[Federal Register Volume 91, Number 158 (Tuesday, August 18, 2026)]
[Proposed Rules]
[Pages 53368-53391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-16796]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 91, No. 158 / Tuesday, August 18, 2026 /
Proposed Rules
[[Page 53368]]
DEPARTMENT OF THE TREASURY
12 CFR Chapter XV
[TREAS-DO-2026-0496]
RIN 1505-AC95
GENIUS Act Regulations on Payment Stablecoin Issuance, Offer, and
Sale
AGENCY: Department of the Treasury.
ACTION: Notice of proposed rulemaking (NPRM).
-----------------------------------------------------------------------
SUMMARY: The Department of the Treasury (Treasury) proposes to issue
regulations to implement section 3 of the Guiding and Establishing
National Innovation for U.S. Stablecoins (GENIUS) Act regarding the
statutory prohibitions and limitations on payment stablecoin issuance,
offer, and sale in the United States.
DATES: Comments on the NPRM must be received on or before October 19,
2026.
ADDRESSES: Written comments may be submitted through one of two
methods:
Electronic Submission: Comments may be submitted
electronically through the Federal Government eRulemaking portal at
https://www.regulations.gov.
Mail: Send to U.S. Department of the Treasury, Attention:
Office of General Counsel, 1500 Pennsylvania Avenue NW, Washington, DC
20220.
We encourage comments to be submitted via https://www.regulations.gov. All comments should be captioned with ``GENIUS Act
Regulations on Payment Stablecoin Issuance, Offer, and Sale.'' Please
include your name, organizational affiliation, address, email address,
and telephone number in your comment. In general, all comments
received, including attachments and other supporting materials, will be
part of the public record and subject to public disclosure. Do not
submit any information in your comment or supporting materials that you
consider confidential or inappropriate for public disclosure.
FOR FURTHER INFORMATION CONTACT: Brendan Costello and Cody Gaffney,
Attorney-Advisors, Office of the General Counsel, and Jonathan
Hurowitz, Senior Advisor, Office of Financial Institutions, Treasury,
at [email protected] or 202-622-0480.
SUPPLEMENTARY INFORMATION:
I. Background and Authority
The GENIUS Act, enacted on July 18, 2025, establishes a
comprehensive framework for the regulation of payment stablecoins.\1\
As defined in the GENIUS Act, a payment stablecoin is a digital asset
\2\ (i) that is, or is designed to be, used as a means of payment or
settlement, and (ii) the issuer of which is obligated to convert,
redeem, or repurchase for a fixed amount of monetary value (not
including a digital asset denominated in a fixed amount of monetary
value) and represents that the issuer will maintain, or create the
reasonable expectation that it will maintain, a stable value relative
to a fixed amount of monetary value.\3\
---------------------------------------------------------------------------
\1\ See Public Law 119-27 (codified at 12 U.S.C. 5901 et seq.).
The GENIUS Act is referred to throughout this proposal simply as
``the Act.''
\2\ The term ``digital asset'' means any digital representation
of value that is recorded on a cryptographically secured distributed
ledger. See section 2(6) of the Act (12 U.S.C. 5901(6)).
\3\ See section 2(22) of the Act (12 U.S.C. 5901(22)). Digital
assets that are (i) national currencies, (ii) deposits (as defined
in section 3 of the Federal Deposit Insurance Act), including
deposits recorded using distributed ledger technology, or (iii)
securities (as defined in certain federal securities laws) are not
considered payment stablecoins. See id.
---------------------------------------------------------------------------
Section 3 of the Act (12 U.S.C. 5902) delineates the fundamental
architecture of the payment stablecoin market in the United States,
prescribing who may issue, offer, sell, or otherwise make available
payment stablecoins. Section 3 ``is intended to have extraterritorial
effect if conduct involves the offer or sale of a payment stablecoin to
a person located in the United States.'' \4\
---------------------------------------------------------------------------
\4\ Section 3(e) of the Act (12 U.S.C. 5902(e)).
---------------------------------------------------------------------------
With respect to issuance of payment stablecoins, section 3(a) of
the Act (12 U.S.C. 5902(a)) makes it unlawful for any person other than
a permitted payment stablecoin issuer to issue a payment stablecoin in
the United States.\5\ Knowing participation in a violation of section
3(a) is punishable by a fine of not more than $1 million for each
violation, imprisonment for not more than five years, or both under the
Act.\6\
---------------------------------------------------------------------------
\5\ See section 3(a) of the Act (12 U.S.C. 5902(a)). The term
``permitted payment stablecoin issuer'' means a person formed in the
United States that is (i) a subsidiary of an insured depository
institution that has been approved to issue payment stablecoins
under section 5 of the Act (12 U.S.C. 5904), (ii) a Federal
qualified payment stablecoin issuer (as defined in section 2(11) of
the Act (12 U.S.C. 5901(11))), or (iii) a State qualified payment
stablecoin issuer (as defined in section 2(31) of the Act (12 U.S.C.
5901(31))). See section 2(23) of the Act (12 U.S.C. 5901(23)).
Permitted payment stablecoin issuers are regulated by the primary
Federal payment stablecoin regulators or State payment stablecoin
regulators, as appropriate.
\6\ Section 3(f) of the Act (12 U.S.C. 5902(f)).
---------------------------------------------------------------------------
Section 3(b) of the Act (12 U.S.C. 5902(b)) addresses the offer,
sale, or otherwise making available of payment stablecoins in the
United States by digital asset service providers. Under the Act, a
digital asset service provider is a person (such as a digital asset
exchange) 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 exchanging digital assets for monetary value or for
other digital assets, transferring digital assets to a third party,
acting as a digital asset custodian, or participating in financial
services relating to digital asset issuance.\7\
---------------------------------------------------------------------------
\7\ See section 2(7) of the Act (12 U.S.C. 5901(7)).
---------------------------------------------------------------------------
Section 3(b) (12 U.S.C. 5902(b)) contains two distinct
prohibitions. First, under section 3(b)(1) of the Act (12 U.S.C.
5902(b)(1)), beginning on July 18, 2028 (i.e., the date that is three
years after the date of enactment of the GENIUS Act), it shall be
unlawful for a digital asset service provider to offer or sell a
payment stablecoin to a person in the United States, unless the payment
stablecoin is issued by a permitted payment stablecoin issuer.\8\
Second, section 3(b)(2) (12 U.S.C. 5902(b)(2))--which unlike section
3(b)(1) becomes applicable on the effective date of the Act--
specifically addresses payment stablecoins issued by foreign payment
stablecoin issuers,\9\ providing that it shall be unlawful for any
digital asset service provider to offer, sell, or otherwise make
available in the United States a payment stablecoin issued by a
[[Page 53369]]
foreign payment stablecoin issuer unless the foreign payment stablecoin
issuer has the technological capability to comply, and will comply,
with the terms of any lawful order and any reciprocal arrangement
pursuant to section 18 of the Act (12 U.S.C. 5916).\10\
---------------------------------------------------------------------------
\8\ See section 3(b)(1) of the Act (12 U.S.C. 5902(b)(1)).
\9\ The term ``foreign payment stablecoin issuer'' means an
issuer of a payment stablecoin that is organized under the laws of
or domiciled in a foreign country, a territory of the United States,
Puerto Rico, Guam, American Samoa, or the Virgin Islands, and is not
a permitted payment stablecoin issuer. See section 2(12) of the Act
(12 U.S.C. 5901(12)).
\10\ See section 3(b)(2) of the Act (12 U.S.C. 5902(b)(2)). The
effective date of the GENIUS Act is expected to be January 18, 2027
(i.e., the date that is 18 months after the date of enactment of the
GENIUS Act). See section 20 of the Act (Pub. L. 119-27, 20, 139
Stat. 466, set out as a note under 12 U.S.C. 5901).
---------------------------------------------------------------------------
Various provisions of the Act create exemptions from certain of
these general prohibitions relating to the issuance, offer, sale, or
making available of payment stablecoins. First, section 3(h) (12 U.S.C.
5902(h)) contains rules of construction that expressly exempt three
categories of transactions from section 3: (i) the direct transfer of
digital assets between two individuals acting on their own behalf and
for their own lawful purposes, without the involvement of an
intermediary, (ii) any transaction involving the receipt of digital
assets by an individual between an account owned by the individual in
the United States and an account owned by the individual abroad that
are offered by the same parent company, and (iii) any transaction by
means of a software or hardware wallet that facilitates an individual's
own custody of digital assets.\11\
---------------------------------------------------------------------------
\11\ See section 3(h) of the Act (12 U.S.C. 5902(h)).
---------------------------------------------------------------------------
Second, section 18(a) of the Act (12 U.S.C. 5916(a)) provides that
the prohibitions under section 3 (12 U.S.C. 5902) shall not apply to a
foreign payment stablecoin issuer if certain conditions are met,
including that (i) the foreign payment stablecoin issuer is subject to
regulation and supervision by a foreign payment stablecoin regulator of
a foreign country that has a regulatory and supervisory regime with
respect to payment stablecoins that the Secretary of the Treasury
determines, pursuant to section 18(b) of the Act (12 U.S.C. 5916(b)),
is comparable to the regulatory and supervisory regime established
under the GENIUS Act, and (ii) the foreign payment stablecoin issuer is
registered with the Office of the Comptroller of the Currency
(OCC).\12\
---------------------------------------------------------------------------
\12\ See section 18(a) of the Act (12 U.S.C. 5916(a)).
---------------------------------------------------------------------------
Third, section 5(f) of the Act (12 U.S.C. 5904(f)) authorizes the
primary Federal payment stablecoin regulators to waive the application
of the requirements of the Act for a period not to exceed 12 months
beginning on the effective date of the Act with respect to subsidiaries
of insured depository institutions and Federal qualified payment
stablecoin issuers with a pending application on the Act's effective
date.\13\
---------------------------------------------------------------------------
\13\ See section 5(f) of the Act (12 U.S.C. 5904(f)). ``Primary
Federal payment stablecoin regulator'' is defined in section 2(25)
of the Act (12 U.S.C. 5901(25)) and may refer, depending on the
entity in question, to the OCC, the Board of Governors of the
Federal Reserve System (Board), the Federal Deposit Insurance
Corporation (FDIC), or the National Credit Union Administration
(NCUA). ``Federal qualified payment stablecoin issuer'' is defined
in section 2(11) of the Act (12 U.S.C. 5901(11)).
---------------------------------------------------------------------------
Finally, the Act vests Treasury with authority to issue regulations
providing certain safe harbors that are consistent with the purposes of
the Act, limited in scope, and apply to a de minimis volume of
transactions, and to provide certain other limited safe harbors in
unusual and exigent circumstances.\14\
---------------------------------------------------------------------------
\14\ See section 3(c) of the Act (12 U.S.C. 5902(c)).
---------------------------------------------------------------------------
The Act directs Treasury to issue regulations to implement section
3, including regulations to define terms.\15\ On September 19, 2025,
Treasury published in the Federal Register an Advance Notice of
Proposed Rulemaking (ANPRM) to solicit public comment on questions
relating to the implementation of the Act.\16\ In drafting this NPRM,
Treasury carefully considered comments received in response to the
ANPRM that were material and relevant to the subjects addressed
herein.\17\
---------------------------------------------------------------------------
\15\ See section 3(d) of the Act (12 U.S.C. 5902(d)). See also
section 13 of the Act (12 U.S.C. 5913) (requiring Treasury and other
regulators to promulgate regulations to carry out the GENIUS Act).
\16\ See 90 FR 45159 (Sep. 19, 2025). Comments on the ANPRM were
originally due on October 20, 2025, but Treasury later extended the
comment period by 15 days to November 4, 2025. See 90 FR 47251 (Oct.
1, 2025).
\17\ This proposal addresses only the portions of section 3 of
the Act (12 U.S.C. 5902) relating to the issuance, offer, sale, and
making available of payment stablecoins. Other provisions of section
3 of the Act (12 U.S.C. 5902), such as section 3(g) of the Act (12
U.S.C. 5902(g))'s rules concerning the treatment of payment
stablecoins for accounting, margining, and other purposes, are
outside the scope of this proposal. In addition, conduct that would
constitute an unlawful issuance, offer, or sale of a payment
stablecoin under this proposal may, depending on the facts and
circumstances, also lead to penalties under section 4(e)(3) of the
Act. See 12 U.S.C. 5903(e)(3) (providing that it shall be unlawful
to ``market a product in the United States as a payment stablecoin
unless the product is issued pursuant to'' the Act and setting
penalties for knowing and willful participation). While Treasury
will consider whether it would be helpful or appropriate to issue
guidance or procedures relating to potential penalties under section
4(e)(3) of the Act (12 U.S.C. 5903(e)(3)), that is outside the scope
of this proposal.
---------------------------------------------------------------------------
II. Description of the Proposed Rule
A. Treasury's Approach to This Rulemaking
Consistent with its obligation to faithfully implement the GENIUS
Act, in crafting this proposal, Treasury focused on the text of the
GENIUS Act itself as the starting point for these proposed regulations
and did not start from any pre-existing regulatory baseline.
Nevertheless, throughout the proposal, Treasury considered certain
discrete aspects of existing legal and regulatory regimes where
Treasury believes these regimes may be instructive to the regulation of
payment stablecoin activities under section 3 of the Act.
For example, in developing this proposal, Treasury considered
several comments to the ANPRM that suggested that the federal
securities laws, in addition to the text of the GENIUS Act, should
serve as a reference point for implementing section 3 of the Act.
Treasury recognizes that there are longstanding legal regimes that
address the issue, offer, and sale of other financial instruments, such
as securities, including offshore activities.
However, the GENIUS Act clearly distinguishes among payment
stablecoins, securities, and commodities, expressly providing that
payment stablecoins are not securities or commodities.\18\ Unlike many
existing financial instruments that are designed for investment and
capital appreciation, payment stablecoins are, or are designed to be,
used as a means of payment or settlement and are expected to maintain a
stable value. Treasury believes that the Act evinces a clear intent for
payment stablecoins to serve as an effective means of payment and
settlement, including across borders, and application of traditional
investment rules to payment stablecoins may frustrate that goal.
Similarly, some operational mechanics of payment stablecoins (such as
payment stablecoin minting and redemption) may differ from traditional
securities and commodities in material ways that may not be properly
accounted for by applying those existing regulatory regimes to payment
stablecoins.\19\
---------------------------------------------------------------------------
\18\ Specifically, section 17 of the Act (Pub. L. 119-27, 17,
139 Stat. 459, amending 7 U.S.C. 1a and 15 U.S.C. 77b, 78c, 78lll,
80a-2, 80a-3, and 80b-2) clarifies that payment stablecoins are not
securities for purposes of the federal securities laws, nor
commodities for purposes of the Commodity Exchange Act.
\19\ Several commenters on the ANPRM expressed similar
sentiments. For example, one commenter on the ANPRM noted that while
Securities and Exchange Commission (SEC) rules may be a useful
example, not all aspects of those rules are appropriate in the
context of digital assets. Another commenter noted that while the
territorial approach of certain SEC rules could be a possible
starting point, unique issues may be presented by digital assets
that would require updating that approach.
---------------------------------------------------------------------------
Treasury welcomes comment on whether this approach is appropriate
or whether, in the alternative, these
[[Page 53370]]
regulations should adopt an approach that is more similar to existing
securities or commodities regulatory frameworks, such as Regulation S
under the Securities Act.\20\
---------------------------------------------------------------------------
\20\ See 17 CFR 230.901-905.
---------------------------------------------------------------------------
B. Overview of the Rule
This proposal would add new part 1523 to subchapter C of chapter XV
of title 12 of the Code of Federal Regulations.\21\ Part 1523 would
define key terms and implement section 3's prohibitions related to the
issuance, offer, sale, and making available of payment stablecoins.
---------------------------------------------------------------------------
\21\ On April 3, 2026, Treasury proposed broad-based principles
for determining whether a State-level regulatory regime is
substantially similar to the Federal regulatory framework under
section 4(c) of the Act (12 U.S.C. 5903(c)). See 91 FR 16844 (Apr.
3, 2026). Those principles would be codified at Part 1521 within a
new Subchapter C of Chapter XV of the Code of Federal Regulations.
This proposal would add new part 1523 to subchapter C, reserving
part 1522 for other regulations.
---------------------------------------------------------------------------
Proposed Sec. 1523.1 sets out the scope of Part 1523 and defines
key terms. Consistent with the Act, proposed Sec. 1523.1 makes clear
that this part is intended to have extraterritorial effect if conduct
involves the offer or sale of a payment stablecoin to a person located
in the United States. Proposed Sec. 1523.1 also defines terms such as
``issue'' and ``located in the United States.'' Significantly, proposed
Sec. 1523.1 makes clear that a payment stablecoin issuer may also be
considered a digital asset service provider, and thus, the rules that
apply to issuers and the rules that apply to digital asset service
providers are not mutually exclusive.
Proposed Sec. 1523.2 implements the prohibition on payment
stablecoin issuance in the United States under section 3(a) of the Act
(12 U.S.C. 5902(a)). First, proposed Sec. 1523.2(a) makes clear that
foreign payment stablecoin issuers that meet the criteria set out in
section 18(a) of the Act (12 U.S.C. 5916(a)), including registration
with the OCC, may issue payment stablecoins in the United States in
addition to permitted payment stablecoin issuers. Next, proposed Sec.
1523.2(b) provides that a person will be considered to have issued a
payment stablecoin in the United States only if, at the time of
issuance, the person is located in the United States (as defined in
proposed Sec. 1523.1) or the person issues the payment stablecoin to a
person located in the United States (as defined in proposed Sec.
1523.1). By contrast, proposed Sec. 1523.2(c) describes activities
that would be deemed not to be issuances of payment stablecoins in the
United States. Finally, proposed Sec. 1523.2(d) provides examples of
activities that, when conducted by a person in connection with the
issuance of a payment stablecoin that violates section 3(a) of the Act
(12 U.S.C. 5902(a)), may constitute participation in an unlawful
issuance for purposes of the criminal penalty in section 3(f) of the
Act (12 U.S.C. 5902(f)), such as acting as a market maker for newly-
issued payment stablecoins or coordinating with the issuer to
facilitate key steps in the issuance.
Proposed Sec. 1523.3 implements the GENIUS Act's prohibitions on
the offer, sale, and making available of payment stablecoins by digital
asset service providers under section 3(b) of the Act (12 U.S.C.
5902(b)). First, proposed Sec. 1523.3(a) and (b) codify sections
3(b)(1) and 3(b)(2) of the Act (12 U.S.C. 5902(b)(1), (2)),
respectively, with some clarifications. Second, proposed Sec.
1523.3(c) describes a digital asset service provider's obligations with
respect to a foreign payment stablecoin issuer's compliance with lawful
orders and reciprocal arrangements. Next, proposed Sec. 1523.3(d)
enumerates examples of activities that constitute the offer or sale of
payment stablecoins, such as directly soliciting a person located in
the United States, advertising a payment stablecoin as available for
purchase by persons located in the United States, and advising
potential purchasers on how to evade generally applicable location
detection or restriction mechanisms. Finally, proposed Sec. 1523.3(e)
describes activities that would be deemed not to be offers or sales of
payment stablecoins to persons located in the United States.
Proposed Sec. 1523.4 sets out exemptions and safe harbors from the
section 3 framework, and Treasury requests comment on whether to create
additional safe harbors.
Proposed Sec. 1523.5 includes a severability provision. Proposed
Appendix A provides a number of interpretations intended to clarify the
application of proposed Part 1523 to certain common or complex
scenarios.
