The Blockchain Association has submitted a 26-page comment letter urging the U.S. Treasury to clarify how its proposed GENIUS Act rules would apply to decentralized finance, stablecoin trading platforms and foreign-issued payment tokens.
Summary
- Blockchain Association filed a 26-page response seeking clearer Treasury rules for stablecoin intermediaries and decentralized infrastructure.
- The group wants ordinary secondary-market trading excluded from liability for knowingly participating in unlawful stablecoin issuance.
- Foreign stablecoin checks should rely on official regulatory records instead of extensive investigations, the association argues.
- Permissionless protocols should not face new wallet identification obligations when counterparties’ locations cannot reasonably be determined.
- Treasury’s October 19 consultation deadline has passed, while the proposed rules remain subject to review before adoption.
According to the industry’s October 19 submission, the group supports Treasury’s plan to regulate payment stablecoin issuance but wants clearer definitions of digital asset service providers and limits on liability for unlawful issuance. The letter questions whether some compliance requirements could extend to businesses and blockchain participants that do not directly deal with stablecoin issuers or customers.
Treasury’s proposal implements Section 3 of the GENIUS Act, which governs who may issue, offer or sell payment stablecoins in the United States. The agency sought public comments through October 19, ahead of the law’s expected effective date in January 2027.
The Blockchain Association said it wants the final regulations to follow Congress’s statutory language while maintaining safeguards for stablecoin holders. Its objections focus on how the proposal treats routine transactions, software infrastructure and counterparties whose identities may not be available on public blockchains.
DeFi developers seek clearer limits on service provider rules
The Blockchain Association wants Treasury to clarify which businesses qualify as digital asset service providers, or DASPs, under the stablecoin law.
The statutory definition generally covers businesses that exchange digital assets, transfer them for customers, provide custody or participate in services related to issuance. However, the GENIUS Act excludes certain underlying blockchain protocols, self-custody software and participants whose activities are limited to validation or specified peer-to-peer liquidity functions.
In its letter, the group argues that Treasury should preserve the distinction between customer-facing businesses and firms operating their own assets. It warns that proprietary traders or companies managing their own stablecoin inventory could otherwise face requirements intended for intermediaries serving customers.
The association points to decentralized exchanges and other permissionless systems, where users may interact through software without handing control of their assets to a central operator. Its position is that operating or developing the underlying infrastructure should not automatically place a person within the service provider definition.
Treasury’s August proposed rule already recognizes statutory exemptions for certain direct transfers between individuals and transactions using self-custody wallets. The disagreement concerns how those exclusions should apply when businesses interact with decentralized protocols or provide supporting technical services.
Earlier, crypto.news covered Treasury’s proposed stablecoin restrictions, including the separate requirements for issuers and platforms making payment stablecoins available to U.S. customers. Treasury’s August notice addresses issuance, offers and sales under Section 3 rather than every regulatory obligation associated with stablecoin activity.
The association supports a narrow reading of the service provider definition and argues that clearer regulatory language would help distinguish ordinary blockchain infrastructure from entities distributing stablecoins commercially. The letter does not ask Treasury to exempt businesses merely because they describe their services as decentralized.
Blockchain Association challenges unlawful issuance liability standard
Another concern involves the circumstances under which a third party could face liability for knowingly participating in unlawful stablecoin issuance.
Section 3 of the GENIUS Act prohibits unauthorized issuance in the United States and provides criminal penalties for knowing participation in a violation. The statute permits fines of up to $1 million per violation, imprisonment for up to five years, or both.
The association wants Treasury to make clear that liability requires actual knowledge of the relevant unlawful issuance and affirmative, substantial assistance coordinated with the issuer. It argues that simply trading a stablecoin or providing liquidity should not establish participation in its original issuance.
The letter describes several different market activities to illustrate the distinction. A firm buying and selling stablecoins on an exchange for its own account would occupy a different position from a company paid by an issuer to distribute newly created tokens to purchasers.
A market maker could have direct access to minting and redemption facilities without agreeing to distribute stablecoins for an issuer. The association argues that this relationship, standing alone, should not create criminal exposure when the market maker is managing inventory through ordinary transactions.
Its proposed clarification would address the significance of coordination with an issuer, not simply when a stablecoin was minted or how quickly it changed hands. The group specifically opposes treating a token’s age or a transaction’s proximity to issuance as sufficient evidence of knowing participation.
Treasury’s proposal discusses substantial assistance in connection with potentially unlawful issuance, but the association wants that limitation made explicit in the final regulatory text. It recommends a safe harbor for independent secondary-market activity where no issuer-directed distribution obligation or knowing assistance exists.
