penalties for Violations
Violations carry criminal penalties. Knowing participation in an unlawful issuance constitutes a crime punishable by fines up to $1 million per violation and imprisonment of up to five years, or both. The proposed rule identifies activities that could constitute participation, including acting as a market maker for newly issued payment stablecoins or coordinating with the issuer to facilitate critical steps in the issuance process.
No foreign issuer has received an OCC determination as of the NPRM publication date.
Restrictions on Offering and Selling Stablecoins
The offer-and-sale restrictions apply to digital asset service providers and split into two distinct timelines with different substantive requirements.
| Provision | Effective Date | Requirement | Applies To |
|---|---|---|---|
| Section 3(b)(1) | July 18, 2028 | DASP may not offer or sell any payment stablecoin to a U.S. person unless issued by a permitted or qualifying foreign issuer | All payment stablecoins |
| Section 3(b)(2) | January 18, 2027 (expected) | DASP may not offer, sell, or make available stablecoins from foreign issuers lacking technological capability to comply with lawful orders | Only foreign-issued stablecoins |
The second provision applies sooner but targets specifically foreign-issued payment stablecoins. It requires that the foreign issuer possess the technological capacity to comply with lawful orders and participate in reciprocal enforcement arrangements between the U.S. and the issuer’s home jurisdiction. This places the burden on U.S. exchanges and custodians to verify whether tokens like USDT satisfy these conditions before continuing to list or distribute them.
The proposed rule enumerates activities constituting offers or sales of payment stablecoins to U.S. persons. Directly soliciting a U.S. resident, advertising a stablecoin as purchasable by Americans, and advising buyers on how to circumvent location-detection mechanisms all qualify. Certain activities are explicitly deemed not to constitute offers or sales, providing clarity for cross-border operations.
Impact on USDT and Foreign-Issued Stablecoins
Tether operates as a foreign payment stablecoin issuer without OCC registration under the GENIUS Act framework. Under the proposed rule, U.S. digital asset service providers cannot list or distribute USDT starting from the GENIUS Act’s effective date unless Tether demonstrates the technological capability to comply with U.S. lawful orders and establishes a reciprocal enforcement arrangement with the United States. No foreign jurisdiction has yet received a comparability determination enabling its issuers to register under Section 18.
This creates a binary outcome for USDT: either Tether registers with the OCC and satisfies compliance requirements, or U.S. exchanges must delist the token from platforms serving American customers. The rule does not name specific stablecoins, but the practical effect targets tokens issued outside U.S. jurisdiction.
Businesses relying on USDT for payments, treasury management, or settlement face disruption risk. Platforms need to evaluate whether their current stablecoin inventory complies with incoming requirements and prepare contingency plans for tokens that may become unavailable to U.S. users. The July 2028 deadline for broader restrictions adds further pressure, eliminating any remaining pathway for distributing unlicensed stablecoins through domestic channels.
Compliance Timeline and Action Items
Stakeholders have approximately 60 days from Federal Register publication to submit comments on the proposed rule.
| Milestone | Date | Action Required |
|---|---|---|
| Comment period closes | October 19, 2026 | Submit public comments via regulations.gov |
| GENIUS Act effective date | January 18, 2027 (expected) | Foreign issuer compliance check begins |
| Full offer-and-sale prohibition | July 18, 2028 | All unlicensed stablecoins removed from U.S. markets |
U.S. businesses holding or accepting USDT should begin assessing exposure immediately. Exchange operators need to audit their token listings against the proposed definitions of issuance, offer, sale, and location. Custodial platforms should evaluate whether their foreign-issued stablecoin holdings meet the lawful-order compliance standard. Companies integrating stablecoin payments into treasury operations should identify fallback options using domestically licensed issuers.
Final rules may differ from the current proposal, but the direction is clear: the U.S. stablecoin market is moving toward a licensing-based system that privileges domestically regulated issuers and restricts foreign competition absent enforceable cross-border cooperation frameworks.