C. Scope, Applicability, and Definitions (Proposed Sec. 1523.1)
1. Scope and Applicability
Proposed Sec. 1523.1 sets forth the scope and applicability of
Part 1523. Paragraph (a) provides that Part 1523 is issued by Treasury
to implement section 3 of the Act (12 U.S.C. 5902) regarding statutory
prohibitions and limitations on issuing, offering, selling, and
otherwise making available payment stablecoins in the United States.
2. Extraterritorial Effect
Proposed paragraph (b) makes clear that, consistent with section
3(e) of the Act (12 U.S.C. 5902(e)), proposed Part 1523 is intended to
have extraterritorial effect if conduct involves the offer or sale of a
payment stablecoin to a person located in the United States.
Question 1: Is the extraterritorial effect of section 3 of the Act
(12 U.S.C. 5902) (as described in this proposed Part 1523) clear or
should Treasury provide additional clarity? For example, should
Treasury specify in regulatory text the extent to which Part 1523 has
extraterritorial effect as to the issuance of payment stablecoins to
persons located outside of the United States?
Question 2: Are there any scenarios in which issuing or making
available a payment stablecoin would not reasonably be considered an
offer or sale? If so, would such activity nonetheless fall within the
extraterritorial scope of the Act and this Part? Are there any
scenarios in which other conduct or transactions involving a payment
stablecoin contemplated by Part 1523 would not reasonably be considered
within the extraterritorial scope of the Act?
3. Definitions
Proposed paragraph (c) sets forth a number of definitions for
purposes of Part 1523.\22\
---------------------------------------------------------------------------
\22\ These definitions are proposed only for the purposes of
part 1523 and this proposal does not propose to define terms that
may be defined by any other statute or regulation, including other
sections of the Act and regulations issued thereunder. For example,
the proposed definition of ``issue'' is designed for and based on
section 3 of the Act (12 U.S.C. 5902), which is meant to proscribe
issuance by persons that are not permitted payment stablecoin
issuers; this context is distinct from other contexts that may use
facially similar terminology, such as the concepts of ``outstanding
issuance value'' that are used by the primary Federal payment
stablecoin regulators for purposes of prudential reserve
requirements for permitted payment stablecoin issuers.
---------------------------------------------------------------------------
Under the proposal, the terms ``digital asset,'' ``federal
qualified payment stablecoin issuer,'' ``foreign payment stablecoin
issuer,'' ``insured depository institution,'' ``lawful order,''
``monetary value,'' ``offer,'' ``payment stablecoin,'' ``permitted
payment stablecoin issuer,'' ``person,'' ``primary Federal payment
stablecoin regulator,'' ``State,'' and ``subsidiary'' \23\ would be
defined by cross-reference to the corresponding statutory definitions
in section 2 of the
[[Page 53371]]
Act (12 U.S.C. 5901) without further elaboration.
---------------------------------------------------------------------------
\23\ With respect to this term, proposed paragraph (c) cites
both sections 2(32) and 2(33) of the Act (12 U.S.C. 5901(32), (33))
to ensure subsidiaries of insured credit unions are appropriately
captured. See 91 FR 6531, 6532 n.13 (Feb. 12, 2026).
---------------------------------------------------------------------------
Question 3: Should any of the terms that would be defined solely by
cross-reference to section 2 of the Act (12 U.S.C. 5901) be clarified?
For example, should Treasury clarify the application of the term
``person'' to various entities that may be involved with payment
stablecoins, including those that are or may be affiliated with a
government entity. If a term's definition depends on other defined
terms in the Act, should those nested definitions be spelled out?
Should any of the definitions be reproduced in the text of Part 1523
rather than by cross-reference to the Act?
Question 4: Should Treasury make any modifications to the
definition of ``lawful order'' as proposed for part 1523, including
clarifications, such as to define terms within the definition of
``lawful order'' as considered by FinCEN for its proposed definition of
the term ``lawful order'' or otherwise to align more closely to FinCEN
regulatory definitions? See 91 FR 18582, 18594-5 (Apr. 10, 2026).
Question 5: For purposes of section 3 of the Act (12 U.S.C. 5902)
and Part 1523, should Treasury interpret the term ``payment
stablecoin'' and related definitions to include a digital asset that
the issuer is obligated to redeem in other forms of value that may be
the functional equivalent of those forms of ``monetary value''
enumerated in section 2(17) of the Act (12 U.S.C. 5901(17)) (i.e.,
national currencies or deposits as defined in section 3 of the Federal
Deposit Insurance Act)? For example, should a digital asset that is
redeemable only in credit union shares be considered a payment
stablecoin within the scope of section 3 of the Act (12 U.S.C. 5902)
and these proposed regulations? Does the ubiquitous convertibility of
credit union shares and bank deposits in the U.S. financial system bear
on this question? Similarly, should digital assets redeemable only in
non-deposit liabilities of a company that are commonly viewed by the
public as ubiquitously convertible to bank deposits be considered to be
payment stablecoins? What are the practical or evasion risks of
possible interpretations?
By contrast, the proposal would define several key terms other than
solely by cross-reference to the Act either because the Act does not
define the term or because Treasury has determined that additional
clarity is needed to provide regulatory certainty.
Act or GENIUS Act. Proposed Sec. 1523.1(c) would define ``Act'' or
``GENIUS Act'' to mean the Guiding and Establishing National Innovation
for U.S. Stablecoins Act (12 U.S.C. 5901 et seq.).
Digital asset service provider. Proposed Sec. 1523.1(c) would
define ``digital asset service provider'' by cross-reference to section
2(7) of the Act (12 U.S.C. 5901(7)), with the additional clarification
that the term includes a person that, for compensation or profit,
engages in the business in the United States of issuing payment
stablecoins.
Treasury considered whether the Act should be read as treating
issuers of payment stablecoins and digital asset service providers as
mutually exclusive categories, but concluded that the better reading of
the Act is that issuers of payment stablecoins can simultaneously be
digital asset service providers. Notably, the Act does not specify that
issuers of payment stablecoins cannot be digital asset service
providers, but in other instances does specify when two categories are
mutually exclusive.\24\ Further, some of the core activities of payment
stablecoin issuers (such as the activities of permitted payment
stablecoin issuers listed in section 4(a)(7) of the Act (12 U.S.C.
5903(a)(7))) clearly fall within the list of digital asset service
provider activities in section 2(7) of the Act (12 U.S.C. 5901(7)). For
example, redeeming payment stablecoins (section 4(a)(7)(A)(ii) of the
Act (12 U.S.C. 5903(a)(7)(A)(ii))) necessarily involves exchanging
digital assets for monetary value (section 2(7)(A)(ii) of the Act (12
U.S.C. 5901(7)(A)(ii))). For this reason, Treasury not only determined
that the categories of payment stablecoin issuer and digital asset
service provider are overlapping, but that all persons that, for
compensation or profit, engage in the business in the United States of
issuing payment stablecoins will constitute digital asset service
providers as defined in the Act.
---------------------------------------------------------------------------
\24\ Compare section 2(7) of the Act (12 U.S.C. 5901(7))
(defining ``digital asset service provider'' without carving out
issuers of payment stablecoins) with section 2(12) of the Act (12
U.S.C. 5901(12)) (defining ``foreign payment stablecoin issuer'' and
clearly noting that a permitted payment stablecoin issuer is not a
foreign payment stablecoin issuer).
---------------------------------------------------------------------------
A contrary reading in which payment stablecoin issuers are deemed
not to be digital asset service providers could further have the effect
of exempting persons who engage in significant payment stablecoin offer
and sale activities in the United States from the operative
restrictions of section 3 (12 U.S.C. 5902) merely because they are also
engaged in payment stablecoin issuance. For example, such an
interpretation would, theoretically, allow a permitted payment
stablecoin issuer to offer and sell a payment stablecoin that a digital
asset service provider is not permitted to offer or sell, such as a
payment stablecoin issued by a foreign payment stablecoin issuer that
does not have the technological capability to comply, or will not
comply, with the terms of any lawful order and any reciprocal
arrangement pursuant to section 18 of the Act (12 U.S.C. 5916).\25\
This interpretation would likewise allow a foreign payment stablecoin
issuer to offer and sell a payment stablecoin issued by another issuer
that is not compliant with the GENIUS Act. Such an interpretation would
facilitate the evasion of section 3's prohibitions and obviate the
GENIUS Act's otherwise clear boundaries ensuring that payment
stablecoins offered and sold to persons in the United States comply
with the Act's requirements.
---------------------------------------------------------------------------
\25\ See section 3(b)(2) of the Act (12 U.S.C. 5902(b)(2)).
---------------------------------------------------------------------------
Question 6: Does Treasury's determination that all persons that,
for compensation or profit, engage in the business in the United States
of issuing payment stablecoins constitute digital asset service
providers reflect the best reading of the statute? Assuming payment
stablecoin issuers can also be digital asset service providers, is
additional clarity needed with respect to how any of section 3's
prohibitions regarding the offer or sale of payment stablecoins apply
to payment stablecoin issuers? Are there certain digital asset service
provider restrictions that should not apply to payment stablecoin
issuers, and if so, should it depend on whether the issuers are
registered or unregistered under the Act? By contrast, if issuers of
payment stablecoins and digital asset service providers are mutually
exclusive categories, what changes would be necessary to the proposal
to clarify the application of section 3?
Question 7: Should any additional clarification (beyond the one
clarification proposed) be provided on the statutory definition of the
term ``digital asset service provider''?
Issue. The term ``issue'' is not defined in the Act. Proposed Sec.
1523.1(c) defines ``issue'' to mean, except as required by a lawful
order, the first transfer of a payment stablecoin by the issuer,
whether directly or indirectly, including by crediting an account, that
results or will result in a person other than the issuer having the
right to use or transfer the payment stablecoin or to have the payment
stablecoin converted, redeemed, or repurchased.
Because the term ``issue'' is not defined in the Act, in order to
implement the limitation on payment
[[Page 53372]]
stablecoin issuance in section 3(a) (12 U.S.C. 5902(a)), it is
necessary for Treasury to determine when in the process of creating a
new payment stablecoin the payment stablecoin should be considered to
have been issued.\26\ The proposed definition contains several elements
designed to ensure that the definition captures the appropriate payment
stablecoin activities consistent with the text and purposes of the Act.
The proposed definition also contains an exception to allow for
compliance with a lawful order notwithstanding proposed Sec.
1523.2.\27\
---------------------------------------------------------------------------
\26\ For a description of how payment stablecoins are created,
see Strengthening American Leadership in Digital Financial
Technology at 90 (July 2025), https://www.whitehouse.gov/wp-content/uploads/2025/07/Digital-Assets-Report-EO14178.pdf.
\27\ The Act calls for compliance with lawful orders in various
provisions. See, e.g., sections 3(b)(2), 4(a)(6), and 8 of the Act
(12 U.S.C. 5902(b)(2), 5903(a)(6), and 5907). Treasury's proposed
regulatory provisions accordingly seek to implement the language
provided in the GENIUS Act regarding lawful orders.
---------------------------------------------------------------------------
First, the proposed definition focuses on the first transfer of the
payment stablecoin by the issuer. This element is consistent with the
plain meaning of ``issue'' \28\ as well as existing definitions of
``issue'' for other financial instruments.\29\ A consequence of this
element is that a digital asset that has been minted but is held in the
issuer's treasury would not be considered to have been issued as a
payment stablecoin because the digital asset has not yet been
transferred to a third party.\30\ However, the direct minting of a
payment stablecoin to a holder's wallet would be considered a first
transfer of the payment stablecoin.
---------------------------------------------------------------------------
\28\ See Black's Law Dictionary, ``Issue'' (12th ed., 2024)
(``to be put forth officially,'' ``to send out or distribute
officially''); Merriam-Webster Online (``to put forth or distribute
usually officially,'' ``to send out for sale or circulation'').
\29\ See UCC Sec. 3-105(a) (defining ``issue'' to mean ``the
first delivery of an instrument by the maker or drawer, whether to a
holder or nonholder, for the purpose of giving rights on the
instrument to any person''); id. at Sec. 1-201(b)(15) (defining
delivery, with respect to an instrument, as ``voluntary transfer of
possession''). Treasury believes that reference to negotiable
instruments under Article 3 of the Uniform Commercial Code (UCC) is
a helpful analogy because such instruments share certain
characteristics with payment stablecoins--namely that they are, or
are designed to be, used as a means of payment or settlement.
Treasury further believes that concepts of transfer with respect to
controllable electronic records under Article 12 of the UCC also
serve as helpful analogies. See, e.g., UCC Sec. 12-104(d) (``A
purchaser of a controllable electronic record acquires all rights in
the controllable electronic record that the transferor had or had
power to transfer . . .''); id. at Sec. 12-105(a) (providing that a
person has control over a record if it, among other things, gives
the person exclusive power to ``transfer control of the electronic
record to another person''). However, Treasury does not take a
position in this proposal on appropriate treatment under the UCC of
any transactions involving payment stablecoins, either before or
after the effective date of the Act.
\30\ Treasury notes that the OCC proposed to define
``outstanding issuance value'' to exclude payment stablecoins held
in the issuer's treasury. See 91 FR 10202, 10208 (Mar. 2, 2026).
---------------------------------------------------------------------------
Second, the proposed definition clarifies that the first transfer
of the payment stablecoin may be effected directly or indirectly by the
issuer. This element is intended to address situations where the first
transfer of the payment stablecoin is effected by the issuer through an
agent or intermediary acting on behalf of the issuer, such as an
underwriter or distributor.
Third, the proposed definition clarifies that the transfer of a
payment stablecoin includes the crediting of an account. This element
is intended to address situations where rights associated with the
payment stablecoin have been transferred to a person other than the
issuer, but the payment stablecoin remains in the issuer's wallet, for
example, because the issuer also serves as custodian. In this
situation, even though the payment stablecoin has not transferred to a
different wallet address, Treasury believes that an issuance has
occurred.
Fourth, the first transfer of the payment stablecoin by the issuer
must result or will result in a person other than the issuer having the
right to use or transfer the payment stablecoin or to have the payment
stablecoin converted, redeemed, or repurchased. This element reflects
the key features that make a digital asset a payment stablecoin as
defined in the Act: its usability as a means of payment or settlement
and its convertibility into a fixed amount of monetary value.\31\ As
such, in defining when a payment stablecoin is considered to have been
issued, Treasury believes that it is appropriate to focus on the
transaction that gives rise to these key features of a payment
stablecoin.\32\ Further, existing definitions of ``issue'' include
similar language focused on the vesting of rights in a third party.\33\
---------------------------------------------------------------------------
\31\ See section 2(22) of the Act (12 U.S.C. 5901(22)) (defining
``payment stablecoin'' as a digital asset that, among other things,
is, or is designed to be, used as a means of payment or settlement,
and the issuer of which is obligated to convert, redeem, or
repurchase for a fixed amount of monetary value).
\32\ Treasury notes that the OCC similarly concluded that the
concept of issuance should be understood consistent with the defined
term ``payment stablecoin.'' See 91 FR 10202, 10208 (Mar. 2, 2026)
(discussing ``outstanding issuance value'').
\33\ In particular, under Article 3 of the UCC, a negotiable
instrument is not issued unless the first delivery is ``for the
purpose of giving rights on the instrument to any person.'' See UCC
Sec. 3-105(a).
---------------------------------------------------------------------------
Treasury proposes to include the phrase ``will result'' in this
fourth element to make clear that the issuance of a payment stablecoin
need not result in a right to use or transfer the payment stablecoin
immediately, or a right to have the payment stablecoin converted,
redeemed, or repurchased immediately. Treasury considered that an
issuer may, by smart contract or otherwise, limit the holder of a
digital asset purporting to be a payment stablecoin from redeeming or
further transferring the payment stablecoin until some future time
(such as a purported payment stablecoin that may not be redeemed until
6 months after issuance). In such a case, during the lockout period,
the purported payment stablecoin could potentially be viewed as not
having been issued because the issuer does not have an obligation at
present to convert, redeem, or repurchase the purported payment
stablecoin on demand or the holder of the payment stablecoin does not
have the right to use or further transfer it. However, Treasury
believes that such an interpretation is not compelled by section 2(22)
or section 3(a) of the Act (12 U.S.C. 5901(22), 5902(a)) and would
facilitate evasion of section 3(a). Instead, for example, Treasury
believes that a purported payment stablecoin which the issuer is
obligated to convert, redeem, or repurchase for a third party at some
future time should, during the non-redemption period, be considered a
payment stablecoin that has been issued.
Another aspect of the fourth element of the definition of ``issue''
is that it does not require that the transferee be the person who has
the right to use, transfer, or redeem the payment stablecoin. For
example, Treasury considered that the issuer may transfer the payment
stablecoin to a custodian, but it is the custodian's customer who has
the right to use, transfer, or redeem the payment stablecoin. In this
case, Treasury believes that the payment stablecoin has been issued,
notwithstanding the fact that the transferee does not have the right to
use, transfer, or redeem the payment stablecoin. Additionally, Treasury
is aware that some payment stablecoins may be, as a technical matter,
redeemable only by certain persons (such as intermediaries in
contractual privity with the issuer), rather than by each individual
holder of the payment stablecoin. The proposed fourth element of the
definition of ``issue'' would ensure that these payment stablecoins are
considered to have been issued even though a person other than the
holder has the right to redeem the payment stablecoin.
The proposed definition of ``issue'' contains the phrase ``except
as required
[[Page 53373]]
by a lawful order'' to allow for compliance with a lawful order
notwithstanding proposed Sec. 1523.2.
The proposed definition of ``issue'' contains one additional
clarification: For the avoidance of doubt, after a payment stablecoin
has been converted, redeemed, repurchased, or otherwise reacquired by
the issuer, the first subsequent transfer of the payment stablecoin by
the issuer that otherwise satisfies the proposed definition is
considered a new issuance, whether or not the transfer is characterized
as a reissuance, except as required by a lawful order. This is the case
whether or not the issuer burns the digital asset or holds it on its
books. Treasury believes this understanding of reissuance is
appropriate, administrable, and consistent with the Act because,
although the digital asset may continue to exist following the
redemption or transfer back to the issuer, the issuer no longer has an
obligation to a third party to convert, redeem, or repurchase the
payment stablecoin. However, the subsequent transfer of the payment
stablecoin to a person other than the issuer would have the economic
effect of a new issuance, in that a third party would newly have the
right to use or transfer the payment stablecoin, or to have the payment
stablecoin converted, redeemed, or repurchased. Finally, recognizing
that the terms of a lawful order requiring seizing, freezing, burning,
or preventing the transfer of a payment stablecoin may additionally
require reissuance of the payment stablecoin, the last clause of the
clarification makes clear that issuers may reissue a payment stablecoin
to comply with a lawful order notwithstanding proposed Sec. 1523.2.
As discussed in section II.H below, Treasury is proposing to
include in Appendix A several interpretations of proposed Part 1523.
Some of the proposed interpretations relate to when a payment
stablecoin is considered to be issued.
Question 8: Is the proposed definition of ``issue'' appropriate and
clear as to the point in time at which an issuance occurs? Should a
payment stablecoin be considered to have been issued earlier or later
in the process of creating a payment stablecoin?
Question 9: Should a payment stablecoin that is minted and exists
on the public blockchain be considered issued even where the issuer
holds the payment stablecoin in its treasury?
Question 10: Is the phrase ``first transfer'' sufficiently clear in
the context of payment stablecoin issuance? Should the definition
incorporate other existing concepts relating to transfer, such as
transfer of control or transfer of possession under the UCC?