The association raises a separate timing concern because different Section 3 restrictions become operative on different dates. It argues that Treasury should not use its interpretation of knowing participation to impose the general service-provider distribution restrictions before Congress’s July 2028 deadline.
Foreign stablecoin issuers face questions over platform checks
Foreign-issued payment stablecoins present another area where the Blockchain Association is seeking changes.
Treasury’s proposal would restrict service providers from offering certain foreign stablecoins to U.S. customers unless applicable statutory conditions are satisfied. Those conditions include obligations relating to lawful orders and, for qualifying foreign issuers using the statutory pathway, oversight arrangements and registration requirements.
The group argues that exchanges and custodians may not have enough information to independently investigate every foreign issuer’s systems. Some platforms have no contractual relationship with the companies whose tokens they list, leaving them unable to obtain detailed technical assurances.
The association therefore recommends that service providers be allowed to rely on publicly available records maintained by Treasury and the Office of the Comptroller of the Currency. It wants those official records to provide an administrable way to determine whether a foreign issuer meets the relevant regulatory conditions.
The submission challenges an open-ended due diligence standard that could require platforms to independently assess a foreign issuer’s technical ability to comply with lawful orders. Under its preferred approach, a platform’s reliance on official records would remain subject to exceptions when it actually knows the issuer cannot or will not comply.
The unresolved treatment of foreign issuers has already drawn attention from stablecoin market participants. An August review of implementation delays examined the foreign-issuer pathway and Treasury’s role in determining whether another jurisdiction’s oversight is comparable to the U.S. framework.
Separate reporting on foreign stablecoin access examined how the law’s requirements could affect the availability of USDT through U.S. service providers. Those questions depend on the final rules and applicable compliance dates, not an immediate prohibition imposed by the October comment letter.
Treasury’s original proposal establishes that qualifying foreign issuers may use a statutory exception involving a comparable regulatory regime and OCC registration. The association’s request concerns how downstream platforms can establish compliance when they do not control the issuer or its technology.
Permissionless wallets complicate proposed U.S. location checks
The Blockchain Association is also challenging Treasury’s proposed standard for determining whether a stablecoin recipient is located inside the United States.
The draft uses a “reasonably believes” test in certain circumstances involving foreign issuers and digital asset service providers. Treasury discusses customer information, geographic restrictions, device-location checks and transaction monitoring as possible ways to support that assessment.
According to the association, those tools may be unavailable when a participant interacts only with a public wallet address. Blockchain transactions do not necessarily disclose the wallet owner’s legal identity, residence or physical location.
The group recommends using actual knowledge and information reasonably obtained through ordinary business operations. It argues that participants should not have to create new identification or geolocation systems solely because an unidentified wallet can interact with a permissionless protocol.
A service provider with an existing customer relationship may already possess location details through account registration or compliance checks. The association distinguishes that situation from a smart-contract interaction where neither party has a direct customer relationship with the other.
The letter does not recommend protecting firms that deliberately target U.S. users while ignoring information already available to them. Its proposed standard would consider purposeful solicitation and actual knowledge of a U.S. counterparty while avoiding a blanket obligation to identify every wallet.
In June, DeFi groups challenged stablecoin compliance obligations under a separate Treasury proposal addressing anti-money laundering requirements. Those comments involved a different rulemaking, although they raised related questions about the information available to issuers and participants in decentralized transactions.
The Blockchain Association’s October letter asks Treasury to retain its main geographic framework while revising the conditions attached to offshore transactions. It opposes certain alternative approaches discussed in the proposal, including a rule that would treat every transfer to a U.S. recipient as unlawful issuance without considering the issuer’s reasonable precautions.
Consumer group raises separate GENIUS Act concerns
Another organization submitted comments focused on consumer protections as Treasury’s public consultation closed.
The National Cryptocurrency Association announced that it had filed recommendations addressing what stablecoin holders should be able to do if an issuer’s legal status changes. Its proposals include allowing users time to redeem, sell or convert existing stablecoins before restrictions affect their holdings.
The organization requested safeguards intended to help victims recover stolen funds and preserve self-custody and direct peer-to-peer transfers. Those recommendations are separate from the Blockchain Association’s arguments about intermediary definitions, foreign issuer checks and knowledge standards.
Treasury’s August proposal identifies different compliance dates for payment stablecoin issuers and digital asset service providers. Foreign-issued stablecoin restrictions are expected to begin when the law becomes effective, currently anticipated on January 18, 2027, while the general distribution restriction under Section 3(b)(1) is scheduled for July 18, 2028.
The Treasury proposal was published in the Federal Register on August 18 under docket TREAS-DO-2026-0496 and regulatory identification number 1505-AC95. Its public comment period ended October 19, with the final wording and timing of any regulatory revisions still awaiting Treasury’s decision.
