The Blockchain Association warned the U.S. Treasury in a 26-page letter that vague GENIUS Act stablecoin rules could sweep in DeFi software and ordinary traders.
Key Points:
- The group backed Treasury's core approach but wants a narrower definition of digital asset service providers.
- It argued that secondary-market trading should not expose firms to criminal liability for unlawful issuance.
- Platforms should rely on public regulatory lists to vet foreign stablecoins, the letter said.
Blockchain Association Letter
The group filed its comments Monday, the last day of a public comment period that closed with 123 submissions. The Treasury proposal implements Section 3 of the GENIUS Act, which decides who may issue, offer and sell payment stablecoins in the U.S. The law, signed on Jul. 18, 2025, is expected to take effect on Jan. 18, 2027.
The association backed Treasury's goal of safe, reserve-backed stablecoins from regulated companies. Still, it wants a tighter definition of digital asset service providers, one that covers only businesses serving customers and leaves out self-custody software, validators and firms trading their own assets.
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GENIUS Act Liability
Under the law, knowing participation in unlawful stablecoin issuance can bring fines of up to $1 million per violation and up to five years in prison. The association argued that ordinary secondary-market trading should not count as participation. "Our letter seeks clearer lines so the final rule matches what Congress wrote," the group wrote on X.
Liability should hinge on actual knowledge and substantial help coordinated with the issuer, it said.
Foreign Stablecoin Rules
Many exchanges have no direct relationship with overseas issuers, so the group opposes open-ended due diligence duties before platforms list foreign stablecoins. It wants them to lean on public lists kept by regulators, while still acting when they know an issuer cannot comply.
The letter also asks Treasury to drop a "reasonably believes" test for spotting U.S. counterparties, since permissionless protocols may reveal nothing beyond a wallet address.
It urged the department to scrap an open-ended "functional equivalent" test and revisit its compliance cost estimates. Effective dates, it added, should line up with related GENIUS Act rules.
The October filing follows an Aug. 21 letter in which the association endorsed customer identification rules proposed by the Financial Crimes Enforcement Network, the Federal Reserve and three other agencies.
That letter welcomed limiting identity checks to direct dealings between issuers and their customers. Regulators including the Fed have also floated their own proposals for other parts of the law.
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