Question 11: Should a payment stablecoin that a third party has
purchased be considered issued upon offer or sale, even though it has
not yet been transferred to the third party (or potentially even
minted)?
Question 12: What additional clarification would be useful
regarding when a payment stablecoin is transferred ``indirectly'' by an
issuer? Should Treasury clarify that this would cover, for example,
transfers that occur automatically through smart contracts or other
mechanisms?
Question 13: How should purported restrictions on the class of
holders eligible to redeem the payment stablecoin, or the time or
manner in which they can do so, be considered when determining whether
a payment stablecoin has been issued? For example, should a payment
stablecoin be considered issued if there is no obligation at present to
redeem the payment stablecoin, but there is an obligation to redeem it
in the future? Should it matter whether the obligation to redeem the
payment stablecoin in the future is known with certainty (e.g., the
payment stablecoin can be redeemed starting six months after issuance),
or whether the existence of the obligation to redeem the payment
stablecoin in the future is dependent on an uncertain trigger event or
condition (e.g., the payment stablecoin can be redeemed only if a
particular trigger occurs)?
Question 14: How should a payment stablecoin that has been redeemed
or is otherwise transferred back to the issuer be viewed? If the
payment stablecoin is held by the issuer (rather than being burned) for
a time and is thereafter transferred to a third party, should that
constitute a new issuance or only a new offer or sale?
Question 15: Which types of activity by an issuer, or by a person
acting on behalf of an issuer, including activity that could be
considered to be secondary market activity, should be treated as an
issuance, and which should not? Should the analysis differ for issuer
buybacks and resales, market-making activity, transfers of redeemed or
reacquired stablecoins, or recovered or seized tokens?
Question 16: Should an increase in the aggregate amount of payment
stablecoins outstanding be a necessary condition for an activity to
constitute an issuance? Are there circumstances in which the aggregate
amount outstanding does not increase, but the activity should
nevertheless be treated as an issuance, such as certain chain
migrations, burning of tokens, wrapped-token arrangements, or transfers
of previously redeemed or reacquired stablecoins?
Question 17: Under what circumstances should internal transfers,
custody movements, treasury-management activity, or other activity by
or on behalf of an issuer be treated as an issuance? How should the
definition apply to transfers among issuer-controlled wallets,
transfers to custodians or agents acting solely for the issuer,
transfers to affiliates, transfers to omnibus accounts, or transfers to
exchanges, market makers, liquidity providers, or other intermediaries
that may later make the payment stablecoin available to third parties?
Question 18: How should the theft of a payment stablecoin from the
issuer or the unintended transfer of a payment stablecoin to a third
party by the issuer be viewed? What about a transfer in the absence of
a sale (e.g., an airdrop)? Should the payment stablecoins in these
examples be considered to have been issued?
Question 19: Under what circumstances, if any, should the transfer
or movement of a payment stablecoin from one blockchain network to
another, including through a bridge or similar cross-chain mechanism,
be treated as an issuance? Should the treatment depend on the technical
structure of the bridging arrangement, including whether the
arrangement uses a lock-and-mint, burn-and-mint, liquidity-pool,
issuer-operated bridge, third-party bridge, or other mechanism?
Question 20: Under what circumstances, if any, should a bridge
provider, bridge operator, custodian, or other intermediary involved in
cross-chain transfers be treated as an issuer of a payment stablecoin?
What factors should be relevant to that determination, including
control over minting or burning, control over reserve assets,
redemption obligations, contractual rights, or the ability to create or
retire tokenized claims?
Question 21: Under what circumstances should the creation, minting,
distribution, or transfer of a wrapped version of a payment stablecoin,
a bridged representation of a payment stablecoin, a deposit receipt, or
another tokenized claim referencing a payment stablecoin be treated as
a new issuance? Should the analysis depend on the economic or legal
rights embedded in the wrapped token, receipt token, or other
instrument, including rights to use, transfer, redeem, convert, or
obtain the underlying payment stablecoin or related reserve value?
[[Page 53374]]
Question 22: Is it clear from the definition of ``issue'' that an
issuer directly minting a payment stablecoin into a holder's account is
considered an issuance? If not, how could that be made more clear?
Issuer. Although the Act defines terms such as ``permitted payment
stablecoin issuer'' and ``foreign payment stablecoin issuer,'' the term
``issuer'' itself is not defined in the Act. Proposed Sec. 1523.1(c)
would define ``issuer'' of a particular payment stablecoin to mean a
person who (i) is obligated to convert, redeem, or repurchase the
payment stablecoin for a fixed amount of monetary value, and (ii)
represents that the person will maintain, or creates the reasonable
expectation that the person will maintain, a stable value relative to
the value of a fixed amount of monetary value.
Treasury believes that a definition of ``issuer'' is necessary
because both the Act and the proposal refer to the ``issuer'' of a
payment stablecoin in several instances. For example, the Act's
definition of ``payment stablecoin'' refers to the issuer,\34\ and
Treasury's proposed definition of ``issue'' requires a transfer to a
person other than the issuer. More generally, Treasury believes that
there may be situations where the creation and distribution of a
payment stablecoin involves multiple parties, such as in white label
arrangements, and a definition of ``issuer'' would be useful to clarify
each party's obligations and facilitate compliance with the Act.
---------------------------------------------------------------------------
\34\ See section 2(22) of the Act (12 U.S.C. 5901(22)).
---------------------------------------------------------------------------
The proposed definition of ``issuer'' incorporates two elements,
both of which derive from the statutory definition of ``payment
stablecoin'': the issuer is obligated to convert, redeem, or repurchase
the payment stablecoin for a fixed amount of monetary value, and the
issuer represents that such issuer will maintain, or creates the
reasonable expectation that it will maintain, a stable value relative
to the value of a fixed amount of monetary value. As described above
with respect to the definition of ``issue,'' Treasury interprets the
obligation to convert, redeem, or repurchase the payment stablecoin
broadly--imposing a lockout period or placing other conditions on
redemption will not prevent a person from being considered the
``issuer'' of a particular payment stablecoin if the conditions for
being an issuer are otherwise satisfied.
Treasury believes that relying on these core statutory functions of
the issuer relating to the payment stablecoin appropriately identifies
the issuer. Other persons who participate in the issuance (e.g., by
performing technical functions to effectuate minting of the payment
stablecoin, or by providing their branding in a white label
arrangement) but do not carry out the functions identified in the
statute would not be considered an issuer of the payment stablecoin for
purposes of proposed Part 1523 but may still be subject to criminal
penalties if they knowingly participate in an unlawful issuance, as
described further in the discussion around proposed Sec. 1523.2(d).
Question 23: Is the proposed definition of ``issuer'' appropriate
and clear? Is a definition of ``issuer'' necessary at all? Should
either of the proposed prongs be sufficient? For example, should having
a redemption obligation be independently sufficient to be treated as an
issuer, without inquiry into representations or expectations regarding
maintaining a stable value, or vice versa? Should the definition of
``issuer'' also include a prong related to the minting or creation of
the payment stablecoin? If so, how should the definition account for an
issuer that contracts out the technical work of minting the payment
stablecoin to a third party?
Question 24: Are there situations in which the two activities that
define ``issuer'' under the proposal are conducted by different
persons? In those cases, who should be viewed as the issuer of the
payment stablecoin? Is there a risk of evasion if activities are split
among persons to attempt to avoid any one of them being considered the
issuer? What about a corporate structure where a single subsidiary or
affiliate has the legal obligation to redeem the payment stablecoins,
but the issuance activities are otherwise carried out in a separate
public-facing entity?
Question 25: Can there be more than one issuer of a payment
stablecoin? For example, if a parent entity functionally takes all
steps to issue the payment stablecoin but the obligation is legally
recorded as a liability of a subsidiary or affiliate, is only the
subsidiary or affiliate considered the issuer, or has the parent also
issued a payment stablecoin? Similarly, in a white label arrangement,
should a person providing its branding for the payment stablecoin be
considered an issuer? Does that answer change if the parent, person
providing its branding, or another person has a joint or secondary
obligation (e.g., through a guarantee) to redeem or repurchase the
payment stablecoin (e.g., in the event that the original obligee fails
to redeem or repurchase)? Is it better to treat the parent, person
providing its branding, or other person as ``participating'' in the
issuance in accordance with proposed Sec. 1523.2(d) below, rather than
as an issuer of the payment stablecoin?
Located in the United States. Section 3 of the Act (12 U.S.C. 5902)
refers to a person ``located in the United States'' but does not define
the phrase.\35\ In other instances, section 3 refers to persons located
or activities conducted ``in the United States,'' but this phrase is
similarly undefined.\36\ As described below in connection with proposed
Sec. 1523.2 and Sec. 1523.3, Treasury has interpreted these phrases
in section 3 of the Act (12 U.S.C. 5902) consistently as referring to
persons ``located in the United States.''
---------------------------------------------------------------------------
\35\ E.g., section 3(e) of the Act (12 U.S.C. 5902(e)) (stating
that section 3 is intended to have extraterritorial effect if
conduct involves the offer or sale of a payment stablecoin ``to a
person located in the United States'').
\36\ E.g., section 3(a) of the Act (12 U.S.C. 5902(a))
(prohibiting the issuance of certain payment stablecoins ``in the
United States''); section 3(b)(1) of the Act (12 U.S.C. 5902(b)(1))
(prohibiting digital asset service providers from offering or
selling certain payment stablecoins ``to a person in the United
States'').
---------------------------------------------------------------------------
Proposed Sec. 1523.1(c) would define ``located in the United
States'' separately with respect to individuals and entities. With
respect to an individual, ``located in the United States'' would mean
the individual is physically present in the United States, unless the
individual is not a resident of the United States and the individual's
physical presence in the United States is merely temporary. The
proposed definition thus generally turns on the individual's physical
presence on U.S. soil,\37\ but carves out temporarily present non-
residents. Treasury considered an alternative approach in which all
individuals who are physically present in the United States are
regarded as ``located in the United States,'' but concluded that such
an approach is not compelled by the Act and could create significant
administrability concerns and punitive results. For example, consider a
non-U.S. resident who is issued a payment stablecoin by a foreign
payment stablecoin issuer while temporarily on vacation in the United
States, even if the individual has a longstanding relationship with the
foreign payment stablecoin issuer, and even if the foreign payment
stablecoin issuer has previously verified the foreign residency of the
individual and was not aware of the individual's temporary travel plans
to the United States. In this case,
[[Page 53375]]
Treasury does not believe it would be reasonable to subject the foreign
payment stablecoin issuer to all requirements relating to dealings with
persons located in the United States and potential associated
penalties, and the Act does not clearly require this result.
---------------------------------------------------------------------------
\37\ See Black's Law Dictionary, ``Location'' (12th ed. 2024)
(``the specific place or position of a person or thing'').
---------------------------------------------------------------------------
Conversely, the proposed definition of ``located in the United
States'' would exclude U.S. residents who are not physically present in
the United States, such as a U.S. resident who is temporarily abroad.
Treasury does not believe that the limitation in section 3(a) of the
Act (12 U.S.C. 5902(a)) on issuing a payment stablecoin ``in the United
States'' was intended to capture, for example, a foreign payment
stablecoin issuer who issues a payment stablecoin to a U.S. resident
temporarily traveling abroad on vacation. Application of Part 1523 to
U.S. residents abroad would also risk frustrating particular goals of
the Act, such as to promote payment stablecoins as payment instruments
and establish reciprocal arrangements with foreign jurisdictions, while
providing an appropriately tailored regime to mitigate potential
illicit finance threats. At the outer extreme, a U.S. resident
traveling temporarily in a foreign country where payment stablecoins
were routinely used as payment instruments would be unable to purchase
a limited amount of payment stablecoins used in that country to engage
in ordinary transactions within the country.
With respect to a partnership, company, corporation, association,
trust, estate, cooperative organization, or other business entity,
proposed Sec. 1523.1(c) would define ``located in the United States''
to mean that the entity (i) is organized or incorporated under the laws
of the United States or a State, or (ii) has its principal place of
business in the United States. This disjunctive definition comports
with traditional notions of corporate domicile,\38\ and Treasury
believes that this traditional definition is appropriate in the context
of the Act.
---------------------------------------------------------------------------
\38\ See Black's Law Dictionary, ``Domicile'' (12th ed. 2024)
(stating that ``the legal home of a corporation'' is usually ``its
state of incorporation or the state in which it maintains its
principal place of business,'' and noting that for determining
whether diversity jurisdiction exists in federal court, ``a
corporation is considered a citizen of both its state of
incorporation and the state of its principal place of business'').
---------------------------------------------------------------------------
As discussed in section II.H below, Treasury is proposing to
include in Appendix A several interpretations of proposed Part 1523.
Some of the proposed interpretations relate to when a person is
considered to be located in the United States.
Question 26: Is the proposed definition of ``located in the United
States'' appropriate and clear? Is the proposed definition
underinclusive of persons who should properly be considered located in
the United States? Is the proposed definition overinclusive of persons
who should not properly be considered located in the United States?
Question 27: Should Treasury prescribe standards for what
constitutes residence in the United States or temporary presence in the
United States?
Question 28: Does Treasury's proposed definition of ``located in
United States'' present substantial operational challenges for issuers
or risk of evasion by persons to whom tokens are issued? What
considerations and capabilities should Treasury take into account to
address such challenges and risks?
Question 29: Should Treasury prescribe standards for what
constitutes an entity's principal place of business for purposes of
determining its corporate domicile? Should Treasury consider
alternatives to what it means to be ``located in the United States''
for corporate entities, such as where an entity does substantial
business? Are all entities, incorporated or unincorporated, that may be
issuers of payment stablecoins sufficiently captured by this
definition?
Offer. Proposed Sec. 1523.1(c) would define ``offer'' by cross-
reference to section 2(21) of the Act (12 U.S.C. 5901(21)), with the
additional clarification that the term includes making available for
purchase, sale, or exchange a payment stablecoin that has not yet been
issued. Treasury believes that the plain meaning of ``offer'' includes
presales of payment stablecoins that have not yet been issued, and that
making this interpretation explicit in proposed Sec. 1523.1(c) would
promote clarity and facilitate compliance with the Act's requirements
related to offers and sales of payment stablecoins.
Question 30: Should the term ``offer'' be defined to expressly
state that presales of payment stablecoins that have not yet been
issued constitute offers of payment stablecoins?
United States. The term ``United States'' is not defined in the
GENIUS Act. Proposed Sec. 1523.1(c) would define ``United States'' to
mean each of the several States (defined in the Act to include the
District of Columbia and each territory of the United States), the
Indian lands (as that term is defined in the Indian Gaming Regulatory
Act), and the Insular Possessions of the United States.\39\ Together
with the statutory definition of ``State,'' Treasury intends the
proposed definition of ``United States'' to include the full territory
subject to U.S. jurisdiction.
---------------------------------------------------------------------------
\39\ The proposed definition is based on the definition of
``United States'' in 31 CFR 1010.100(hhh), except that the reference
to U.S. territories has been removed because the statutory
definition of ``State'' already includes U.S. territories.
---------------------------------------------------------------------------
Question 31: Is the proposed definition of ``United States''
(together with the statutory definition of ``State'') clear? Is the
proposed definition underinclusive of geographies that should properly
be considered part of the United States for purposes of Part 1523? Is
the proposed definition overinclusive of geographies that should not
properly be considered part of the United States for purposes of Part
1523?
Question 32: Are there any additional statutory or non-statutory
terms that should be defined in Part 1523?
D. Payment Stablecoin Issuance (Proposed Sec. 1523.2)
Proposed Sec. 1523.2 implements the limitation in section 3(a) of
the Act (12 U.S.C. 5902(a)) on payment stablecoin issuance in the
United States. Proposed paragraph (a) codifies the statutory limitation
with certain clarifications. Proposed paragraph (b) clarifies when a
person will be considered to have issued a payment stablecoin in the
United States. Proposed paragraph (c) clarifies when a person will be
considered to not have issued a payment stablecoin in the United
States. Finally, proposed paragraph (d) clarifies when a person has
participated in a violation of section 3(a) of the Act (12 U.S.C.
5902(a)) for purposes of the penalty imposed by section 3(f) of the Act
(12 U.S.C. 5902(f)).
1. Limitation on Payment Stablecoin Issuance in the United States
(Proposed Sec. 1523.2(a))
Section 3(a) of the Act (12 U.S.C. 5902(a)) generally provides that
it shall be unlawful for any person other than a permitted payment
stablecoin issuer to issue a payment stablecoin in the United States.
Proposed Sec. 1523.2(a) implements this provision and provides that,
except in accordance with the exemptions and safe harbors in proposed
Sec. 1523.4, it shall be unlawful for any person to issue a payment
stablecoin in the United States unless the person is a permitted
payment stablecoin issuer, or a foreign payment stablecoin issuer that
meets the criteria set out in section 18(a) of the Act (12 U.S.C.
5916(a)).
[[Page 53376]]
The text of proposed Sec. 1523.2(a) differs from the text of
section 3(a) of the Act (12 U.S.C. 5902(a)) in two key ways. First, the
inclusion of the qualifying language ``[e]xcept in accordance with
Sec. 1523.4'' makes clear from the outset that certain exemptions and
safe harbors may apply. These exemptions and safe harbors are addressed
in proposed Sec. 1523.4.
Second, while the text of section 3(a) (12 U.S.C. 5902(a)) only
expressly contemplates issuance of payment stablecoins in the United
States by permitted payment stablecoin issuers, proposed Sec.
1523.2(a) additionally states that foreign payment stablecoin issuers
that meet the criteria set out in section 18(a) of the Act (12 U.S.C.
5916(a)) may lawfully issue payment stablecoins in the United States.
Treasury believes that the best reading of the Act, considered as a
whole, is that foreign payment stablecoin issuers that meet the
criteria set out in section 18(a) of the Act (12 U.S.C. 5916(a)) may
issue payment stablecoins in the United States. This conclusion is
principally based on two key provisions of the statute. First, section
18(a) of the Act (12 U.S.C. 5916(a)) provides that the ``prohibitions
under section 3'' shall not apply to a foreign payment stablecoin
issuer meeting certain criteria. Treasury believes that the plain
meaning of this phrase is that the prohibition in section 3(a) of the
Act (12 U.S.C. 5902(a)) shall not apply to a foreign payment stablecoin
issuer meeting the criteria set out in section 18(a) of the Act (12
U.S.C. 5916(a)).\40\
---------------------------------------------------------------------------
\40\ Treasury acknowledges that the heading of section 3(a) of
the Act (12 U.S.C. 5902(a)) refers to this paragraph as a
``limitation'' rather than a ``prohibition'' (unlike section 3(b) of
the Act (12 U.S.C. 5902(b))). However, Treasury does not believe
that paragraph headings are determinative. The limitation in section
3(a) is, in substance, a prohibition on issuance of payment
stablecoins in the United States by persons not authorized to do so,
and is therefore among the prohibitions referenced in section 18(a)
of the Act (12 U.S.C. 5916(a)).
---------------------------------------------------------------------------
Second, section 4(a)(12)(C) of the Act (12 U.S.C. 5903(a)(12)(C))
expressly states that certain companies not domiciled in the United
States or its Territories may not issue payment stablecoins without the
approval of the Stablecoin Certification Review Committee (SCRC). This
section of the statute would be in direct tension with section 3 if
foreign payment stablecoin issuers were outright prohibited from
issuing payment stablecoins in the United States.
