The U.S. Department of the Treasury has proposed rules that would define when a payment stablecoin is issued in the United States and when it is offered, sold, or otherwise made available to a person located here. For issuers, exchanges, custodians, market makers, distributors, bridge operators, and other digital asset businesses, those definitions may determine whether an activity falls within the GENIUS Act—even when part of the transaction occurs offshore.

Comments on the proposal are due October 19, 2026.

From Statutory Framework to Operational Perimeter

Section 3 of the GENIUS Act establishes the basic boundaries of the U.S. payment stablecoin market. It generally limits U.S. issuance to permitted payment stablecoin issuers and regulates when digital asset service providers may offer, sell, or make payment stablecoins available in the United States.

Treasury’s notice of proposed rulemaking does not address every aspect of the GENIUS Act. Its focus is narrower but commercially significant: identifying the conduct, participants, and geographic connections that bring issuance and distribution activity within Section 3.

The proposal matters because stablecoins rarely move through a simple issuer-to-holder transaction. A typical distribution structure may involve an issuer, custodian, exchange, market maker, liquidity provider, distributor, smart contract, or cross-chain bridge—sometimes operating across several jurisdictions. Treasury’s proposed definitions look beyond labels and focus on how rights in the stablecoin move through that structure.

When Is a Payment Stablecoin “Issued”?

Treasury proposes to define issuance as the first transfer of a payment stablecoin by the issuer, directly or indirectly, that results—or will result—in someone other than the issuer obtaining the right to use or transfer the token or have it converted, redeemed, or repurchased.

Several consequences follow:

• Minting alone would generally not constitute issuance if the stablecoin remains in the issuer’s treasury.

• Minting directly to a holder’s wallet would constitute issuance.

• Crediting a customer’s account may constitute issuance even if the token remains in a wallet controlled by an issuer that also acts as custodian.

• A transfer through an agent, underwriter, distributor, or other intermediary may still be treated as an issuance by the issuer.

• A lockup or delayed redemption feature would not necessarily postpone issuance if the transfer will give the holder relevant use, transfer, or redemption rights in the future.

• If an issuer redeems or reacquires a stablecoin and later transfers it again, the later transfer may be treated as a new issuance.

This functional approach may affect treasury management, omnibus custody, white-label arrangements, issuer buybacks, resales, airdrops, wrapped stablecoins, and cross-chain structures. Treasury is expressly requesting comment on how bridges, lock-and-mint arrangements, burn-and-mint models, and tokenized claims referencing an underlying stablecoin should be treated.

What Makes an Issuance Occur “in the United States”?

Under the proposal, an issuance would occur in the United States if, at the time of issuance:

1. The issuer is located in the United States; or

2. The stablecoin is issued to a person located in the United States.

For an individual, location would generally turn on physical presence rather than citizenship or permanent residence. For a business entity, the proposal would treat the entity as located in the United States if it is organized or incorporated under U.S. or state law or has its principal place of business in the United States.

Treasury also proposes a pathway for an issuer outside the United States to establish that an issuance occurred offshore. That approach would depend on the issuer having a reasonable belief that the acquiring person was outside the United States, supported by appropriate policies, procedures, and controls.

Treasury is seeking input on whether those controls should include customer identification, account-opening information, contractual representations, IP or device-location checks, geographic restrictions, and transaction monitoring.

The practical point is that an offshore entity, foreign server, or non-U.S. wallet does not end the analysis. The relevant inquiry may include the issuer’s location, the acquirer’s location, the ultimate distribution chain, and the controls used to determine where participants are located.

“Offer” Extends Beyond a Completed Sale

Treasury would clarify that an offer includes making a payment stablecoin available for purchase, sale, or exchange—even if the stablecoin has not yet been issued. Presales may therefore fall within the rule before tokens are minted or transferred.

For digital asset service providers, the proposal treats offering, selling, and otherwise making a stablecoin available as overlapping concepts. Activities that may be captured include:

• Displaying or listing a stablecoin on a platform available to U.S. persons;

• Providing a mechanism through which a U.S. person can purchase or exchange it;

• Distributing newly issued stablecoins;

• Facilitating initial market access or liquidity; and

• Making a foreign-issued payment stablecoin available in the United States.

