Treasury Issues Advanced Notice of Proposed Rulemaking on GENIUS Act Implementation
Now that the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act has now been enacted into law, the focus moves to the agency rulemaking that will implement it. On September 18, 2025, the U.S. Department of the Treasury (Treasury) issued an Advanced Notice of Proposed Rulemaking (ANPRM) soliciting comment on a wide swath of questions relating to implementation of the GENIUS Act, which created a regulatory framework for payment stablecoins in the United States. The ANPRM builds upon Treasury's earlier Request for Comment on Innovative Methods to Detect Illicit Activity Involving Digital Assets that had been issued in August 2025.
Comments on the ANPRM are due by October 20, 2025, likely taking heed of the White House Report on Digital Assets calling for "immediate" action.
Commenters don't need to respond to every question and the ANPRM notes that Treasury expects to invite further public comment on proposed regulations before adopting any final regulations. The ANPRM presents an excellent opportunity for interested stakeholders to educate regulators and to help shape the rules that will ultimately govern payment stablecoins.
Context
In its earlier request for comment on illicit finance, Treasury sought feedback to identify innovative or novel methods, techniques, or strategies that regulated financial institutions use to detect illicit activity involving digital assets, especially with regard to application program interfaces, artificial intelligence, digital identity verification, and use of blockchain technology monitoring. Its request noted that Treasury was researching improvements in the ability of financial institutions to detect illicit activity, costs to financial institutions, amount and sensitivity of that data that is collected and reviewed, operational challenges and efficiency considerations, cybersecurity risks, and effectiveness of tools and methods to mitigate illicit finance. Comments on Treasury's illicit finance request are due by October 17, 2025.
Key Questions and Themes
The ANPRM expands upon Treasury's earlier request for comment on illicit finance involving digital assets by seeking feedback on the remaining provisions of the GENIUS Act. Broadly speaking, the ANPRM seeks input on areas where regulatory clarity is needed, especially about prohibitions on certain issuances of permitted payment stablecoins, marketing, BSA/AML and sanctions obligations, state versus federal oversight, comparable foreign regulatory and supervisory regimes, and tax issues. The ANPRM lists 58 questions pertaining to the following six categories:
- Stablecoin Issuers and Service Providers
- Illicit Finance
- Foreign Payment Stablecoin Regimes
- Taxation
- Insurance
- Economic Data
Key definitions and requirements
The ANPRM seeks input as to whether additional clarification is needed for the terms "payment stablecoin" and "digital asset service provider." For instance, "digital asset service provider" under the statute means a person that, for compensation or profit, engages in the business in the United States (including on behalf of customers or users in the United States) of (1) exchanging digital assets for monetary value; (2) exchanging digital assets for other digital assets; (3) transferring digital assets to a third party; (4) acting as a digital asset custodian; or (5) participating in financial services relating to digital asset issuance. These terms are incredibly broad and may be construed along the lines of recent approaches under Interagency Third-Party Risk Management Guidance.
In addition, comments on whether clarification is needed on the meanings of "pay," "interest," and "yield" and the scope of the Section 4(a)(11) prohibition of payment of any form of interest or yield on payment stablecoins. These are all important definitions that are critical for implementation as well as understanding the scope of what is covered by the GENIUS Act framework and possible alternative activities outside this framework.
Exemptions
The ANPRM also seeks comment on the extraterritorial application of the GENIUS Act and transactions exempted from it, including whether regulations should be promulgated for safe harbors from the GENIUS Act's limitation that makes it unlawful for any person other than a permitted payment stablecoin issuer (PPSI) to issue a payment stablecoin in the United States.
Reserve requirements
The ANPRM also seeks feedback on whether clarification is needed regarding the scope of reserve requirements and the holding of reserve assets, while also seeking feedback on how market participants currently meet existing jurisdictional reserve requirements to minimize settlement or liquidity risk across jurisdictions that require local custody of reserve assets.
State regulatory frameworks
Input is also sought on what broad-based principles should be considered in determining whether a state-level regime is substantially similar to the federal regulatory framework. This component will be an important aspect of a federal regulatory system that may (or may not) allow qualified payment stablecoin issuers to opt for state regulation.
Accounting treatment
The ANPRM also asks how payment stablecoins that are not issued by PPSIs should be treated for accounting purposes. (The GENIUS Act provides that payment stablecoins issued by a PPSI must not be treated as cash or as a cash equivalent for accounting purposes but does not state how they should be characterized specifically, and the accounting rules may present a range of options.)
Illicit finance and compliance
In addition to those topics addressed in Treasury's earlier request for comment on illicit finance involving digital assets, the ANPRM seeks comment on what should be considered in promulgating regulations on AML and sanctions programs, the reporting of suspicious activity, customer identification and due diligence, and what unique features of PPSIs should be considered. The ANPRM also asks whether further clarification is needed on the PPSI's requirement to have the technological capability to comply with lawful orders in the economic sanctions context and what factors should be considered in determining whether noncompliant foreign payment stablecoin issuers (FPSIs) have cured noncompliance.
Non-U.S. payment stablecoin issuers and supervision
Further, the ANPRM seeks comment on comparability and reciprocity for FPSIs. The questions ask for the identification of foreign payment stablecoin or supervisory regimes that are comparable to the regime established in the GENIUS Act, while also asking about the differences between regimes that potentially could create market frictions in international digital asset activity. Additionally, input is requested regarding the factors that would disqualify a foreign jurisdiction from being deemed comparable and how interoperability should be interpreted. What information should be required from registered FPSIs and whether any clarification is needed on the prohibition of offers and sales of payment stablecoins issued by foreign issuers in the United States are also among the questions in the ANPRM.
Other issues
Finally, the ANPRM looks for areas on which guidance from the IRS would be helpful, as well as the impact of the GENIUS Act on the insurance industry, insurance coverage to be purchased by PPSIs and FPSIs, and insurance reserve practices. Economic data as to the costs and benefits of regulations related to the GENIUS Act, bankruptcy, and conflicts of interest are also addressed.
The ANPRM underscores the Administration's drive for swift rulemaking in connection with crypto. Earlier this month, Patrick Witt, the new head of the President's Council of Advisers on Digital Assets, noted that rulemaking for the GENIUS Act was his top priority. This ANPRM is further evidence of the desire of the Administration to have a complete U.S. legislative and regulatory structure for digital assets in place as soon as possible. The intent to make the United States "the crypto capital of the world" is not a slogan and is being taken seriously by regulators outside of the U.S. This, in turn, is driving continued institutional adoption and acceptance of digital assets.
Those interested in submitting comments should reach out to their usual DWT contact.