Treasury further believes that practical considerations reinforce
the conclusion, based on the text of the statute, that foreign payment
stablecoin issuers that meet the criteria set out in section 18(a) of
the Act (12 U.S.C. 5916(a)) may issue payment stablecoins in the United
States. The Act clearly contemplates secondary market transactions in
the United States involving payment stablecoins issued by foreign
payment stablecoin issuers.\41\ Thus, construing the Act as prohibiting
direct issuance of payment stablecoins in the United States by foreign
payment stablecoin issuers would require extra steps before these
payment stablecoins are made available in U.S. markets.\42\ Treasury
believes that these extra steps would create inefficiencies,
potentially obscure from U.S. regulators certain key steps in the
creation of payment stablecoins intended for persons located in the
United States, and may create an unintended uneven playing field as
between permitted payment stablecoin issuers and foreign payment
stablecoin issuers that meet the criteria set out in section 18(a) of
the Act (12 U.S.C. 5916(a)) that ultimately discourages payment
stablecoin and broader digital asset innovation in the United States
relative to foreign countries. Treasury believes this result would be
inconsistent with the purposes of the Act and does not reflect the best
reading of the Act.\43\
---------------------------------------------------------------------------
\41\ See, e.g., section 3(b)(2) of the Act (12 U.S.C.
5902(b)(2)) and section 18(c)(1)(A) of the Act (12 U.S.C.
5916(c)(1)(A)).
\42\ Specifically, a foreign payment stablecoin issuer would
need to issue the payment stablecoin to a person not located in the
United States, such as a foreign exchange, which in turn would need
to then act as a digital asset service provider to offer or sell the
payment stablecoins to persons in the United States or transfer the
payment stablecoin to a digital asset service provider to do so.
\43\ Treasury also considered, in the alternative, whether the
Act contemplates that payment stablecoins issued by foreign payment
stablecoin issuers would only be traded on the secondary market in
the United States, rather than being directly issued in the United
States. See, e.g., section 3(b)(2) of the Act (12 U.S.C. 5902(b)(2))
(expressly focusing on the offer and sale of such stablecoins);
section 18(c)(1)(A) of the Act (12 U.S.C. 5916(c)(1)(A)) (providing
that a foreign payment stablecoin issuer may offer or sell payment
stablecoins using a digital asset service provider if certain
requirements are met). However, Treasury believes that these other
isolated references cannot overcome the plain text reading of
section 18(a) of the Act (12 U.S.C. 5916(a)), as described above.
---------------------------------------------------------------------------
Treasury notes that proposed Sec. 1523.2(a) addresses generally
which categories of persons may issue a payment stablecoin in the
United States and does not exhaustively list all potentially applicable
prerequisites to issuing payment stablecoins in the United States. For
example, a permitted payment stablecoin issuer or a foreign payment
stablecoin issuer that meets the criteria set out in section 18(a) of
the Act (12 U.S.C. 5916(a)) may need to obtain the approval of the SCRC
prior to issuing a payment stablecoin pursuant to section 4(a)(12) of
the Act (12 U.S.C. 5903(a)(12)).\44\
---------------------------------------------------------------------------
\44\ Treasury expects that the Stablecoin Certification Review
Committee will issue separate regulations or guidance to implement
section 4(a)(12) of the Act (12 U.S.C. 5903(a)(12)).
---------------------------------------------------------------------------
Question 33: Does Treasury's interpretation that foreign payment
stablecoin issuers that meet the criteria set out in section 18(a) may
issue payment stablecoins in the United States reflect the best reading
of the Act? What would be the practical effects if foreign payment
stablecoin issuers were instead permitted to offer and sell payment
stablecoins to persons in the United States but not issue payment
stablecoins in the United States?
Question 34: Should Sec. 1523.2(a) address generally which
categories of persons may issue a payment stablecoin in the United
States (as proposed), or should it list some or all potentially
applicable prerequisites to issuing payment stablecoins in the United
States (such as the need to obtain the approval of the SCRC pursuant to
section 4(a)(12) (12 U.S.C. 5903(a)(12)))?
2. Issuance in the United States (Proposed Sec. 1523.2(b))
The Act does not define when a person has issued a payment
stablecoin ``in the United States.'' Proposed Sec. 1523.2(b) provides
that a person will be considered to have issued a payment stablecoin in
the United States only if, at the time of issuance, the person is
located in the United States, or the person issues the payment
stablecoin to a person located in the United States.
Treasury first determined that a standard based on the location of
the parties to the transaction is consistent with the text of the Act
and would be administrable and promote clarity and compliance with the
requirements of the Act. In particular, the proposed approach would be
simpler for all payment stablecoin market participants to understand,
relative to other approaches that considered, for example, a broader
conception of U.S. nexus, and thus better facilitate compliance with
the requirements of the Act, especially in light of criminal penalties
associated with violations of section 3(a) (12 U.S.C. 5902(a)).\45\
[[Page 53377]]
Similarly, the proposed approach would be more administrable for
Treasury and other implementing agencies.
---------------------------------------------------------------------------
\45\ Unlike other Federal financial regulatory frameworks, such
as Federal securities law frameworks or Federal banking law
frameworks, which have existed for decades, the Federal payment
stablecoin framework has not yet even become effective. Treasury
believes that adopting regulations that clarify the criminal
penalties associated with participations in issuances in violation
of section 3(a) of the Act (12 U.S.C. 5902(a)) as provided in
section 3(f) of the Act (12 U.S.C. 5902(f)) should be set forth as
simply as practicable. Treasury further believes this approach
comports with the spirit of Executive Order 14294, Fighting
Overcriminalization in Federal Regulations, 90 FR 20363 (May 14,
2025) (stating that the ``status quo . . . privileges large
corporations, which can afford to hire expensive legal teams to
navigate complex regulatory schemes and fence out new market
entrants, over average Americans'' and that ``[a]gencies
promulgating regulations potentially subject to criminal enforcement
should explicitly describe the conduct subject to criminal
enforcement''). Therefore, in accordance with Executive Order 14294,
participating in violations of section 3(a) and the proposed
implementing regulations, if finalized, may be subject to criminal
penalties with mens rea of knowingly as an element pursuant to 12
U.S.C. 5902(f).
---------------------------------------------------------------------------
Treasury next considered whether issuance in the United States
should be determined based on the location of the issuer or based on
the location of the third party to which the payment stablecoin has
been issued.\46\ In the former case, a payment stablecoin would be
considered issued in the United States if the issuer is located in the
United States, even if the third party to which the payment stablecoin
has been issued is located abroad. In the latter case, a payment
stablecoin would be considered issued in the United States if the third
party is located in the United States, even if the issuer is located
abroad.
---------------------------------------------------------------------------
\46\ Treasury's interpretation of ``located in the United
States'' is discussed above in connection with proposed Sec.
1523.1(c).
---------------------------------------------------------------------------
Various provisions of the Act suggest that Congress was concerned
with both the issuance of payment stablecoins to persons located in the
United States and the issuance of payment stablecoins by issuers
located in the United States.\47\ However, Treasury believes that the
Act does not evidence any intent to capture issuances where neither the
issuer nor the recipient of the payment stablecoin is located in the
United States. Extending the reach of part 1523 to such issuances could
raise questions about the extraterritorial application of the Act.
---------------------------------------------------------------------------
\47\ By contrast, Treasury interprets the Act's offer and sale
provisions as squarely focused on protecting U.S. markets. For
example, section 3(b)(1) of the Act (12 U.S.C. 5902(b)(1)) and
section 3(e) of the Act (12 U.S.C. 5902(e)) both explicitly refer to
the offer or sale of a payment stablecoin ``to a person [located] in
the United States.'' See also section 4(e)(3) of the Act (12 U.S.C.
5903(e)(3)) (making it unlawful ``to market a product in the United
States as a payment stablecoin'' unless issued pursuant to the Act).
In comparison, the issuance provision in section 3(a) of the Act (12
U.S.C. 5902(a)) uses broader language (``in the United States''
rather than ``to a person [located] in the United States''), which
suggests a broader focus on issuance activities based in the United
States, even if the person to whom a payment stablecoin is issued is
located abroad. Other provisions of the Act related to issuers, such
as section 4(a) of the Act (12 U.S.C. 5903(a))'s standards for
permitted payment stablecoin issuers, evince a Congressional concern
for issuers of payment stablecoins located in the United States and
relying on the U.S. financial system for their operations.
---------------------------------------------------------------------------
As discussed in section II.H below, Treasury is proposing to
include in Appendix A several interpretations of proposed Part 1523.
Some of the proposed interpretations relate to when a payment
stablecoin is considered to be issued in the United States.
Question 35: Should issuance in the United States be determined
based on the location of the parties to the transaction? Alternatively,
should Treasury consider other, broader measures of nexus to the United
States during the issuance process, such as the use of U.S. financial
institutions, payment rails, or other infrastructure?
Question 36: Is the proposed standard for when a payment stablecoin
is considered to have been issued in the United States appropriate? For
example, should the location of a payment stablecoin issuance be
determined based solely on the location of the issuer, or based solely
on the location of the third party to which the payment stablecoin has
been issued?
Question 37: Are there other situations covered by proposed Sec.
1523.2 for which Treasury should also not deem an issuance in the
United States to have occurred in furtherance of the purposes of this
Act? For example, should issuances resulting from certain types of
reverse solicitations involving payment stablecoins issued by foreign
payment stablecoin issuers not be deemed to violate the prohibition?
3. Activities Deemed Not To Be Issuance in the United States (Proposed
Sec. 1523.2(c))
Whereas proposed Sec. 1523.2(b) is intended to provide clarity
about what constitutes payment stablecoin issuance in the United States
for purposes of section 3(a) of the Act (12 U.S.C. 5902(a)), proposed
Sec. 1523.2(c) describes when a person not located in the United
States will be deemed not to issue a payment stablecoin in the United
States. In this way, proposed Sec. 1523.2(c) is intended to provide
clarity and promote compliance with the Act by describing what a
foreign issuer must do to avoid any potential liability under section
3(a) of the Act (12 U.S.C. 5902(a)). Significantly, a person that meets
the requirements of proposed Sec. 1523.2(c) will be deemed not to have
violated section 3(a) of the Act (12 U.S.C. 5902(a)) even if the
person's activities would otherwise constitute, for example, the
inadvertent issuance of an unregistered payment stablecoin to a person
located in the United States.
To benefit from the protection of proposed Sec. 1523.2(c), a
person must meet four conditions. First, the person must not be located
in the United States as defined in proposed Sec. 1523.1(c). Second,
the person must reasonably believe that each person to whom the payment
stablecoin is issued is not located in the United States. Treasury
acknowledges that what constitutes a reasonable belief may depend on
the facts and circumstances. However, Treasury intends this requirement
to exclude situations where the issuer knows, has reason to know, or
should know, based on the facts and circumstances, including
representations of the person to whom the payment stablecoin is issued
or other information reasonably accessible to the issuer, that the
person is located in the United States.
Third, the issuer must have adopted and implemented policies,
procedures, and controls reasonably designed to avoid issuing the
payment stablecoin to any person located in the United States. Treasury
emphasizes that these policies, procedures, and controls must not only
be adopted on paper, but actually implemented in the issuer's
operations, in order for the issuer to benefit from proposed Sec.
1523.2(c). In addition, Treasury believes that policies, procedures,
and controls cannot be said to be reasonably designed if they are
static; rather, Treasury expects issuers to periodically review and
update their policies, procedures, and controls as warranted by
changing circumstances, such as when the payment stablecoin market
matures, technology evolves, the issuer gains experience in issuing
payment stablecoins, and in response to discovery of any inadvertent
issuance to persons located in the United States.
Finally, the issuer must not engage in advertising or solicitation
activities that target, or could be reasonably expected to have the
effect of targeting, any person located in the United States. Treasury
believes this condition is necessary to avoid a situation where an
issuer is not knowingly issuing payment stablecoins to a person located
in the United States, but is engaged in activities that could
foreseeably have this result.
Proposed Sec. 1523.2(c) reflects certain concepts that are similar
to concepts reflected in Regulation S under the Securities Act,
including determination of the non-U.S. status of the relevant person
and prohibition against U.S.-targeted advertising or solicitation.\48\
[[Page 53378]]
Proposed Sec. 1523.2(c), however, would operate within the proposed
definition of ``located in the United States'' and would not adopt
Regulation S's offshore-transaction framework. In particular, proposed
Sec. 1523.2(c) would not determine whether an entity acquirer is
outside the United States by reference to the location from which an
authorized employee or other authorized person originates the relevant
transaction instruction.
---------------------------------------------------------------------------
\48\ Regulation S clarifies the extraterritorial application of
the registration provisions of the Securities Act of 1933. It
provides generally that any offer or sale of securities that occurs
outside the United States is not subject to registration under the
Securities Act, and includes two safe harbors for specified
transactions. See Release No. 33-6863 (April 24, 1990). The safe
harbors require that offers and sales of securities occur in
offshore transactions (which includes not being made to U.S.
persons), and that no directed selling efforts are made in the
United States. The term ``offshore transaction'' is defined in Rule
902(c) and the term ``directed selling efforts'' is defined in Rule
902(h) of Regulation S. While proposed part 1523 is similar in
certain ways to Regulation S, Treasury does not intend to formally
incorporate any portion of that regulation or any interpretations
thereof.
---------------------------------------------------------------------------
Question 38: What policies, procedures, or controls should support
a reasonable belief that the acquiring person is outside the United
States? Should Treasury identify specific controls, such as customer
identification and due diligence, account-opening information,
geographic access restrictions, device- or network-location checks,
contractual representations, transaction monitoring, or other controls?
Would this diligence take the form of self-attestations, IP address
checking, identification document checking, or something else? If the
issuer only directly distributed to a digital asset service provider or
other intermediary to make the market or otherwise facilitate the
transfer of newly-issued payment stablecoins to the ultimate
purchasers, should the issuer's obligations be limited to checking
whether the intermediary is located in the United States? Or should the
issuer be required or expected to work with the intermediary to confirm
whether the ultimate purchasers of newly-issued payment stablecoins are
located in the United States? Does a reasonableness standard provide
sufficient guidance? Should the policies, procedures, and controls be
reviewed and updated on a particular cadence?
4. Participation in Violation of Section 3(a) of the Act (Proposed
Sec. 1523.2(d))
Section 3(f) (12 U.S.C. 5902(f)) imposes certain penalties on
persons who knowingly participate in a violation of section 3(a) (12
U.S.C. 5902(a)). The Act does not define what it means to participate
in a violation of section 3(a)'s limitation on payment stablecoin
issuance. To promote clarity on the scope of this penalty provision and
prevent evasion of the Act, Treasury is proposing three specific but
non-exclusive examples in proposed Sec. 1523.2(d) of when a person
would be considered to participate in a violation of section 3(a) in
connection with a payment stablecoin issued in violation of section
3(a). These proposed examples do not represent all situations where a
person would be considered to participate in a violation of section
3(a), but rather Treasury enumerates these examples to provide a
principled framework in implementing regulations with respect to
section 3(a).
First, proposed Sec. 1523.2(d)(1) provides that a person would
participate in a violation of section 3(a) if, in connection with a
payment stablecoin issued in violation of section 3(a), the person
incurs an obligation to a third party to convert, redeem, or repurchase
a payment stablecoin, including a secondary obligation to convert,
redeem, or repurchase on behalf of the original issuer. This example is
intended to capture the issuer itself, as well as others who
effectively function as a joint issuer or guarantor insofar as they are
obligated to redeem a payment stablecoin issued in violation of section
3(a).
Second, proposed Sec. 1523.2(d)(2) provides that a person would
participate in a violation of section 3(a) if, in connection with a
payment stablecoin issued in violation of section 3(a), the person
coordinates with the issuer to facilitate key steps in the issuance,
such as soliciting customers or minting the payment stablecoins. This
example is intended to capture persons who provide substantial
assistance to the issuer in issuing a payment stablecoin in violation
of section 3(a), and where such assistance was provided prior to or at
the point at which the payment stablecoins are considered issued. For
example, in a white label arrangement, the person providing its
branding may be considered to facilitate key steps in the issuance
process even though such person may not itself be the issuer of the
payment stablecoin.
Third, proposed Sec. 1523.2(d)(3) provides that a person would
participate in a violation of section 3(a) if, in connection with a
payment stablecoin issued in violation of section 3(a), the person acts
as a market maker for newly issued payment stablecoins, distributes the
newly issued payment stablecoins to purchasers of newly issued payment
stablecoins, or otherwise makes the newly issued payment stablecoins
available for secondary market trading. This example is intended to
capture persons who provide substantial assistance in issuing a payment
stablecoin in violation of section 3(a), and where such assistance was
provided at or around the point of issuance. Treasury expects, for
example, that this would cover a digital asset service provider making
an initial listing of an unregistered payment stablecoin shortly after
issuance, in effect supporting the mass initial distribution of the
unlawful issuance. Treasury generally does not intend for proposed
Sec. 1523.2(d)(3) to cover persons who merely purchase a smaller
subset of the unlawfully issued payment stablecoins in the issuance for
their own use (as opposed to for immediate resale in a dealer
capacity), nor is proposed Sec. 1523.2(d)(3) intended to capture
secondary market trading activities that do not have a close temporal
nexus to the initial issuance. Of course, secondary market trading
activities of unregistered payment stablecoins at any time may
implicate the prohibitions on offer and sale in section 3(b) of the Act
(12 U.S.C. 5902(b)), as described further below.
Treasury emphasizes that the proposed examples are not intended to
be exhaustive, and that other persons not covered by these examples may
be found to have knowingly participated in a violation of section 3(a).
As discussed in section II.H below, Treasury is proposing to
include in Appendix A several interpretations of proposed Part 1523.
Some of the proposed interpretations relate to when a person may have
participated in a violation of section 3(a) of the Act (12 U.S.C.
5902(a)).
Question 39: Are the proposed examples of when a person would be
considered to participate in a violation of section 3(a) appropriate
and clear?
Question 40: What additional examples of when a person would be
considered to participate in a violation of section 3(a) should
Treasury adopt?
Question 41: Should the situations covered by proposed Sec.
1523.2(d) be non-exhaustive examples of participating in an unlawful
issuance, or should they be an exhaustive set? What is the value and
risk of providing complete certainty of activities that constitute
participation versus preserving flexibility to capture participation in
unlawful issuances in ways that are unanticipated or structured to
evade proposed rule?
Question 42: Are there situations covered by proposed Sec.
1523.2(d) for which Treasury should grant foreign payment stablecoin
issuers or related parties relief in furtherance of the purposes of
this Act? If so, what would be the appropriate form(s) of such relief?
[[Page 53379]]
Question 43: Should Treasury set requirements, guidance, or safe
harbors relating to how a person should determine if it is
participating in an unlawful issuance in accordance with proposed Sec.
1523.2(d)? If so, would they be similar to or different from the
requirements, guidance, or safe harbors contemplated in the prior
question relating to proposed Sec. 1523.2(c)? Should the requirements
differ based on whether the participant in the issuance is the issuer
itself, a person providing its branding in a white label arrangement, a
market maker, a service provider, or something else? Should one
participant be permitted to rely on the representations of another
participant that the issuance is lawful? Are such requirements,
guidance, or safe harbors appropriate and necessary for Sec. 1523.2 or
should Sec. 1523.2 focus instead on the factual contours of
participating in an issuance to a person located in the United States,
and reserve questions of knowledge or due diligence to the
determination of a ``knowing'' violation under section 3(f)?
