The U.S. Department of the Treasury has proposed a detailed regulatory framework defining how payment stablecoins can be issued, offered and sold in the United States under the GENIUS Act. Released on August 17, 2026, the Notice of Proposed Rulemaking (NPRM) focuses on Section 3 of the GENIUS Act and begins filling in some of the most important details left open by the legislation.

The proposal covers permitted issuers, foreign stablecoins, exchanges and other digital asset service providers, cross-border transactions, geographic restrictions, lawful orders and potential safe harbors.

Treasury Defines When a Stablecoin Is Issued in the U.S.

The GENIUS Act itself does not define "issue," so Treasury proposes treating issuance as the first transfer of a payment stablecoin by an issuer that gives another person the right to use, transfer, convert, redeem or repurchase it. That distinction matters for stablecoin issuers managing large token inventories.

A token that has been minted but remains inside an issuer-controlled treasury would generally not yet be considered issued. If the issuer directly mints the stablecoin into a user's wallet, however, Treasury would consider the issuance to have occurred.

The proposal also addresses redeemed tokens. If a stablecoin is redeemed, repurchased or otherwise returned to the issuer and later transferred back to another party, Treasury proposes treating that subsequent transfer as a new issuance, regardless of whether the company calls it a reissuance.

This could have important operational implications as stablecoins increasingly become financial infrastructure rather than assets used primarily for crypto trading. EtherWorld explored this shift in What Enterprises Need to Know About: Stablecoins, where stablecoins were examined as emerging rails for payments, treasury management and tokenized asset settlement.

A stablecoin would generally be considered issued in the U.S. when either the issuer is located in the United States or the recipient is located in the country at the time of issuance. For individuals, location is primarily based on physical presence. A U.S. resident travelling abroad would generally not be considered located in the United States for these provisions, while Treasury proposes an exception for non-U.S. residents who are only temporarily visiting America.

This location-based approach reflects the increasingly cross-border nature of digital dollars. The issue is particularly relevant as stablecoins grow beyond trading and become payment infrastructure, a trend visible in How Mastercard Is Using Stablecoin Infrastructure for Global Payments.

Exchanges Face New Stablecoin Rules From July 2028

Beginning July 18, 2028, these providers would generally be prohibited from offering or selling a payment stablecoin to someone located in the United States unless the token was issued by a permitted payment stablecoin issuer or a qualifying foreign issuer operating under the GENIUS Act's Section 18 framework.

Treasury provides several examples of conduct that could constitute offering or selling a stablecoin to a U.S. person. These include directly soliciting U.S. customers, advertising a token as available for purchase in the United States, agreeing to sell it to a U.S.-located buyer and even explaining how users could bypass geographic restrictions such as IP-based controls.

Europe has already demonstrated how regulation can reshape stablecoin availability. As EtherWorld covered in Europe Delists USDT as MiCA Rules Take Effect, exchanges have adjusted their stablecoin offerings as MiCA compliance requirements take hold. The transition became even more visible when Europe's Largest Fintech Revolut moved to delist USDT.

This transition is occurring while large financial institutions are entering the market. Fidelity's launch of the USD-backed FIDD stablecoin highlighted how regulated institutions are positioning themselves for a more structured stablecoin environment.

Foreign Stablecoins Face Lawful Order & Due Diligence Tests

Under the proposed rules, a digital asset service provider generally could not offer or make a foreign-issued stablecoin available in the United States unless the issuer has the technological capability to comply with lawful orders and will comply with applicable reciprocal arrangements under Section 18.

Treasury specifically asks whether due diligence should include examining smart contracts and checking whether functions capable of freezing, seizing or burning tokens actually exist and work as represented.

Platforms would be allowed to rely on representations made by foreign issuers, but only after conducting reasonable due diligence. They could not rely on those representations when they know, have reason to know or should know that the claims are false.

Foreign issuers satisfying Section 18 requirements could still participate in the U.S. market. Treasury's proposal interprets the GENIUS Act as allowing qualifying foreign issuers to issue payment stablecoins directly in the United States rather than requiring every token to first enter offshore secondary markets.

The question has broader implications because stablecoins are increasingly being embedded into international financial systems. More than 140 companies recently joined an initiative covered by EtherWorld in Open USD Stablecoin for Global Business Payments, demonstrating growing interest in stablecoins as cross-border business infrastructure.

Regulated issuance is also reaching public blockchains. Telcoin's eUSD launch on Polygon provided another example of how stablecoin models are increasingly intersecting with regulated financial institutions and open blockchain networks.

Safe Harbors, Cross-Border Rules & What Comes Next

Treasury is not proposing an absolute ban on every transaction falling outside the main framework. The NPRM contains several exemptions and protections, including relief for certain applicants awaiting authorization, exemptions already established by the GENIUS Act and potential safe harbors during unusual and exigent circumstances.

Direct transfers between two individuals acting on their own behalf without an intermediary can remain exempt under specified conditions. Certain transactions involving self-custody software or hardware wallets are also protected.

Foreign issuers may also avoid being treated as issuing stablecoins in the United States when they reasonably believe recipients are outside the country, operate effective policies and controls intended to prevent U.S. issuance and avoid advertising or solicitation directed toward U.S. users.

Treasury is simultaneously asking whether it should go further and create an offshore framework resembling Regulation S, the securities-law framework commonly used to distinguish offshore transactions from U.S. offerings.

However, Treasury stresses that payment stablecoins are not securities or commodities under the GENIUS Act and argues that simply importing traditional investment-market rules may not properly reflect how stablecoins function as payment and settlement instruments.

The distinction is increasingly important as policymakers around the world decide how digital money should interact with existing payment systems. EtherWorld previously examined this question in Does India Need Stablecoins When UPI Already Works?, highlighting how stablecoin use cases can differ dramatically between domestic payments and cross-border digital-dollar infrastructure.

The wider U.S. debate also extends beyond stablecoins. EtherWorld's comparison of the GENIUS Act vs. CLARITY Act explains how the two pieces of legislation address different parts of America's emerging digital asset regulatory system.

Treasury has included 87 questions in the NPRM, covering everything from stablecoin airdrops and market makers to bridges, wrapped assets, geographic controls, foreign issuers and safe harbors. That makes the current proposal less of a finished rulebook and more of the next major stage in implementing the GENIUS Act.

To promote your Web3 articles, events, and projects, you may reach out anytime via EtherWorld PR for submissions and collaboration.

Related Articles

1. What Enterprises Need to Know About: Stablecoins
2. Europe Delists USDT as MiCA Rules Take Effect
3. Europe's Largest Fintech Revolut to Delist USDT by August 31
4. Over 140 Firms Unite to Launch Open USD Stablecoin for Global Business Payments
5. Telcoin's eUSD Goes Live on Polygon

To follow blockchain news, track Ethereum protocol progress, and read our latest stories, subscribe to our weekly today.

Join the EtherWorld & Avarch Internship Program and build your career in blockchain, content, social media, video, podcast editing, or operations. Send your resume and brief introduction to contact@etherworld.co.