The US Treasury has unveiled a proposal to regulate stablecoin issuers and exchanges through the implementation of the GENIUS Act.. This new guidance aims to ensure that both domestic and international entities meet specific standards before offering digital assets to American users.
The broad jurisdiction of the GENIUS Act
The US Treasury is proposing a significant expansion of its regulatory reach by implementing a rule where a transaction falls under US oversight if either the issuer or the recipient is located within the United States. This "issuer or recipient" approach means that even if a stablecoin company has no physical headquarters in America, its digital assets could be subject to US law if they touch a US-based wallet.
As the US Treasury announced, this move is designed to prevent foreign entities from bypassing domestic standards. To avoid these rules entirely, foreign issuers may be forced to implement strict technical controls that block their stablecoins from ever reaching American users. This creates a high barrier to entry for international firms that wish to remain outside the scope of the GENIUS Act.
Mandatory freeze and burn powers for foreign issuers
Under the new proposal, foreign stablecoin issuers seeking to serve the American market must demonstrate they can comply with US legal orders. Specifically, these companies may be required to prove they have the technical capability to freeze, seize, or burn stablecoins, or otherwise halt their movement when legally mandated by US authorities.
According to the report, the responsibility for verification will not rest solely on the issuers. Crypto exchanges will be required to conduct their own independent checks to ensure that any stablecoin they list is provided by an authorized issuer . This prevents exchanges from simply taking an issuer's word regarding their ability to comply with law enforcement requests. Furthermore,the Treasury may allow foreign companies to operate if their home regulatory regimes are deemed "comparable" to US standards, though the specific criteria for this comparison remain unstated.
The 2028 deadline for exchange delistings
The proposed guidance places significant pressure on crypto exchanges and market makers to audit their current offerings. The report indicates that from 2028, exchanges may be forced to reconsider or delist stablecoins whose issuers do not meet the specific requirements laid out in the GENIUS Act.
This timeline suggests a looming period of restructuring for the digital asset industry. market makers and exchanges could face legal or regulatory complications if they are found to be facilitating the reach of newly created, unauthorized stablecoins to American buyers. The Treasury's focus extends beyond mere listing; it also targets the advertising of stablecoins to Americans and any actions that help customers bypass local restrictions.
Uncertainties regarding self-custody and hardware wallet exemptions
While the proposal is comprehensive, several critical areas remain unverified and subject to change. The Treasury has indicated that certain exemptions may exist for direct transfers between individuals, but the final scope of these exemptions has not been determined.
There is also significant ambiguity regarding how the rules will interact with self-custody software and hardware wallets. While some transactions through these devices may receive limited exemptions, the report notes that none of these requirements are final. The full details of these restrictions are expected to follow once the proposal is officially published in the Federal Register for public comment.
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