5. Alternative Approaches
In lieu of the proposal discussed above, Treasury is also
considering alternative approaches under which proposed Sec. 1523.2
would deem any issuance of a payment stablecoin by a person other than
a permitted payment stablecoin issuer or a foreign payment stablecoin
issuer that meets the criteria set out in section 18(a) of the Act (12
U.S.C. 5916(a)) to a person who is located in the United States to be
unlawful, regardless of whether the issuer knew or should have known
that the recipient was actually located in the United States. Such an
alternative would involve narrowing or removing proposed Sec.
1523.2(c). This alternative approach would provide a clear, unambiguous
line as to whether payment stablecoins were issued in the United States
that depends only on factually verifiable locations of the issuer and
the person to whom the payment stablecoins were issued. The lawful or
unlawful nature of the issuance, therefore, would not depend on other
facts and circumstances, such as the level of due diligence performed
by the issuer.
Treasury acknowledges that this outcome may be viewed as overly
strict, particularly where the issuer took reasonable steps to ensure
that the recipient was not located in the United States and reasonably
believed that the recipient was not located in the United States at the
time of the issuance. However, under this approach, the due diligence
steps that the issuer took or its reasonable belief with respect to the
location of the recipient would not be relevant considerations as to
whether an issuance has occurred in the United States in the first
instance; rather, these factors are most relevant to the question of
whether the issuer or another person ``knowingly'' participated in an
unlawful issuance, which is a required element for the criminal
penalties under section 3(f) of the Act (12 U.S.C. 5902(f)).
As a second alternative, Treasury is considering whether to align
proposed Sec. 1523.2 more directly to the territorial concepts
reflected in Regulation S under the Securities Act by adopting a
broader offshore transaction framework. Under this alternative, for
example, the term ``located in the United States'' would not be defined
based on an individual or entity's status (e.g., residency or
jurisdiction of organization), and a foreign payment stablecoin issuer
would be deemed not to issue a payment stablecoin in the United States
if (i) the issuance is made in an offshore transaction and (ii) no
directed selling efforts are made in the United States by the foreign
payment stablecoin issuer or any person acting on its behalf. Proposed
Sec. 1523.2(c) similarly incorporates certain Regulation S-like
concepts, but it would not adopt Regulation S's offshore-transaction
framework nor its specific definitions.
In such an alternative, an offshore transaction could be defined to
require that no offer be made to a person in the United States and
that, at the time the acquisition request or other transaction
instruction is originated, the person acquiring the payment stablecoin
is outside the United States, or the foreign payment stablecoin issuer
and any person acting on its behalf reasonably believe that the person
acquiring the payment stablecoin is outside the United States. Similar
to proposed Sec. 1523.2(c), the reasonable belief standard could be
supported by reasonably designed, implemented, and maintained policies,
procedures, and controls, which may include customer identification and
due diligence, account-opening information, geographic access
restrictions, device- or network-location tools, contractual
representations, transaction monitoring, and other controls reasonably
designed to identify whether the person acquiring the payment
stablecoin is outside the United States.
Unlike proposed Sec. 1523.2(c), when the person acquiring the
payment stablecoin is a legal entity, if an authorized employee places
the acquisition request or other transaction instruction while abroad,
the requirement that the person acquiring the payment stablecoin be
outside the United States would be satisfied, regardless of the place
of incorporation or principal place of business of the entity.
As compared to proposed Sec. 1523.2(c), the alternative would more
directly incorporate the concept of directed selling efforts from
Regulation S, which could be defined as any activity undertaken for the
purpose of, or that could reasonably be expected to have the effect of,
conditioning the market in the United States for the payment
stablecoin. In applying that concept to payment stablecoins, Treasury
could consider whether activity is undertaken for the purpose of, or
could reasonably be expected to have the effect of, promoting,
soliciting, or creating demand in the United States for the payment
stablecoin. Such activity could include advertising or solicitation
directed at the United States, liquidity incentives directed at U.S.
use, merchant-enablement activity in the United States, U.S.-facing
wallet or platform integrations, or other ecosystem-development
activity intended to facilitate the use or circulation of the payment
stablecoin in the United States, even if the formal issuance occurs
outside the United States.
While informed by Regulation S concepts, such an approach need not
import Regulation S wholesale. For example, Regulation S's category
structure, distribution compliance periods, and offering restrictions
may not be necessary.
Treasury recognizes that this alternative may better address
certain cross-border fact patterns than the proposed approach, which
defines when a payment stablecoin has been issued ``in the United
States'' based on the location of the issuer and acquirer. For example,
a nominally offshore issuance may be structured to place newly issued
payment stablecoins into U.S. circulation through an affiliate,
distributor, market maker, platform, or other intermediary. Conversely,
an issuance may involve a U.S.-organized entity acting through non-U.S.
personnel, accounts, and operations for non-U.S. customers, with no
U.S.-directed activity. More closely aligning with Regulation S may
provide more clarity for certain financial institutions that are
already familiar with this well-established framework and have controls
designed for it, though it may provide more complexity for payment
stablecoin actors that are not already familiar with Regulation S.
Treasury requests comment on whether an
[[Page 53380]]
offshore-transaction framework would better distinguish between those
fact patterns, or whether the proposed approach, including the proposed
definition of ``located in the United States'' and proposed Sec.
1523.2(b)-(d), provides greater administrability and certainty.
Treasury also requests comment on whether the alternative
frameworks would create undue complexity or increase or decrease
evasion risk or risk of flowback of large volumes of payment
stablecoins to the U.S. market.
Question 44: Should Treasury adopt the first alternative described
above, wherein an issuance is per se unlawful if any payment
stablecoins are issued to persons located in the United States, where
knowledge and procedures are relevant only for the secondary question
of whether criminal penalties may attach?
Question 45: Should Treasury adopt an offshore transaction
framework more similar to Regulation S, such as the approach described
in the second alternative above, under which a foreign payment
stablecoin issuer would be deemed not to issue a payment stablecoin in
the United States for purposes of section 3(a) of the Act (12 U.S.C.
5902(a)) if the issuance is made in an offshore transaction and no
directed selling efforts are made in the United States by the issuer or
any person acting on its behalf?
Question 46: Should any offshore transaction framework apply only
to foreign payment stablecoin issuers? Should such a framework replace
proposed Sec. 1523.2(b)-(d), supplement proposed Sec. 1523.2(b)-(d),
or be structured as a safe harbor under Sec. 1523.4?
Question 47: Should a foreign payment stablecoin issuer be unable
to rely on offshore treatment if the issuer or any person acting on its
behalf knows that the transaction has been prearranged with a person in
the United States?
Question 48: What conduct should Treasury identify as inconsistent
with offshore treatment or as evidence of directed selling efforts in
the United States? For example, should such conduct include advertising
the payment stablecoin as available to persons in the United States,
advising persons how to evade location-detection or restriction
mechanisms, providing U.S.-directed liquidity incentives, supporting
U.S.-facing wallet or platform integrations, or facilitating U.S.
merchant acceptance?
Question 49: What conduct should Treasury identify as ordinarily
not constituting directed selling efforts standing alone? For example,
should such conduct include legally required notices with no
promotional content; factual communications to existing holders;
processing conversion, redemption, or repurchase requests; ordinary
custody or safekeeping; and ordinary technical support?
Question 50: Are there additional concepts, conditions,
limitations, interpretations, or exceptions from Regulation S or other
areas of law that Treasury should consider incorporating into any
offshore transaction framework for payment stablecoin issuance? For
example, should Treasury consider a category structure, distribution
compliance periods, offering restrictions, purchaser certifications,
transfer restrictions, notice or platform-control requirements, special
treatment for discretionary accounts or similar accounts held for the
benefit or account of non-U.S. persons by others, such as fiduciaries,
organizations, or affiliates? Should Treasury also incorporate anti-
evasion principles, such as rules for transactions specifically
targeted at identifiable groups of U.S. persons abroad, prearranged
transactions with persons in the United States, or transactions that
are formally offshore but part of a plan or scheme to evade section
3(a) of the Act (12 U.S.C. 5902(a))?
E. Payment Stablecoin Offer and Sale (Proposed Sec. 1523.3)
Proposed Sec. 1523.3 implements the prohibitions in section 3(b)
of the Act (12 U.S.C. 5902(b)) on offers and sales of payment
stablecoins by digital asset service providers. Proposed paragraphs (a)
and (b) codify the statutory prohibitions in sections 3(b)(1) and
3(b)(2) of the Act (12 U.S.C. 5902(b)(1), (2)) with certain
clarifications. Proposed paragraph (c) clarifies a digital asset
service provider's obligations with respect to a foreign payment
stablecoin issuer's compliance with lawful orders and reciprocal
arrangements. Proposed paragraph (d) provides examples of activities
that constitute an offer or sale of a payment stablecoin to a person in
the United States. Proposed paragraph (e) describes when a digital
asset service provider will be deemed not to violate the prohibitions
in section 3(b) of the Act (12 U.S.C. 5902(b)).
In developing proposed regulations to implement section 3(b) of the
Act (12 U.S.C. 5902(b)), Treasury first considered the relationship
between the prohibitions in section 3(b)(1) and section 3(b)(2). As a
preliminary matter, Treasury notes that the prohibitions in section
3(b)(1) and section 3(b)(2) of the Act (12 U.S.C. 5902(b)(1), (2)) are
similar in language, structure and effect: Both prohibitions declare it
to be unlawful for a digital asset service provider to engage in
certain proscribed activities related to a payment stablecoin, unless
the payment stablecoin is issued by a person meeting certain criteria.
The most obvious differences between the two prohibitions are the date
on which each becomes applicable and the criteria that must be met for
a digital asset service provider not to violate each prohibition.
Beyond these obvious differences, there are two more subtle
differences between the prohibitions in sections 3(b)(1) and 3(b)(2) of
the Act (12 U.S.C. 5902(b)(1), (2)). First, whereas section 3(b)(1)
proscribes the ``offer or [sale]'' of certain payment stablecoins,
section 3(b)(2) proscribes the ``offer, [sale], or otherwise mak[ing]
available'' of certain payment stablecoins. With respect to ``make
available,'' Treasury acknowledges that different terms in a statute
are ordinarily presumed to have different meanings, in which case,
``make available'' should be understood to refer to a distinct set of
activities that are not ``offer'' or ``sale,'' but that general rule is
not dispositive.\49\ In this case, the Act defines ``offer'' as ``to
make available for purchase, sale, or exchange.'' \50\ For this reason,
Treasury does not believe that the statutory terms ``offer,'' ``sell,''
and ``make available'' are mutually exclusive, and they may
significantly overlap. Further, at least for purposes of the proposed
rule, Treasury believes that the value of reducing redundancy and
promoting clarity to digital asset service providers on the scope of
prohibited activities counsels against providing separate and distinct
examples of what constitutes the ``mak[ing] available'' of a payment
stablecoin, which may create confusion among the legal obligations that
apply to digital asset service providers. For this reason, proposed
Sec. 1523.3(d) enumerates a single set of activities that, when
conducted by a digital asset service provider, would violate either
section 3(b)(1) or section 3(b)(2), as applicable. Treasury notes that
these
[[Page 53381]]
examples are not exhaustive, and that other activities may constitute
the offer, sale, or making available of a payment stablecoin.
---------------------------------------------------------------------------
\49\ See, e.g., William Eskridge, Interpreting Law (2016)
(noting that the presumption against interpreting a provision of a
statute in a way that would render other provisions superfluous or
redundant ``must give way when offset by other evidence of statutory
meaning''); King v. Burwell, 576 U.S. 473, 491 (2015) (noting with
respect to a particular statute that ``rigorous application of the
canon does not seem a particularly useful guide to a fair
construction of the statute''); Marx v. Gen. Revenue Corp., 568 U.S.
371, 385 (2013) (observing that ``[t]he canon against surplusage is
not an absolute rule'').
\50\ See section 2(21) of the Act (12 U.S.C. 5901(21)).
---------------------------------------------------------------------------
Second, section 3(b)(1) applies to the offer or sale of certain
payment stablecoins ``to a person in the United States,'' but section
3(b)(2) applies to the offer, sale, or otherwise making available ``in
the United States'' of certain payment stablecoins. As discussed above,
Treasury acknowledges that different terms in a statute are ordinarily
presumed to have different meanings. However, Treasury believes that
whatever the outer boundaries of this phrase in section 3(b)(2),
offering, selling, or otherwise making available a payment stablecoin
``in the United States'' must include offering or selling to a person
located in the United States. Thus, in this respect, section 3(b)(2) at
least includes, if it is not coextensive with, section 3(b)(1). This
reading is consistent with section 3(e) of the Act (12 U.S.C. 5902(e)),
which provides extraterritorial treatment for conduct involving an
offer or sale of a payment stablecoin to a ``person located in the
United States.'' As noted above, Treasury believes that the value of
promoting clarity and reducing redundancy counsels against an overly
complex proposed rule. Accordingly, proposed Sec. 1523.3(b) specifies
that the prohibition in section 3(b)(2) extends to offers or sales to
persons located in the United States, and all of the examples
enumerated in proposed Sec. 1523.3(d) that would violate section
3(b)(1) or section 3(b)(2), as applicable, are activities conducted
with respect to persons located in the United States.
Question 51: Does Treasury's interpretation of the relationship
between section 3(b)(1) and section 3(b)(2) reflect the best reading of
the Act? In particular, does the phrase ``make available'' include
activities not already covered by ``offer'' or ``sell,'' and if so,
what are specific examples of such activities? Is offering or selling
``in the United States'' meaningfully different from offering or
selling ``to a person in the United States''?
1. Offer and Sale Activities On and After July 18, 2028 (Proposed Sec.
1523.3(a))
Section 3(b)(1) of the Act (12 U.S.C. 5902(b)(1)) provides that,
except as provided in section 3(c) (12 U.S.C. 5902(c)) and section 18
(12 U.S.C. 5916), beginning on the date that is three years after the
date of enactment of the Act, it shall be unlawful for a digital asset
service provider to offer or sell a payment stablecoin to a person in
the United States, unless the payment stablecoin is issued by a
permitted payment stablecoin issuer. Proposed Sec. 1523.3(a)
implements section 3(b)(1) of the Act (12 U.S.C. 5902(b)(1)) and
provides that beginning on July 18, 2028, except in accordance with
Sec. 1523.4, it shall be unlawful for a digital asset service provider
to offer or sell a payment stablecoin to a person located in the United
States unless the payment stablecoin is (i) issued by a permitted
payment stablecoin issuer, or (ii) issued by a foreign payment
stablecoin issuer that meets the criteria set out in section 18(a) of
the Act (12 U.S.C. 5916(a)).
The text of proposed Sec. 1523.3(a) codifies the substance of
section 3(b)(1) of the Act (12 U.S.C. 5902(b)(1)) without change but
Treasury has included certain ministerial clarifications in the
regulatory text. First, proposed Sec. 1523.3(a) specifies that the
prohibition in section 3(b)(1) becomes applicable on July 18, 2028,
which is the date that is three years after the date of enactment of
the Act. Second, the inclusion of the qualifying language ``except in
accordance with Sec. 1523.4'' makes clear from the outset that certain
exemptions and safe harbors may apply. These exemptions and safe
harbors are addressed below in connection with proposed Sec. 1523.4.
Third, whereas section 3(b)(1) merely cross-references section 18 of
the Act (12 U.S.C. 5916) as providing an exemption, proposed Sec.
1523.3(a) more clearly spells out that the prohibition does not apply
to a payment stablecoin issued by a foreign payment stablecoin issuer
that meets the criteria set out in section 18(a) of the Act (12 U.S.C.
5916(a)).
2. Offer and Sale of Payment Stablecoins Issued by Foreign Payment
Stablecoin Issuers (Proposed Sec. 1523.3(b))
Section 3(b)(2) of the Act (12 U.S.C. 5902(b)(2)) provides that it
shall be unlawful for any digital asset service provider to offer,
sell, or otherwise make available in the United States a payment
stablecoin issued by a foreign payment stablecoin issuer unless the
foreign payment stablecoin issuer has the technological capability to
comply, and will comply, with the terms of any lawful order and any
reciprocal arrangement pursuant to section 18 of the Act (12 U.S.C.
5916). Proposed Sec. 1523.3(b) implements section 3(b)(2) of the Act
(12 U.S.C. 5902(b)(2)) and provides that, except in accordance with
Sec. 1523.4, it shall be unlawful for a digital asset service provider
to offer or sell to a person located in the United States, or otherwise
offer, sell, or make available in the United States, a payment
stablecoin issued by a foreign payment stablecoin issuer unless the
foreign payment stablecoin issuer has the technological capability to
comply with, and will comply, with the terms of any lawful order and
any reciprocal arrangement pursuant to section 18 of the Act (12 U.S.C.
5916).
The text of proposed Sec. 1523.3(b) differs from the text of
section 3(b)(2) of the Act (12 U.S.C. 5902(b)(2)) in two respects.
First, the inclusion of the qualifying language ``except in accordance
with Sec. 1523.4'' makes clear from the outset that certain exemptions
and safe harbors may apply. These exemptions and safe harbors are
addressed below in connection with proposed Sec. 1523.4. Second,
proposed Sec. 1523.3(b) makes clear that, as discussed above, the
statutory phrase ``offer, sell, or otherwise make available in the
United States'' includes offering or selling to a person located in the
United States.
Treasury considered whether section 3(b)(2) of the Act (12 U.S.C.
5902(b)(2)) is applicable to a payment stablecoin issued by a foreign
payment stablecoin issuer meeting the criteria set out in section 18(a)
of the Act (12 U.S.C. 5916(a)). Treasury does not believe that sections
18(a) and 3(b), when read together, were intended to relieve foreign
payment stablecoin issuers meeting the criteria in section 18(a) of the
Act (12 U.S.C. 5916(a)) of the obligations to comply with lawful orders
and reciprocal arrangements, or to authorize the offer or sale of
payment stablecoins issued by non-compliant issuers. Instead, Treasury
believes that sections 18(a) and 3(b), when read together, relieve
foreign payment stablecoin issuers meeting the criteria of section
18(a) of the Act (12 U.S.C. 5916(a)) from the general prohibition on
offers and sales of their payment stablecoins, while retaining the
obligations to comply with lawful orders and reciprocal arrangements.
Treasury notes that these obligations of foreign payment stablecoin
issuers arise under or are reinforced by other provisions of the Act,
namely section 8(a)(1) of the Act (12 U.S.C. 5907(a)(1)) (regarding
lawful orders) and sections 18(a) (12 U.S.C. 5916(a)) and 18(d) of the
Act (12 U.S.C. 5916(d)) (regarding reciprocity).
3. Compliance With Lawful Orders and Reciprocal Arrangements (Proposed
Sec. 1523.3(c))
As described above, section 3(b)(2) and proposed Sec. 1523.3(b)
each refer to limitations on digital asset service providers' ability
to offer, sell, or make available in the United States a payment
stablecoin issued by a foreign payment
[[Page 53382]]
stablecoin issuer. In particular, in order for the payment stablecoin
to be lawfully offered, sold, or made available by a digital asset
service provider, the foreign payment stablecoin issuer must have the
technological capability to comply, and will comply, with the terms of
any lawful order and any reciprocal arrangement pursuant to section 18
of the Act (12 U.S.C. 5916). Recognizing the importance of providing
clarity to digital asset service providers on how to avoid unlawful
offers and sales of payment stablecoins issued by foreign payment
stablecoin issuers, proposed Sec. 1523.3(c) clarifies a digital asset
service provider's obligations with respect to these requirements. It
provides that, for purposes of proposed Sec. 1523.3(b), a digital
asset service provider may rely on a representation by a foreign
payment stablecoin issuer that the foreign payment stablecoin issuer
has the technological capability to comply, and will comply, with the
terms of any lawful order and any reciprocal arrangement pursuant to
section 18 of the Act (12 U.S.C. 5916), subject to two constraints.
