Blockchain Association says Treasury's GENIUS Act rollout needs clearer DeFi, foreign issuer rules

The Blockchain Association has urged the U.S. Treasury Department to clarify key terms of its proposed rules implementing Section 3 of the GENIUS Act, which governs who can issue, offer, and sell payment stablecoins in the country.

In a 26-page letter filed Monday, the industry group expressed support for the Treasury's core approach but called for clearer lines on the definition of digital asset service providers (DASPs), "knowing participation" standards, and foreign issuer requirements.

The Treasury sought public feedback on its proposed regulations for the GENIUS Act, a landmark stablecoin legislation signed into law last year and expected to take effect in January 2027. The public comment period closed on Monday, with 123 submissions received, according to the federal regulations portal.

The association said that it supports the agency's core objective of ensuring that payment stablecoins are safe, trustworthy, and issued by regulated companies that maintain adequate reserves.

Clarifications

"We applaud Treasury's implementation efforts. Our letter seeks clearer lines so the final rule matches what Congress wrote," the group said in a thread of X posts.

Specifically, the group called for clearer definitions of DASPs, which determine which businesses are subject to certain stablecoin rules. 

"Congress wrote that definition for businesses serving customers, and excluded core infrastructure like self-custody software and validators. Firms trading their own assets shouldn't be swept in," the association said.

The letter also raised concerns about the proposed rule's treatment of "knowing participation" in unlawful stablecoin issuance, which could carry criminal penalties.

"Liability should require actual knowledge and substantial assistance in coordination with the issuer," the group said, adding that ordinary secondary-market trading should not constitute participation.

Foreign-issued stablecoins

The association also called for changes to certain proposed due diligence requirements. It said the Treasury should not require DASPs to conduct "open-ended due diligence" on foreign payment stablecoin issuers to offer their stablecoins, as many DASPs often lack any direct relationship with foreign issuers.

Instead, the group recommended allowing DASPs to rely on regulators' publicly available prohibition lists to comply with due diligence obligations.

The letter also urged the Treasury to replace its proposed "reasonably believes" standard — which is designed to determine whether a counterparty is located in the U.S. — with one based on actual knowledge and information gathered in the ordinary course.

It argued that in permissionless environments, participants may "interact only with a wallet address" and receive no further information. That would make additional identification and geolocation requirements difficult to implement, the letter said.