Treasury’s examples are expressly nonexclusive. A business should therefore evaluate the substance of its role rather than rely on whether it calls itself an exchange, distributor, market maker, software provider, or something else.

Foreign-Issued Stablecoins Face a Two-Stage Framework

The proposal distinguishes between two important dates.

Beginning on the GENIUS Act’s expected effective date of January 18, 2027, a digital asset service provider generally may not offer, sell, or otherwise make available in the United States a stablecoin issued by a foreign payment stablecoin issuer unless that issuer has the technological capability to comply—and will comply—with lawful orders and applicable reciprocal arrangements.

Beginning July 18, 2028, a digital asset service provider generally may not offer or sell any payment stablecoin to a person located in the United States unless it was issued by a permitted payment stablecoin issuer or a qualifying foreign issuer.

For foreign issuers seeking direct access to the U.S. market, the proposal also contemplates eligibility where the issuer is supervised under a foreign regime Treasury determines is comparable and the issuer is registered with the Office of the Comptroller of the Currency, subject to other applicable statutory conditions.

Due Diligence Shifts Downstream

Treasury’s proposal places meaningful responsibility on platforms and other digital asset service providers that distribute foreign-issued stablecoins.

A service provider may be able to rely on a foreign issuer’s representation that it can and will comply with lawful orders and reciprocal arrangements, but only after conducting reasonable due diligence. At a minimum, Treasury expects the provider to determine whether a prohibition on secondary trading is in effect and to consider other reasonably available evidence about the issuer’s compliance.

Reliance would not be available if the service provider knew, had reason to know, or should have known that the representation was false. Treasury is seeking comment on whether diligence should include written certifications, periodic updates, record retention, smart-contract review, or verification of functions capable of freezing, seizing, or burning tokens.

This is a significant allocation of compliance risk. An exchange or distributor may not be able to treat issuer eligibility as someone else’s problem. Stablecoin onboarding may require documented legal, technical, and operational review.

Participation Risk Reaches Beyond the Named Issuer

The GENIUS Act authorizes serious penalties for knowingly participating in an unlawful issuance, including fines of up to $1 million per violation and imprisonment of up to five years.

Treasury proposes nonexclusive examples of participation that include:

• Undertaking a redemption or repurchase obligation, including as a joint issuer or guarantor;

• Coordinating with an issuer to solicit customers, mint tokens, or facilitate other key issuance steps;

• Providing branding in certain white-label arrangements;

• Acting as a market maker for newly issued stablecoins;

• Distributing newly issued stablecoins; or

• Supporting an initial listing that facilitates mass distribution of an unlawful issuance.

The proposal indicates that ordinary purchases for a person’s own use and secondary-market transactions lacking a close connection to the initial issuance generally are not the intended focus of this participation provision. Those activities may still raise separate offer-and-sale issues.

What Market Participants Should Review Now

The proposal is not final, but businesses can begin mapping their exposure by asking:

• At what point do rights in the stablecoin first pass to another person?

• Which entity is treated as the issuer in substance, including in white-label or multi-party arrangements?

• Where are the issuer, initial acquirer, customers, and relevant intermediaries located?

• What evidence supports those location determinations?

• Does a platform list, distribute, custody, exchange, or otherwise make the stablecoin available to U.S. persons?

• For a foreign-issued token, can the issuer comply with lawful orders at both the technical and operational levels?

• What diligence, representations, monitoring, and records support reliance on the issuer’s compliance?

• Could a market maker, distributor, bridge operator, or service provider be viewed as participating in the original issuance?

The Comment Window Is an Opportunity to Shape the Rule

Treasury is seeking input on many of the issues that will determine how the rule operates in practice, including location controls, intermediary diligence, presales, treasury-held tokens, bridges, wrapped assets, white-label structures, market making, and foreign-issuer representations.

Comments must be received by October 19, 2026. Companies whose products or business models depend on cross-border stablecoin issuance or distribution should consider whether the proposed definitions create operational ambiguity, impose unworkable diligence expectations, or require clearer safe harbors.

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This blog post is for informational purposes only and is not legal advice. Please consult with a Launch Legal attorney regarding your specific situation.