First, the digital asset service provider may not rely on such
representation unless it conducts reasonable due diligence regarding
the representation. Second, the digital asset service provider may not
rely on such representation if, based on such due diligence or other
information reasonably available to it, the digital asset service
provider knows, has reason to know, or should know that the
representation is false or that the foreign payment stablecoin issuer
does not have the technological capability to comply, or will not
comply, with the terms of any lawful order or any reciprocal
arrangement pursuant to section 18 of the Act (12 U.S.C. 5916).
In considering the requirements of section 3(b)(2) of the Act (12
U.S.C. 5902(b)(2)), Treasury notes that, as a practical matter, a
digital asset service provider may not know, and may not be able to
ascertain without prohibitively onerous inquiry, the full extent of a
foreign payment stablecoin issuer's technological capabilities to
comply with lawful orders and reciprocal arrangements. More
significantly, a digital asset service provider can never know with
certainty whether a foreign payment stablecoin issuer ``will comply''
at all times in the future with the terms of any lawful order or any
reciprocal arrangement. Thus, a strict reading of these provisions of
the Act would effectively foreclose the offer or sale by digital asset
service providers of payment stablecoins issued by foreign payment
stablecoin issuers in all cases because it would be impossible for the
digital asset service provider to meet these exacting standards.
Treasury believes this strict reading is not compelled by the text of
the statute and would frustrate the purpose of the Act, which clearly
contemplates the offer or sale by digital asset service providers of
payment stablecoins issued by foreign payment stablecoin issuers, at
least in some cases.
Instead, Treasury proposes a more practical approach that permits a
digital asset service provider to rely in certain circumstances on a
foreign payment stablecoin issuer's representation that the foreign
payment stablecoin issuer has the technological capability to comply,
and will comply, with the terms of any lawful order and any reciprocal
arrangement pursuant to section 18 of the Act (12 U.S.C. 5916). To be
entitled to rely on such a representation, however, the digital asset
service provider must meet two criteria.
First, the digital asset service provider may not rely on a foreign
payment stablecoin issuer's representation unless it conducts
reasonable due diligence on the foreign payment stablecoin issuer.
Treasury acknowledges that what constitutes a reasonable level of due
diligence may vary depending on the facts and circumstances. In all
cases, however, Treasury expects this due diligence to include
confirming that no prohibition on secondary trading pursuant to section
8 of the Act (12 U.S.C. 5907) is in effect with respect to the foreign
payment stablecoin issuer. Section 8 of the Act (12 U.S.C. 5907)
authorizes the Secretary to designate any foreign payment stablecoin
issuer as noncompliant with the requirement that the foreign payment
stablecoin issuer has the technological capability to comply and
complies with the terms of any lawful order.\51\ The Secretary's
designation is made public via the process laid out in section 8 of the
Act (12 U.S.C. 5907), including publication in the Federal Register,
along with a prohibition on secondary trading of the foreign payment
stablecoin issuer's payment stablecoins in the United States by digital
asset service providers.\52\
---------------------------------------------------------------------------
\51\ See section 8(a) of the Act (12 U.S.C. 5907(a)).
\52\ See section 8(b) of the Act (12 U.S.C. 5907(b)).
---------------------------------------------------------------------------
Treasury considered whether confirming the absence of any
prohibition on secondary trading should alone constitute a sufficient
level of due diligence on the part of a digital asset service provider.
However, other evidence of a foreign payment stablecoin issuer's
noncompliance with, for example, a lawful order may be readily
available from public or non-public sources accessible to the digital
asset service provider, even when no prohibition on secondary trading
under section 8 is yet in effect. In such a situation, Treasury
believes that a digital asset service provider should not be able to
rely on the foreign payment stablecoin issuer's representation. As
such, the proposed requirement that a digital asset service provider
must conduct reasonable due diligence is intended to go beyond merely
confirming that no prohibition on secondary trading is in effect.
Rather, the digital asset service provider should consider all
reasonably available sources of information regarding the foreign
payment stablecoin issuer.
Second, the digital asset service provider may not rely on a
foreign payment stablecoin issuer's representation if, based on such
due diligence or other information reasonably available to it, the
digital asset service provider knows, has reason to know, or should
know that the representation is false or that the foreign payment
stablecoin issuer does not have the technological capability to comply,
or will not comply, with the terms of any lawful order or any
reciprocal arrangement pursuant to section 18 of the Act (12 U.S.C.
5916). Treasury intends this language to include, in addition to actual
knowledge of falsity, a situation where the digital asset service
provider is aware of facts that would cause a reasonable person to
conclude that the foreign payment stablecoin issuer does not have the
technological capability to comply, or will not comply, with the terms
of any lawful order or any reciprocal arrangement pursuant to section
18 of the Act (12 U.S.C. 5916).
Question 52: What due diligence should be required of a digital
asset service provider in order for the digital asset service provider
to be entitled to rely on the representation of a foreign payment
stablecoin issuer that the foreign payment stablecoin issuer has the
technological capability to comply, and will comply, with the terms of
any lawful order and any reciprocal arrangement pursuant to section 18
of the Act (12 U.S.C. 5916)? Should the rule be more prescriptive about
the form of the representation, such as requiring it to be in writing,
contain certain language, or be updated with some frequency? Is the
requirement to conduct reasonable due diligence clear and appropriate?
Should the proposed rule be more prescriptive about the specific steps
a digital asset service
[[Page 53383]]
provider must take? For example, should the rule address certain public
representations or advertisements made by foreign payment stablecoin
issuers, such as that their payment stablecoins are resistant to
freezing? Should the rule require digital asset service providers to
retain records of the representation and due diligence, and if so,
which records and for how long? For example, should a digital asset
service provider be required to audit or examine smart contracts
relating to a payment stablecoin? If so, should a digital asset service
provider be required to verify the existence and/or efficacy of smart
contract functions designed to comply with lawful orders, such as
``seize,'' ``freeze,'' and ``burn'' functions? Would such requirement
effectively prevent digital asset service providers from offering,
selling or otherwise making available payment stablecoins whose code is
not fully open source?
Question 53: Is the proposed ``knows, has reason to know, or should
know'' standard appropriate and clear? Alternatively, should digital
asset service providers be held to a more exacting standard--such as
not having any reason to suspect that a foreign payment stablecoin
issuer does not have the technological capability to comply, or will
not comply, with the terms of any lawful order and any reciprocal
arrangement pursuant to section 18 of the Act (12 U.S.C. 5916)--before
being entitled to rely on the foreign payment stablecoin issuer's
representation?
Question 54: Should the proposed due diligence requirements be
different for lawful orders vs. reciprocal arrangements? For example,
for reciprocal arrangements, should the requirements specify the extent
to which the digital asset service provider should obtain and review
the terms of any reciprocal arrangement with a jurisdiction that is the
foreign payment stablecoin issuer's domicile?
Question 55: Is there any difference in the obligations of digital
asset service providers with respect to lawful orders or reciprocity
agreements before or after July 18, 2028, or with respect to payment
stablecoins issued by foreign payment stablecoin issuers in compliance
with section 18(a) of the Act (12 U.S.C. 5916(a))?
4. Offer and Sale Activities Prescribed (Proposed Sec. 1523.3(d))
Whereas proposed Sec. 1523.3(a) and proposed Sec. 1523.3(b) aim
generally to codify the text of the statutory prohibitions in section
3(b)(1) and section 3(b)(2), respectively, proposed Sec. 1523.3(d)
provides further clarity to digital asset service providers regarding
these prohibitions by enumerating examples of activities that
constitute the offer or sale of a payment stablecoin to a person
located in the United States. Treasury emphasizes that the proposed
examples are not intended to be exhaustive, and that other activities
by digital asset service providers may constitute a violation of
proposed Sec. 1523.3(a) or proposed Sec. 1523.3(b), as applicable,
depending on the facts and circumstances.
First, proposed Sec. 1523.3(d)(1) provides that a digital asset
service provider offers or sells a payment stablecoin to a person
located in the United States if the digital asset service provider
directly solicits a person located in the United States to purchase the
payment stablecoin.
Second, proposed Sec. 1523.3(d)(2) provides that a digital asset
service provider offers or sells a payment stablecoin to a person
located in the United States if the digital asset service provider
advertises the payment stablecoin as available for purchase by persons
located in the United States.
Third, proposed Sec. 1523.3(d)(3) provides that a digital asset
service provider offers or sells a payment stablecoin to a person
located in the United States if the digital asset service provider
responds to an unsolicited inquiry from a person located in the United
States by indicating willingness to sell the payment stablecoin. In
this example, Treasury believes that an offer has occurred because the
digital asset service provider has made a payment stablecoin available
for purchase, sale, or exchange, regardless of the circumstances that
gave rise to the offer.
Fourth, proposed Sec. 1523.3(d)(4) provides that a digital asset
service provider offers or sells a payment stablecoin to a person
located in the United States if the digital asset service provider
advises potential purchasers of the payment stablecoin on how to evade
generally applicable location detection or restriction mechanisms that
would otherwise detect or block purchases by persons located in the
United States, such as IP address checkers. This example is intended to
prevent digital asset service providers from evading the Act by
facilitating a potential purchaser's use of technology to evade the
limitation on purchasers located in the United States.
Fifth, proposed Sec. 1523.3(d)(5) provides that a digital asset
service provider offers or sells a payment stablecoin to a person
located in the United States if the digital asset service provider
enters into a contract for the sale of a payment stablecoin with a
person located in the United States, regardless of the form of
consideration provided in return for the payment stablecoin or the
timing of delivery of the payment stablecoin. Treasury believes that a
sale should be considered to have occurred regardless of the form of
consideration provided in return for the payment stablecoin or the
timing of delivery of the payment stablecoin.
Question 56: Are the proposed examples of activities that, when
conducted by a digital asset service provider, constitute the offer or
sale of a payment stablecoin to a person located in the United States
appropriate and clear?
Question 57: What additional examples of activities that, when
conducted by a digital asset service provider, constitute the offer or
sale of a payment stablecoin to a person located in the United States
should be provided?
Question 58: Should the scenarios included in proposed Sec.
1523.3(d) be an exhaustive list of violations of proposed Sec.
1523.3(a) or proposed Sec. 1523.3(b) rather than a non-exhaustive list
of examples?
Question 59: Is an airdrop of a payment stablecoin considered an
offer, such as on the basis that the payment stablecoin is being made
available for exchange, even in the absence of a sale for
consideration? Or are such airdrops outside the scope of proposed Sec.
1523.3?
Question 60: How should the use of payment stablecoins in
traditional financial instruments and markets, including funds,
implicate or not implicate the provisions governing offer or sale of
payment stablecoins by digital asset service providers? For example, if
a financial instrument pays dividends in the form of payment
stablecoins, should the offer or sale of the underlying instrument be
considered the offer or sale of a payment stablecoin? Should the answer
depend on whether the dividend has already been declared at the time
the underlying instrument is offered or sold? Regardless of the
treatment of the offer or sale of the underlying instrument, should the
payment of the dividend itself be considered an offer or sale of
payment stablecoins?
Question 61: Is it clear how proposed Sec. 1523.3 relates to
participation in an issuance under proposed Sec. 1523.2? In what
scenarios would a digital asset service provider violate one, the
other, or both?
5. Activities Deemed Not To Be Offers or Sales (Proposed Sec.
1523.3(e))
Whereas proposed Sec. 1523.3(d) is intended to provide clarity to
digital
[[Page 53384]]
asset service providers about what offer and sale activities violate
the prohibitions in section 3(b)(1) and 3(b)(2) of the Act (12 U.S.C.
5902(b)(1), (2)), proposed Sec. 1523.3(e) describes when a digital
asset service provider will be deemed not to offer or sell a payment
stablecoin to a person located in the United States, and will be deemed
not to offer, sell, or otherwise make available in the United States a
payment stablecoin. In this way, proposed Sec. 1523.3(e) is intended
to provide clarity and promote compliance with the Act by describing
what a digital asset service provider must do to avoid potentially
violating section 3(b) of the Act (12 U.S.C. 5902(b)). Significantly, a
digital asset service provider that meets the requirements of proposed
Sec. 1523.3(e) will not be considered to have violated section 3(b) of
the Act (12 U.S.C. 5902(b)) even if the digital asset service
provider's activities would otherwise constitute, for example, the
inadvertent sale of an unregistered payment stablecoin to a person
located in the United States.
To benefit from the protection of proposed Sec. 1523.3(e), a
digital asset service provider must meet three conditions. First, the
digital asset service provider must reasonably believe that the person
to whom the payment stablecoin is offered, sold, or otherwise made
available is not located in the United States. Treasury acknowledges
that what constitutes a reasonable belief on the part of the digital
asset service provider may depend on the facts and circumstances.
Similar to the proposed due diligence requirements in proposed Sec.
1523.3(c), however, Treasury intends this requirement to exclude
situations where the digital asset service provider knows or has reason
to know, based on the representations of the person to whom the payment
stablecoin is offered, sold, or otherwise made available or other
information reasonably accessible to the digital asset service
provider, that the person is located in the United States.
Second, the digital asset service provider must have adopted and
implemented policies, procedures, and controls reasonably designed to
avoid offering, selling, or making available the payment stablecoin to
any person located in the United States. Treasury emphasizes that these
policies, procedures, and controls must not only be adopted in form,
but actually implemented in the digital asset service provider's
operations, in order for the digital asset service provider to benefit
from proposed Sec. 1523.3(e). In addition, Treasury believes that
policies, procedures, and controls cannot be said to be reasonably
designed if they are static; rather, Treasury expects digital asset
service providers to periodically review and update their policies,
procedures, and controls as the payment stablecoin market matures,
technology evolves, as the digital asset service provider gains
experience in offering and selling payment stablecoins, and in response
to any identified instances of offers or sales to persons located in
the United States.
Finally, the digital asset service provider must not engage in
advertising or solicitation activities that target, or could be
reasonably expected to have the effect of targeting, any person located
in the United States. Treasury believes this condition is necessary to
avoid a situation where a digital asset service provider is not
knowingly offering, selling, or making payment stablecoins available to
a person located in the United States, but is engaged in activities
that could foreseeably have this result.
Like proposed Sec. 1523.2(c), proposed Sec. 1523.3(e)
incorporates certain concepts that are similar to concepts reflected in
Regulation S under the Securities Act, but would operate within the
proposed definition of ``located in the United States'' and would not
adopt Regulation S's offshore-transaction framework.
Question 62: What policies, procedures, or controls should support
a reasonable belief that the acquiring person is outside the United
States? Should Treasury identify specific controls, such as customer
identification and due diligence, account-opening information,
geographic access restrictions, device- or network-location checks,
contractual representations, transaction monitoring, or other controls?
Would this diligence take the form of self-attestations, IP address
checking, identification document checking, or something else? Should
the policies, procedures, and controls be reviewed and updated on a
particular cadence?
Question 63: Are there other situations covered by proposed Sec.
1523.3 for which Treasury should also not deem an offer or sale to a
person located in the United States to have occurred in furtherance of
the purposes of this Act? For example, should offers or sales resulting
from certain types of reverse solicitations involving payment
stablecoins issued by foreign payment stablecoin issuers not be deemed
to violate the prohibition?
6. Alternative Approaches
As with payment stablecoin issuance, discussed in section II.D.5,
Treasury is also considering several alternative approaches for Sec.
1523.3. First, Treasury is considering an alternative approach under
which proposed Sec. 1523.3 would deem any offer or sale of a payment
stablecoin that is not issued by a permitted payment stablecoin issuer
or a foreign payment stablecoin issuer that meets the criteria set out
in section 18(a) of the Act (12 U.S.C. 5916(a)) to a person who is
located in the United States to be unlawful, regardless of whether the
digital asset service provider knew or should have known that the
recipient or offeree was actually located in the United States. Such an
alternative would involve narrowing or removing proposed Sec.
1523.3(e). This alternative approach would provide a clear, unambiguous
line that depends only on factually verifiable location of the person
to whom the payment stablecoins were offered or sold. The lawful or
unlawful nature of the offer or sale, therefore, would not depend on
other facts and circumstances, such as the level of due diligence
performed by the digital asset service provider.
Treasury acknowledges that this outcome may be viewed as overly
strict, particularly where the digital asset service provider took
reasonable steps to ensure that the recipient was not located in the
United States and reasonably believed that the recipient was not
located in the United States at the time of the offer or sale.
As a second alternative, Treasury is considering whether to align
proposed Sec. 1523.3 more directly to the territorial concepts
reflected in Regulation S under the Securities Act by adopting a
broader offshore transaction framework. Under this alternative, for
example, the term ``located in the United States'' would not be defined
based on an individual's or entity's status (e.g., residency or
jurisdiction of organization), and a digital asset service provider
would be deemed not to offer or sell a payment stablecoin to a person
located in the United States if (i) the offer or sale is made in an
offshore transaction and (ii) no directed selling efforts are made in
the United States by the digital asset service provider or any person
acting on its behalf. Proposed Sec. 1523.3(e) similarly incorporates
certain Regulation S-like concepts, but it would not adopt Regulation
S's offshore-transaction framework nor its specific definitions.
In such an alternative, an offshore transaction could be defined to
require that no offer be made to a person in the United States and
that, at the time the acquisition request or other transaction
instruction is originated, the person acquiring the payment stablecoin
is outside the United States, or the digital
[[Page 53385]]
asset service provider and any person acting on its behalf reasonably
believe that the person acquiring the payment stablecoin is outside the
United States. Similar to proposed Sec. 1523.3(e), the reasonable
belief standard could be supported by reasonably designed, implemented,
and maintained policies, procedures, and controls, which may include
customer identification and due diligence, account-opening information,
geographic access restrictions, device- or network-location tools,
contractual representations, transaction monitoring, and other controls
reasonably designed to identify whether the person acquiring the
payment stablecoin is outside the United States.
Unlike proposed Sec. 1523.3(e), when the person acquiring the
payment stablecoin is a legal entity, if an authorized employee places
the acquisition request or other transaction instruction while abroad,
the requirement that the person acquiring the payment stablecoin be
outside the United States would be satisfied, regardless of the place
of incorporation or principal place of business of the entity.
As compared to proposed Sec. 1523.3(e), the alternative would more
directly incorporate the concept of directed selling efforts from
Regulation S, which could be defined as any activity undertaken for the
purpose of, or that could reasonably be expected to have the effect of,
conditioning the market in the United States for the payment
stablecoin. In applying that concept to payment stablecoins, Treasury
could consider whether activity is undertaken for the purpose of, or
could reasonably be expected to have the effect of, promoting,
soliciting, or creating demand in the United States for the payment
stablecoin. Such activity could include advertising or solicitation
directed at the United States, liquidity incentives directed at U.S.
use, merchant-enablement activity in the United States, U.S.-facing
wallet or platform integrations, or other ecosystem-development
activity intended to facilitate the use or circulation of the payment
stablecoin in the United States, even if the formal issuance occurs
outside the United States.
While informed by Regulation S concepts, such an approach need not
import Regulation S wholesale. For example, Regulation S's category
structure, distribution compliance periods, and offering restrictions
may not be necessary.
Similar to the alternative considered and described in section
II.D.5 above, Treasury recognizes that this alternative may better
address certain cross-border fact patterns than the proposed approach.
