Blockchain Association Petitions Treasury to Narrow GENIUS Act Stablecoin Rules

The Blockchain Association filed a 26-page comment letter requesting that the US Treasury narrow its proposed regulations implementing Section 3 of the GENIUS Act ¹. The letter, submitted on Oct. 19 during the final day of the public feedback period, calls on regulators to set a higher evidentiary threshold before digital asset service providers (DASPs) can be penalized for participating in an unlawful stablecoin issuance ¹. Section 3 of the law establishes federal parameters for issuing payment stablecoins and governs when domestic service providers may distribute or offer them to US users ¹.

Under Treasury's proposed framework announced on Aug. 17, market making and the distribution of newly issued tokens were cited among non-exclusive examples of knowing involvement in illicit issuances ¹. The trade association argued that the agency must mandate proof of actual knowledge regarding the underlying facts that make an issuance illegal, rather than penalizing routine secondary trading or standard market-making services ¹. The industry group also urged Treasury to eliminate a test requiring entities to possess a reasonable belief that a counterparty is located outside the US, citing that firms interacting with decentralized finance protocols often have access solely to wallet addresses ¹.

Carve-Outs for Infrastructure and Dates

The association emphasized that statutory DASP definitions must exclude public blockchain architecture, such as self-custodial software, validators, and liquidity pools ¹. Entities trading solely on proprietary accounts through decentralized exchanges should likewise remain exempt from service-provider classifications ¹. Additionally, the filing requested that service providers be permitted to rely on official regulatory registries rather than conducting exhaustive diligence on offshore stablecoin issuers, while cautioning against provisions that effectively expedite the broader July 18, 2028, compliance timeline set by Congress for DASPs ¹.

The formal feedback arrives as federal agencies coordinate broader framework implementations, following earlier steps where the Treasury and FDIC advance GENIUS Act rules ahead of the 2027 effective date ¹. While Treasury Secretary Scott Bessent framed the original proposal as an effort to offer regulatory clarity, the draft omitted specific compliance dates for Part 1523 ¹. The GENIUS Act takes effect on Jan. 18, 2027, or 120 days after final administrative rules are published, whichever occurs first ¹. At the time of writing, stablecoin $USDT traded flat at $0.9987 amid broader crypto market softness.