The U.S. Treasury Department has released the first comprehensive federal framework for regulating stablecoins, proposing detailed rules that define what it means to issue, offer, or sell payment stablecoins in the United States. The Notice of Proposed Rulemaking (NPRM), published on August 18, 2026, implements section 3 of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which Congress enacted in July 2025. The proposal opens a 60-day public comment period and marks a critical step toward regulatory clarity for the stablecoin industry.

What Does the GENIUS Act Actually Require?

The GENIUS Act establishes a federal licensing framework for stablecoin issuers and digital asset service providers. Beginning January 18, 2027, it will be unlawful to issue a payment stablecoin in the United States without an appropriate federal or state license. A second prohibition, effective July 18, 2028, bars digital asset service providers from offering or selling stablecoins to U.S. persons unless a licensed issuer created them. These timelines give the industry roughly six months and two years, respectively, to comply with the new rules.

The Treasury's proposal addresses a fundamental gap in the statute: the GENIUS Act never defined key terms like "issue," "issuer," or what it means to be "located in the United States." Without these definitions, businesses couldn't know whether their activities triggered the law's requirements. The Treasury is now filling that gap with specific, workable language.

How Does Treasury Define Stablecoin Issuance and Issuers?

• Issuance Definition: Treasury defines "issue" as the first transfer of a stablecoin by its issuer that results, or will result, in another person having the right to use, transfer, or redeem it. This captures indirect transfers and applies even if redemption rights are delayed. A reissuance after redemption counts as a new issuance.
• Issuer Definition: An "issuer" is the person obligated to redeem the stablecoin for a fixed monetary value and who represents that it will hold a stable value. This focus on the redemption promise is critical for clarifying obligations in arrangements such as white-label products, where multiple parties are involved.
• Location Test for Individuals: For an individual, the test turns on physical presence. A person is located in the U.S. if physically present, unless the person is not a U.S. resident and the presence is "merely temporary." A U.S. resident traveling abroad temporarily would not be considered located in the U.S. .
• Location Test for Businesses: For a business, the proposed rule treats the entity as located in the U.S. if it is organized under U.S. or state law, or if it has its principal place of business in the country.

These definitions matter because they determine whether an issuer or service provider falls under U.S. jurisdiction. A foreign stablecoin issuer that never intends to serve U.S. customers operates under different rules than one that does.

What Safe Harbors Does Treasury Offer Foreign Participants?

Recognizing that global stablecoin markets don't respect borders, Treasury proposed safe harbors to help foreign issuers and service providers avoid inadvertently violating the Act. A foreign issuer would be treated as not having issued a stablecoin in the U.S. if it meets four conditions: it is not located in the U.S., reasonably believes the recipient is not located in the U.S., has adopted policies to avoid issuing to persons in the U.S., and does not advertise in a way that targets U.S. persons.

A similar safe harbor covers digital asset service providers. The rules allow a provider to rely on a foreign issuer's representation that it complies with the Act, such as its technical ability to follow lawful orders, if the provider conducts reasonable due diligence. Treasury expects that diligence to include confirming no prohibition on secondary trading under section 8 of the Act is in effect for the issuer. However, a provider cannot rely on a representation it knows, or should know, is false.

Treasury also noted it is weighing alternative approaches, including one modeled more closely on Regulation S under the Securities Act, and is seeking comment on which would be more workable. This signals openness to industry feedback on how to structure the rules in a way that balances consumer protection with practical compliance.

"Treasury welcomes input from stakeholders as we work to provide the regulatory certainty businesses need to innovate and grow in America," said Scott Bessent, Treasury Secretary.

Scott Bessent, Treasury Secretary

The 60-day comment period, which runs from the Federal Register publication date, gives stablecoin issuers, exchanges, payment processors, and other market participants time to weigh in on whether these definitions work in practice. Comments will be submitted through the federal eRulemaking portal.

The Treasury's proposal represents the first time the federal government has attempted to define the boundaries of stablecoin regulation at the national level. As USDC, USDT, and other payment stablecoins continue to grow in adoption across decentralized finance (DeFi) platforms and payment networks, having clear rules about who can issue them and how they can be sold will shape the competitive landscape for years to come. The framework aims to balance innovation with financial stability and consumer protection, though the real test will come when issuers and service providers begin implementing these rules in early 2027.