More closely aligning with Regulation S may provide more clarity for
certain financial institutions that are already familiar with this
well-established framework and have controls designed for it, though it
may provide more complexity for payment stablecoin actors that are not
already familiar with Regulation S. Treasury requests comment on
whether an offshore-transaction framework would better distinguish
between those fact patterns, or whether the proposed approach,
including the proposed definition of ``located in the United States''
and proposed Sec. 1523.3(b)-(e), provides greater administrability and
certainty.
Treasury also requests comment on whether the alternative
frameworks would create undue complexity or increase or decrease
evasion risk or risk of flowback of large volumes of payment
stablecoins to the U.S. market.
Question 64: Should Treasury adopt the first alternative described
above, wherein an offer or sale is per se unlawful if any payment
stablecoins are offered or sold to persons located in the United
States, where knowledge and procedures are not relevant? Does this
alternative reflect the better reading of the statute?
Question 65: Should Treasury adopt an offshore transaction
framework more similar to Regulation S, such as the approach described
in the second alternative above, under which a digital asset service
provider would be deemed not to offer or sell a payment stablecoin in
the United States for purposes of section 3(b) of the Act (12 U.S.C.
5902(b)) if the offer or sale is made in an offshore transaction and no
directed selling efforts are made in the United States by the digital
asset service provider or any person acting on its behalf?
Question 66: Should any offshore transaction framework apply only
to payment stablecoins issued by foreign payment stablecoin issuers,
only to offshore digital asset service providers, or only to some other
subset of payment stablecoins or digital asset service providers?
Should such a framework replace proposed Sec. 1523.3(e), supplement
proposed Sec. 1523.3(e), or be structured as a safe harbor under Sec.
1523.4?
Question 67: Should a digital asset service provider be unable to
rely on offshore treatment if it or any person acting on its behalf
knows that the transaction has been prearranged with a person in the
United States?
Question 68: What conduct should Treasury identify as inconsistent
with offshore treatment or as evidence of directed selling efforts in
the United States? For example, should such conduct include advertising
the payment stablecoin as available to persons in the United States,
advising persons how to evade location-detection or restriction
mechanisms, providing U.S.-directed liquidity incentives, supporting
U.S.-facing wallet or platform integrations, or facilitating U.S.
merchant acceptance?
Question 69: What conduct should Treasury identify as ordinarily
not constituting directed selling efforts standing alone? For example,
should such conduct include legally required notices with no
promotional content; factual communications to existing holders;
processing conversion, redemption, or repurchase requests; ordinary
custody or safekeeping; and ordinary technical support?
Question 70: Are there additional concepts, conditions,
limitations, or exceptions from Regulation S or other areas of law that
Treasury should consider incorporating into any offshore transaction
framework for payment stablecoin offer and sale? For example, should
Treasury consider a category structure, distribution compliance
periods, offering restrictions, purchaser certifications, transfer
restrictions, notice or platform-control requirements, special
treatment for discretionary accounts or similar accounts held for the
benefit or account of non-U.S. persons by others, such as fiduciaries,
organizations or affiliates? Should Treasury also incorporate anti-
evasion principles, such as rules for transactions specifically
targeted at identifiable groups of U.S. persons abroad, prearranged
transactions with persons in the United States, or transactions that
are formally offshore but part of a plan or scheme to evade section
3(b) of the Act (12 U.S.C. 5902(b))?
F. Exemptions and Safe Harbors (Proposed Sec. 1523.4)
Proposed Sec. 1523.4 implements various provisions of the Act that
provide for exemptions and safe harbors from section 3(a)'s limitation
on payment stablecoin issuance and section 3(b)'s prohibition on
payment stablecoin offers or sales. Proposed paragraph (a) codifies the
exemption in section 5(f) of the Act (12 U.S.C. 5904(f)) applicable to
certain persons with a pending application to become a permitted
payment stablecoin issuer. Proposed paragraph (b) addresses those
limited safe harbors that the Secretary may provide in unusual and
exigent
[[Page 53386]]
circumstances pursuant to section 3(c)(2) of the Act (12 U.S.C.
5902(c)(2)). Proposed paragraph (c) codifies the exemptions for
specific transactions in section 3(h)(1) of the Act (12 U.S.C.
5902(h)(1)).
1. Safe Harbor for Pending Applications (Proposed Sec. 1523.4(a))
Section 5(f) of the Act (12 U.S.C. 5904(f)) provides that the
primary Federal payment stablecoin regulators may waive the application
of the requirements of the Act for a period not to exceed 12 months
beginning on the effective date of the Act with respect to the
subsidiary of an insured depository institution, if the insured
depository institution has an application pending for the subsidiary to
become a permitted payment stablecoin issuer on that effective date, or
a Federal qualified payment stablecoin issuer with a pending
application on that effective date. Proposed Sec. 1523.4(a) implements
this provision and provides that the prohibitions in proposed Sec.
1523.2 (relating to payment stablecoin issuance) and Sec. 1523.3
(relating to payment stablecoin offer and sale) shall not apply to a
subsidiary of an insured depository institution or a person applying to
be a Federal qualified payment stablecoin issuer with a pending
application to become a permitted payment stablecoin issuer on the
effective date of the Act, but only if a waiver is granted by the
primary Federal payment stablecoin regulator under section 5(f) of the
Act (12 U.S.C. 5904(f)), and only to the extent such waiver by its
terms waives the provisions of section 3 of the Act (12 U.S.C. 5902).
Treasury believes that the authority granted to the primary Federal
payment stablecoin regulators in section 5(f) of the Act (12 U.S.C.
5904(f)) authorizes those regulators to waive the provisions of section
3 of the Act (12 U.S.C. 5902) for pending applicants. The statutory
phrase ``the requirements of this Act'' plainly encompasses all of the
requirements of the Act, including section 3's requirements regarding
the issuance, offer, and sale of payment stablecoins.
Although such waivers granted by the primary Federal payment
stablecoin regulators could be viewed as self-executing, Treasury
believes that expressly recognizing these waivers in proposed Sec.
1523.4(a) would promote clarity for the industry and for potential
purchasers of payment stablecoins during the period of any such waiver.
Treasury emphasizes, however, that such waivers are intended to be
temporary in duration and limited in scope. As such, the relief
recognized in proposed Sec. 1523.4(a) would apply only for the period
of the waiver. Further, such waiver provides an exemption from proposed
Sec. 1523.2 or Sec. 1523.3 only to the extent such waiver by its
terms waives section 3(a) or 3(b) of the Act (12 U.S.C. 5902(a), (b)),
respectively.
Question 71: Should proposed Sec. 1523.4(a) provide any additional
guidance regarding the effect on section 3 of the Act (12 U.S.C. 5902)
of any waivers granted by the Federal payment stablecoin regulators
pursuant to section 5(f) of the Act (12 U.S.C. 5904(f))?
2. Limited Safe Harbors in Unusual and Exigent Circumstances (Proposed
Sec. 1523.4(b))
Section 3(c) of the Act (12 U.S.C. 5902(c)) authorizes the
Secretary to adopt limited safe harbors from section 3(a)'s limitation
on payment stablecoin issuance in two circumstances. First, section
3(c)(1) (12 U.S.C. 5902(c)(1)) authorizes the Secretary to issue
regulations providing safe harbors that are consistent with the
purposes of the Act, limited in scope, and apply to a de minimis volume
of transactions. Second, section 3(c)(2) of the Act (12 U.S.C.
5902(c)(2)) authorizes the Secretary to provide limited safe harbors if
the Secretary determines that unusual and exigent circumstances
exist.\53\ Proposed Sec. 1523.4(b) implements section 3(c)(2) of the
Act (12 U.S.C. 5902(c)(2)) and provides that the prohibitions in
proposed Sec. 1523.2 and proposed Sec. 1523.3 shall not apply to the
extent that the Department of the Treasury determines that unusual and
exigent circumstances exist in accordance with section 3(c)(2) of the
Act (12 U.S.C. 5902(c)(2)).
---------------------------------------------------------------------------
\53\ Prior to issuing a limited safe harbor, Treasury must
submit to the chairs and ranking members of the Committee on
Banking, Housing, and Urban Affairs of the Senate and the Committee
on Financial Services of the House of Representatives a
justification for the determination of the unusual and exigent
circumstances, which may be contained in a classified annex. See
section 3(c)(2)(B) of the Act (12 U.S.C. 5902(c)(2)(B)). For the
avoidance of doubt, the determination that ``unusual and exigent
circumstances'' exist for purposes of section 3(c)(2) of the GENIUS
Act and any associated regulations, orders, justifications, or
interpretations do not constitute a determination or interpretation
for purposes of other provisions of law that reference unusual or
exigent circumstances. For example, the context for the Secretary's
determination that ``unusual and exigent circumstances'' exist for
purposes of section 3(c)(2) of the GENIUS Act (12 U.S.C. 5902(c)(2))
is distinct from the Secretary's approval of any program or facility
established under section 13(3) of the Federal Reserve Act (12
U.S.C. 343). Any interpretation of ``unusual and exigent
circumstances'' for purposes of section 3(c)(2) of the GENIUS Act
would not constitute an interpretation of that term under section
13(3) of the Federal Reserve Act.
---------------------------------------------------------------------------
Treasury believes that the textual differences between the safe
harbor authorities in section 3(c)(1) and section 3(c)(2) of the Act
(12 U.S.C. 5902(c)(1), (2)) indicate that the latter paragraph
authorizes the Secretary to adopt safe harbors in unusual and exigent
circumstances other than by rulemaking. In particular, section
3(c)(1)'s general grant of authority to the Secretary to adopt safe
harbors specifies that such safe harbors must be issued by regulation,
but there is no similar specification in section 3(c)(2) of the Act (12
U.S.C. 5902(c)(2)). Further, Treasury believes that it would frustrate
the purpose of section 3(c)(2) of the Act (12 U.S.C. 5902(c)(2)) to
allow Treasury to rapidly respond to unusual and exigent circumstances
if the Secretary were required to provide such safe harbors by notice-
and-comment rulemaking. While proposed Sec. 1523.4(b) does not specify
the exact procedural mechanism by which Treasury would provide limited
safe harbors in unusual and exigent circumstances, Treasury generally
expects to provide such limited safe harbors by order.
Question 72: The prohibition on offers and sales in section 3(b)(1)
of the Act (12 U.S.C. 5902(b)(1)) states that it is ``except as
provided in subsection (c),'' but the text of subsection (c) itself
only expressly references safe harbors from subsection (a). Is section
3(c) (12 U.S.C. 5902(c)) best read to authorize standalone safe harbors
for offer and sale unrelated to an issuance of payment stablecoins? Or
is it best read to only authorize safe harbors for offer and sale
incidental to issuance?
Question 73: Should Treasury issue any regulatory safe harbors
under section 3(c)(1) of the Act (12 U.S.C. 5902(c)(1)) at this time?
If so, how would Treasury determine that those safe harbors were
limited to a de minimis volume of transactions? For example, should any
safe harbors be time based (e.g., providing safe harbors for all
issuances for some period of time following the effective date of the
Act or providing safe harbors for all offers and sales for some period
of time following July 18, 2028)? Alternatively, should any safe
harbors be transaction size limited (e.g., providing safe harbors for
all issuances, offers, and sales below a certain volume of
transactions, such as $1 million dollars per year)? Or instead should
any safe harbors be limited to particular industries or use cases?
Should any safe harbors apply only to transactions in payment
stablecoins issued by domestic issuers, foreign issuers, or both? What
are the costs and
[[Page 53387]]
benefits, including any incentive effects, of such safe harbors?
Question 74: Should Treasury issue any regulatory safe harbors
relating to, or otherwise address, State qualified payment stablecoin
issuers that are licensed in a State for some period prior to the State
submitting a certification to the Stablecoin Certification Review
Committee under section 4(c) of the Act (12 U.S.C. 5903(c)) or while
such a certification is pending? Should Treasury issue any regulatory
safe harbors relating to, or otherwise address, State qualified payment
stablecoin issuers that are licensed in a State that may fail to submit
the certification or annual recertification required under section 4(c)
of the Act (12 U.S.C. 5903(c)) in a timely manner or have a
certification or recertification that is denied by the Stablecoin
Certification Review Committee under section 4(c) of the Act (12 U.S.C.
5903(c))? Would any such safe harbors be consistent with the purposes
of the Act, limited in scope, and apply to only a de minimis volume of
transactions? Should the issuance, offer, or sale of payment
stablecoins issued by such a State qualified payment stablecoin issuer
be deemed unlawful under section 3 of the Act (12 U.S.C. 5902) if the
State qualified payment stablecoin issuer does not obtain a Federal
license or a license in another State within a certain period of time?
Question 75: What effect, if any, will Treasury's interpretation of
the prohibitions under section 3 (12 U.S.C. 5902) have on the ability
of U.S. financial institutions to participate in cross-border payments
or other bona fide foreign exchange transactions that include foreign-
issued, foreign currency-denominated payment stablecoins? What changes
could support this use case by U.S. financial institutions, while still
preserving foreign jurisdiction and issuer interest in achieving
comparability under Section 18 of the Act (12 U.S.C. 5916)?
Question 76: Should proposed Sec. 1523.4(b) provide any additional
guidance regarding the effect of any safe harbors adopted by the
Secretary on section 3 of the Act (12 U.S.C. 5902)?
3. Exempt Transactions (Proposed Sec. 1523.4(c))
Section 3(h)(1) of the Act (12 U.S.C. 5902(h)(1)) provides that
section 3 (12 U.S.C. 5902) shall not apply to three categories of
exempt transactions. Proposed Sec. 1523.4(c) implements this provision
nearly verbatim and provides that the prohibitions in proposed Sec.
1523.2 and proposed Sec. 1523.3 shall not apply to (i) the direct
transfer of digital assets between two individuals acting on their own
behalf and for their own lawful purposes, without the involvement of an
intermediary; (ii) any transaction involving the receipt of digital
assets by an individual between an account owned by the individual in
the United States and an account owned by the individual abroad that
are offered by the same parent company; and (iii) any transaction by
means of a software or hardware wallet that facilitates an individual's
own custody of digital assets.
Question 77: Are the categories of transactions exempt from section
3 of the Act (12 U.S.C. 5902) pursuant to section 3(h)(1) (12 U.S.C.
5902(h)(1)) clear?
G. Severability (Proposed Sec. 1523.5)
Proposed Sec. 1523.5 provides that the provisions of this part are
separate and severable from one another. If any provision, clause, or
phrase of this part is stayed or determined to be invalid, it is
Treasury's intention that the remaining provisions shall continue in
effect.
Treasury is proposing to include a severability clause so that in
the event any particular provision of the proposed rule is held to be
invalid, the remainder of the rule would remain in effect, providing
clarity for all participants in the payment stablecoin market. In
particular, even if the portions of this rule regarding issuance were
held to be invalid, the restrictions on offer and sale would generally
operate independently and continue to function as intended, as the
former is directed at the conduct of issuers and the latter is directed
at the conduct of digital asset service providers more broadly.
Similarly, even if the portions of this rule regarding offer and sale
were held to be invalid, the restrictions on payment stablecoin
issuance would generally operate independently and continue to function
as intended. This regulation would have been proposed independently of
any provision that may be determined to be invalid.
H. Interpretations (Proposed Appendix A)
In addition to the provisions of proposed Part 1523 discussed
above, Treasury is proposing to include in Appendix A interpretations
of proposed Part 1523 to further clarify and illustrate the application
of various aspects of the proposed rule.
Proposed Interpretation 1 considers a U.S. resident who is issued a
payment stablecoin while on vacation in a foreign country. This
interpretation is intended to illustrate when a person is considered to
be located in the United States as defined in proposed Sec. 1523.1(c),
and when a payment stablecoin is considered to have been issued in the
United States as described in proposed Sec. 1523.2.
Proposed Interpretation 2 considers the airdropping of a new
payment stablecoin absent any sale.\54\ The interpretation is intended
to illustrate when a payment stablecoin is considered to have been
issued in the United States as described in proposed Sec. 1523.2.
---------------------------------------------------------------------------
\54\ While proposed interpretation 2 does not address offer and
sale, note that the definition of offer includes making a payment
stablecoin available for exchange.
---------------------------------------------------------------------------
Proposed Interpretation 3 considers a situation in which a digital
asset service provider that operates an exchange coordinates with an
issuer to list a newly issued payment stablecoin for sale. The
interpretation is intended to illustrate how the digital asset service
provider's activities may be viewed for purposes of proposed Part 1523.
Proposed Interpretation 4 considers a digital asset that is not
redeemable by the issuer for a period of time after issuance. The
interpretation is intended to illustrate when a payment stablecoin is
considered to have been issued as described in proposed Sec.
1523.2(b).
Question 78: Is the inclusion of interpretations useful?
Question 79: Should the interpretations be codified in Appendix A
to Part 1523 as proposed, or should the interpretations be published in
another location or format?
Question 80: Should Treasury adopt other interpretations that
illustrate the application of other aspects of proposed Part 1523, and
if so, which aspects?
III. Regulatory Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) \55\ requires an agency to
consider the impact of its proposed rules on small entities. In
connection with a proposed rule, the RFA generally requires an agency
to prepare an Initial Regulatory Flexibility Analysis (IRFA) describing
the impact of the rule on small entities, unless the head of the agency
certifies that the proposed rule will not have a significant economic
impact on a substantial number of small entities and publishes such
certification along with a statement providing the factual basis for
such certification in the Federal Register. Treasury's preliminary view
is that the proposed rule would not have a significant economic impact
on a substantial number of small
[[Page 53388]]
entities, but requests comment on the impact of its proposed rule on
small entities. Additional analysis about the effect of the proposed
rule on small entities is available in the regulatory impact analysis
which will be posted to the docket on the website www.regulations.gov.
---------------------------------------------------------------------------
\55\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------
B. Unfunded Mandates Reform Act
Treasury has analyzed the proposed rule under the factors in the
Unfunded Mandates Reform Act of 1995 (UMRA).\56\ Under this analysis,
Treasury considered whether the proposed rule includes a Federal
mandate that may result in the expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year (adjusted annually for inflation).
Pursuant to section 202 of the UMRA,\57\ if a proposed rule meets this
UMRA threshold, Treasury would need to prepare a written statement that
includes, among other things, a cost-benefit analysis of the proposal.
This requirement does not apply to regulations to the extent they
incorporate requirements specifically set forth in law.\58\
---------------------------------------------------------------------------
\56\ 2 U.S.C. 1531 et seq.
\57\ 2 U.S.C. 1532.
\58\ 2 U.S.C. 1532.
---------------------------------------------------------------------------
Treasury's cost-benefit analysis of this proposal is summarized in
section III.E below and described in more detail in the regulatory
impact analysis which will be posted to the docket on the website
www.regulations.gov.
C. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023, 5
U.S.C. 553(b)(4), requires that a notice of proposed rulemaking include
the internet address of a summary of not more than 100 words in length
of a proposed rule, in plain language, that shall be posted on the
website www.regulations.gov.
Treasury is proposing to issue regulations to implement section 3
of the Guiding and Establishing National Innovation for U.S.
Stablecoins (GENIUS) Act (12 U.S.C. 5902), regarding the statutory
prohibitions and limitations on payment stablecoin issuance, offer, and
sale in the United States. The proposal and the required summary can be
found at https://www.regulations.gov.
D. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) states
that no agency may conduct or sponsor, nor is the respondent required
to respond to, an information collection unless it displays a currently
valid Office of Management and Budget (OMB) control number. Treasury's
preliminary view is that this proposed rule does not contain any
information collections within the meaning of the Paperwork Reduction
Act, but requests comment on whether any aspect of the proposal raises
information collection burdens.
E. Regulatory Planning and Review
The Office of Information and Regulatory Affairs (OIRA) in OMB has
determined that this proposed rule is a significant regulatory action
under section 3(f)(1) of Executive Order 12866 and, therefore, is
subject to review under Executive Order 12866. Treasury's analysis
conducted in connection with Executive Order 12866 is summarized below
and Treasury's detailed regulatory impact analysis will be posted to
the docket on the website www.regulations.gov. This proposed rule is
not anticipated to be an E.O. 14192 regulatory action.
As described in more detail in the detailed regulatory impact
analysis, the proposed rule's estimated benefits substantially exceed
the estimated costs. The quantified benefits of this proposal comprise:
regulatory clarity and avoided depegging losses and consumer protection
from avoided issuer failures. Non-quantified benefits include
preservation of dollar dominance in digital payment markets, enhanced
market integrity and investor confidence, innovation incentives from
clear regulatory ``rules of the road'', and improved U.S. competitive
positioning in global digital payments.
The direct costs of this proposed rule are expected to be primarily
transitional: market concentration costs and switching costs. The
analysis also contemplates annual digital asset service provider
compliance costs, and requests comment on whether issuer compliance
costs should be quantified separately, given the overlap described
throughout this proposal among issuers and digital asset service
providers, as well as among issuance, offer, and sale. Qualitative
costs include reduced product choice.
As described in the previous sections and in the more detailed
regulatory impact analysis, Treasury also considered several
alternatives to the proposed rule. In particular, Treasury considered a
less stringent extended transition period (e.g., 36 months) with a safe
harbor permitting unregistered foreign-issued stablecoins with a de
minimis volume (e.g., less than $1 billion in U.S.-held capitalization)
to continue U.S. issuance, but concluded that this safe harbor would
result in delayed benefits (e.g., consumer protection) that far exceed
the reduced transition and other costs. Treasury next considered a more
stringent approach (e.g., removing the proposed Sec. 1523.2(c) and
Sec. 1523.3(e) clarifications, elimination of the residency prong of
the located in the United States definition, or removing the
``reasonable belief'' standard for DASPs), but concluded that the
additional compliance burden and offshore-migration risk exceed the
marginal gains from broader regulatory coverage. Finally, Treasury
considered an approach that was more similar to Regulation S, as
described in the previous sections, but concluded that such an approach
would provide substantially less regulatory clarity and would be more
difficult to administer and enforce.
Treasury requests comment on all aspects of the regulatory impact
analysis, including the data, assumptions, methods, and estimates used
to assess the costs, benefits, transfers, distributional effects, and
alternatives associated with the proposed rule.
Question 81: Does the regulatory impact analysis use an appropriate
baseline for evaluating the effects of the proposed rule? In
particular, does the analysis appropriately distinguish between effects
attributable to the GENIUS Act itself and effects attributable to the
proposed rule?
Question 82: What data, studies, or other information should
Treasury consider to assess the costs and benefits of section 3 of the
Act (12 U.S.C. 5902) as proposed in part 1523?
Question 83: What are the potential costs and benefits of the
implementation of section 3 of the Act (12 U.S.C. 5902) as proposed in
part 1523, beyond costs and benefits imposed by the Act itself? Are
Treasury's estimates of costs and benefits appropriate? To what extent
does Treasury have discretion within the boundaries of the Act to
further reduce costs or increase benefits?
Question 84: Are the potential costs and benefits of the
implementation of section 3 of the Act (12 U.S.C. 5902) as proposed in
part 1523 sufficiently analyzed as distinct from the costs and benefits
of other sections of the Act and associated current or expected
regulatory proposals, such as the registration and prudential
regulatory frameworks proposed by the primary Federal payment
stablecoin regulators, FinCEN, and OFAC? To what extent should Treasury
consider these costs
[[Page 53389]]
and benefits or avoid double counting in its analysis of proposed part
1523?
Question 85: How should Treasury evaluate the costs and benefits of
the alternatives discussed in this proposal, including a per se
location-based approach, an offshore-transaction framework modeled more
closely on Regulation S, more or less prescriptive due diligence
requirements, and additional safe harbors? Are there other alternatives
that should be considered, and what are their respective costs and
benefits?
Question 86: What is the estimated impact on compliance efficiency,
market participation, and demand for payment stablecoins due to clearer
regulatory guidance?
Question 87: Are there information collection burdens associated
with the proposed rule that Treasury has not identified? If so, what
entities would bear those burdens, and what would be the estimated time
and cost associated with them?
List of Subjects in 12 CFR Part 1523
Banks, banking, Consumer protection, Digital assets, Digital asset
service provider, Non-bank entity, Payment stablecoins, Permitted
payment stablecoin issuer, State and local governments, State qualified
payment stablecoin issuer, foreign payment stablecoin issuer.
For the reasons stated in the preamble, the Department of the
Treasury proposes to amend 12 CFR chapter XV subchapter C by adding
part 1523 to read as follows:
SUBCHAPTER C--REGULATION OF PAYMENT STABLECOINS
PART 1523--PAYMENT STABLECOIN OFFER, SALE, AND ISSUANCE
Sec.
1523.1 Scope, Applicability, and Definitions.
1523.2 Payment Stablecoin Issuance.
1523.3 Payment Stablecoin Offer and Sale.
1523.4 Exemptions and Safe Harbors.
1523.5 Severability.
Authority: 12 U.S.C. 5901 et seq.
Sec. 1523.1 Scope, Applicability, and Definitions.
(a) This part is issued by the U.S. Department of the Treasury to
implement section 3 of the Guiding and Establishing National Innovation
for U.S. Stablecoins (GENIUS) Act (12 U.S.C. 5902) regarding the
statutory prohibitions and limitations on issuing, offering, selling,
and otherwise making available payment stablecoins in the United
States.
(b) Consistent with section 3(e) of the Act (12 U.S.C. 5902(e)),
this part is intended to have extraterritorial effect if conduct
involves the offer or sale of a payment stablecoin to a person located
in the United States.
(c) For purposes of this part, the following definitions apply:
Act or GENIUS Act means the Guiding and Establishing National
Innovation for U.S. Stablecoins Act (12 U.S.C. 5901 et seq.).
Digital asset has the meaning set forth in section 2(6) of the Act
(12 U.S.C. 5901(6)).
Digital asset service provider has the meaning set forth in section
2(7) of the Act (12 U.S.C. 5901(7)). For the avoidance of doubt, a
person that, for compensation or profit, engages in the business in the
United States of issuing payment stablecoins is a digital asset service
provider.
Federal qualified payment stablecoin issuer has the meaning set
forth in section 2(11) of the Act (12 U.S.C. 5901(11)).
Foreign payment stablecoin issuer has the meaning set forth in
section 2(12) of the Act (12 U.S.C. 5901(12)).
Insured depository institution has the meaning set forth in section
2(15) of the Act (12 U.S.C. 5901(15)).
Issue means the first transfer of a payment stablecoin by the
issuer, except as required by a lawful order, whether directly or
indirectly, including by crediting an account, that results or will
result in a person other than the issuer having the right to use or
transfer the payment stablecoin or to have the payment stablecoin
converted, redeemed, or repurchased. For the avoidance of doubt, after
a payment stablecoin has been converted, redeemed, repurchased, or
otherwise reacquired by the issuer, the first subsequent transfer of
the payment stablecoin by the issuer that otherwise satisfies this
definition is considered a new issuance, whether or not the transfer is
characterized as a reissuance, except as required by a lawful order.
Issuer means a person who (i) is obligated to convert, redeem, or
repurchase the payment stablecoin for a fixed amount of monetary value,
and (ii) represents that the person will maintain, or creates the
reasonable expectation that the person will maintain, a stable value
relative to the value of a fixed amount of monetary value.
Lawful order has the meaning set forth in section 2(16) of the Act
(12 U.S.C. 5901(16)).
Located in the United States means:
(1) With respect to an individual, the individual is physically
present in the United States, unless the individual is not a resident
of the United States and the individual's physical presence in the
United States is merely temporary; or
(2) With respect to a partnership, company, corporation,
association, trust, estate, cooperative organization, or other business
entity, the entity:
(i) Is organized or incorporated under the laws of the United
States or a State; or
(ii) Has its principal place of business in the United States.
Offer has the meaning set forth in section 2(21) of the Act (12
U.S.C. 5901(21)). For the avoidance of doubt, the term includes making
available for purchase, sale, or exchange a payment stablecoin that has
not yet been issued.
Monetary value has the meaning set forth in section 2(17) of the
Act (12 U.S.C. 5901(17)).
Payment stablecoin has the meaning set forth in section 2(22) of
the Act (12 U.S.C. 5901(22)).
Permitted payment stablecoin issuer has the meaning set forth in
section 2(23) of the Act (12 U.S.C. 5901(23)).
Person has the meaning set forth in section 2(24) of the Act (12
U.S.C. 5901(24)).
Primary Federal payment stablecoin regulator has the meaning set
forth in section 2(25) of the Act (12 U.S.C. 5901(25)).
State has the meaning set forth in section 2(28) of the Act (12
U.S.C. 5901(28)).
Subsidiary has the meaning set forth in sections 2(32) and 2(33) of
the Act (12 U.S.C. 5901(32), (33)), as applicable.
United States means each of the several States, the Indian lands
(as that term is defined in the Indian Gaming Regulatory Act, 25 U.S.C.
2703(4)), and the Insular Possessions of the United States.
Sec. 1523.2 Payment Stablecoin Issuance.
(a) Except in accordance with Sec. 1523.4, it shall be unlawful
for any person to issue a payment stablecoin in the United States
unless the person is:
(1) A permitted payment stablecoin issuer; or
(2) A foreign payment stablecoin issuer that meets the criteria set
out in section 18(a) of the Act (12 U.S.C. 5916(a)).
(b) A person will be considered to have issued a payment stablecoin
in the United States only if, at the time of issuance:
(1) The person is located in the United States; or
(2) The person issues the payment stablecoin to a person located in
the United States.
(c) Notwithstanding any other provision of this section, a person
will be deemed not to issue a payment stablecoin in the United States,
if:
[[Page 53390]]
(1) The person is not located in the United States;
(2) The person reasonably believes that each person to whom the
payment stablecoin is issued is not located in the United States;
(3) The person has adopted and implemented policies, procedures,
and controls reasonably designed to avoid issuing the payment
stablecoin to any person located in the United States; and
(4) The person does not engage in advertising or solicitation
activities that target, or could be reasonably expected to have the
effect of targeting, any person located in the United States.
(d) The following are examples of activities that, when conducted
by a person in connection with the issuance of a payment stablecoin
that violates paragraph (a), constitute participation by the person in
the violation for purposes of the penalty in section 3(f) of the Act
(12 U.S.C. 5902(f)):
(1) The person incurs an obligation to a third party to convert,
redeem, or repurchase a payment stablecoin, including a secondary
obligation to convert, redeem, or repurchase on behalf of the original
issuer;
(2) The person coordinates with the issuer to facilitate key steps
in the issuance, such as soliciting customers or minting the payment
stablecoins; or
(3) The person acts as market maker for the newly issued payment
stablecoin, distributes the newly issued payment stablecoin to
purchasers of the newly issued payment stablecoin, or otherwise makes
the newly issued payment stablecoin available for secondary market
trading.
Sec. 1523.3 Payment Stablecoin Offer and Sale.
(a) Beginning on July 18, 2028, except in accordance with Sec.
1523.4, it shall be unlawful for a digital asset service provider to
offer or sell a payment stablecoin to a person located in the United
States unless the payment stablecoin is:
(1) Issued by a permitted payment stablecoin issuer; or
(2) Issued by a foreign payment stablecoin issuer that meets the
criteria set out in section 18(a) of the Act (12 U.S.C. 5916(a)).
(b) Except in accordance with Sec. 1523.4, it shall be unlawful
for a digital asset service provider to offer or sell to a person
located in the United States, or otherwise offer, sell, or make
available in the United States, a payment stablecoin issued by a
foreign payment stablecoin issuer unless the foreign payment stablecoin
issuer has the technological capability to comply with, and will
comply, with the terms of any lawful order and any reciprocal
arrangement pursuant to section 18 of the Act (12 U.S.C. 5916).
(c) For purposes of paragraph (b) of this section, a digital asset
service provider may rely on a representation by a foreign payment
stablecoin issuer that the foreign payment stablecoin issuer has the
technological capability to comply with, and will comply, with the
terms of any lawful order and any reciprocal arrangement pursuant to
section 18 of the Act (12 U.S.C. 5916), provided that:
(1) The digital asset service provider may not rely on such
representation unless it conducts reasonable due diligence regarding
the representation; and
(2) The digital asset service provider may not rely on such
representation if, based on such due diligence or other information
reasonably available to it, the digital asset service provider knows,
has reason to know, or should know that the representation is false or
that the foreign payment stablecoin issuer does not have the
technological capability to comply, or will not comply, with the terms
of any lawful order or any reciprocal arrangement pursuant to section
18 of the Act (12 U.S.C. 5916).
(d) The following are non-exhaustive examples of activities that
constitute an offer or sale of a payment stablecoin to a person located
in the United States:
(1) Directly soliciting a person located in the United States to
purchase the payment stablecoin;
(2) Advertising the payment stablecoin as available for purchase by
persons located in the United States;
(3) Responding to an unsolicited inquiry from a person located in
the United States by indicating willingness to sell the payment
stablecoin;
(4) Advising potential purchasers of the payment stablecoin on how
to evade generally applicable location detection or restriction
mechanisms that would otherwise detect or block purchases by persons
located in the United States, such as IP address checkers; or
(5) Entering into a contract for the sale of a payment stablecoin
with a person located in the United States, regardless of the form of
consideration provided in return for the payment stablecoin or the
timing of delivery of the payment stablecoin.
(e) Notwithstanding any other provision of this section, a digital
asset service provider will be deemed not to offer or sell a payment
stablecoin to a person located in the United States, and will be deemed
not to offer, sell, or otherwise make available in the United States a
payment stablecoin, if:
(1) The digital asset service provider reasonably believes that the
person to whom the payment stablecoin is offered, sold, or otherwise
made available is not located in the United States;
(2) The digital asset service provider has adopted and implemented
policies, procedures, and controls reasonably designed to avoid
offering, selling, or making available the payment stablecoin to any
person located in the United States; and
(3) The digital asset service provider does not engage in
advertising or solicitation activities that target, or could be
reasonably expected to have the effect of targeting, any person located
in the United States.
Sec. 1523.4 Exemptions and Safe Harbors.
(a) The prohibitions in Sec. 1523.2 and Sec. 1523.3 shall not
apply to a subsidiary of an insured depository institution or a person
applying to be a Federal qualified payment stablecoin issuer with a
pending application to become a permitted payment stablecoin issuer on
the effective date of the Act, but only if a waiver is granted by the
primary Federal payment stablecoin regulator under section 5(f) of the
Act (12 U.S.C. 5904(f)), and only to the extent such waiver by its
terms waives the provisions of section 3 of the Act (12 U.S.C. 5902).
(b) The prohibitions in Sec. 1523.2 and Sec. 1523.3 shall not
apply to the extent that the Department of the Treasury determines that
unusual and exigent circumstances exist in accordance with section
3(c)(2) of the Act (12 U.S.C. 5902(c)(2)).
(c) The prohibitions in Sec. 1523.2 and Sec. 1523.3 shall not
apply to:
(1) The direct transfer of digital assets between two individuals
acting on their own behalf and for their own lawful purposes, without
the involvement of an intermediary;
(2) Any transaction involving the receipt of digital assets by an
individual between an account owned by the individual in the United
States and an account owned by the individual abroad that are offered
by the same parent company; and
(3) Any transaction by means of a software or hardware wallet that
facilitates an individual's own custody of digital assets.
Sec. 1523.5 Severability.
The provisions of this part are separate and severable from one
another. If any provision is stayed or determined to be invalid, it is
Treasury's intention that the remaining provisions shall continue in
effect.
[[Page 53391]]
Appendix A to Part 1523: Interpretations
1. While vacationing in a foreign country, a U.S. resident is
issued a payment stablecoin by an issuer that (a) is both
incorporated under the laws of and has its principal place of
business in the foreign country and (b) does not meet the criteria
set out in section 18(a) of the GENIUS Act (12 U.S.C. 5916(a)). Has
the issuer violated Sec. 1523.2(a)?
No. As described in Sec. 1523.2(b), a person will be considered
to have issued a payment stablecoin in the United States only if, at
the time of issuance, the person issuing the payment stablecoin is
located in the United States, or the person issues the payment
stablecoin to a person located in the United States. The foreign
payment stablecoin issuer is not located in the United States
because it is not organized or incorporated under the laws of the
United States or a State and does not have its principal place of
business in the United States. Similarly, at the time of the
issuance, the U.S. resident is not located in the United States
because he or she is not physically present in the United States.
Although the foreign payment stablecoin issuer has not violated
Sec. 1523.2(a) in this scenario, foreign payment stablecoin issuers
should take care to avoid offers or sales to U.S. residents while
such residents are located in the United States. For example, if the
foreign payment stablecoin issuer directly solicited the U.S.
resident (while he or she was physically located in the United
States) to purchase the payment stablecoin, this conduct would
likely violate Sec. 1523.3, unless the conditions in Sec.
1523.3(e) were satisfied.
2. As part of its marketing strategy for a new payment
stablecoin, an issuer, for no consideration and without previously
advertising the payment stablecoin, mints and airdrops a payment
stablecoin to a U.S. resident who is physically present in the
United States. Following the airdrop, the U.S. resident has or will
have the right to transfer, use, or redeem the payment stablecoin.
Has a payment stablecoin been issued in the United States for
purposes of Sec. 1523.2(a)?
Yes, because the airdrop meets the definition of ``issue'' in
Sec. 1523.1(c), and because, as described in Sec. 1523.2(b), a
payment stablecoin has been issued in the United States because the
person to whom the payment stablecoin was issued was located in the
United States at the time of issuance.
3. A digital asset service provider that operates an exchange
coordinates with an issuer to list newly issued payment stablecoins
on the digital asset service provider's exchange for purchase by
persons located in the United States. The digital asset service
provider does not have an obligation to convert, redeem, or
repurchase the payment stablecoins. Has the digital asset service
provider issued the payment stablecoins within the meaning of Sec.
1523.2(a)?
No. The digital asset service provider is not considered the
issuer as defined in Sec. 1523.1(c) because the digital asset
service provider does not have an obligation to convert, redeem, or
repurchase the payment stablecoins. However, depending on the facts
and circumstances, the digital asset service provider may have
participated in the issuance as described in Sec. 1523.2(d) and may
be offering or selling the payment stablecoins as described in Sec.
1523.3.
4. An issuer mints and transfers a digital asset to a person
located in the United States. The digital asset is designed to be
used as a means of payment or settlement, and the issuer represents
that it will maintain a stable value relative to the value of a
fixed amount of monetary value. However, the issuer provides (by
smart contract or otherwise) that the digital asset is not
redeemable by the issuer until a future date. Has a payment
stablecoin been issued within the meaning of Sec. 1523.2?
Yes. As described in Sec. 1523.1(c), an issuer is considered to
have issued a payment stablecoin if the first transfer of the
payment stablecoin will result in a person other than the issuer
having the right to redeem a payment stablecoin, even if the
redemption obligation does not mature until some period after the
transfer.
Rachel Miller,
Executive Secretary.
[FR Doc. 2026-16796 Filed 8-17-26; 8:45 am]
BILLING CODE 4810-AK-P