Key Insights:
- Blockchain Association seeks clearer GENIUS Act rules for traders and validators.
- Industry challenges trading liability and foreign stablecoin due diligence rules.
- NCA seeks redemption windows, stolen fund recovery, and self-custody protections.
GENIUS Act rules face industry pushback over proposed requirements affecting stablecoin trading, foreign issuers, and blockchain infrastructure.
The Blockchain Association urged the US Treasury to clarify the terms covering criminal liability, compliance checks, and service provider definitions.
Its submission calls for more transparent boundaries for exchanges, proprietary traders, and decentralized protocols while supporting regulated stablecoin issuance.
Treasury’s proposed rules implement Section 3, covering stablecoin issuance, offers, and sales in the United States.
The association supports the Treasury’s objective of adequate reserves and issuance by regulated companies. However, it argues that the final rules must respect statutory exclusions and separate issuance from ordinary trading.
GENIUS Act Scope Draws Industry Objections
The association wants Treasury to distinguish businesses serving customers from firms trading their own assets. It argues that proprietary trading alone should not create digital asset service provider obligations.
Corporate treasuries holding stablecoins and merchants accepting them should also remain outside that category, according to its letter.
The group also seeks explicit regulatory exclusions for self-custody software, validators, and decentralized liquidity mechanisms. It wants those exclusions to follow the functions performed, including newer trading systems.
Providing liquidity through software should not lose protection because the underlying technology changes, the association said. Those exclusions should also apply when Treasury assesses participation in unlawful issuance, it added.
Separately, the association supports defining issuance as the first transfer to another holder. It wants the Treasury to distinguish later independent trades from issuance and preserve both requirements for determining issuer status.
Those requirements concern redemption obligations and representations that a token will maintain stable value. Technical control over minting or wrapping tokens should not automatically make a company an issuer, the group said.
Trading Liability and Foreign Stablecoins
The GENIUS Act submission also challenges language that covers knowing participation in the unlawful issuance.
The association says ordinary market making could trigger criminal liability under the proposal’s treatment of newly issued tokens. It wants liability to require actual knowledge of facts making issuance unlawful, plus substantial assistance coordinated with the issuer.
For foreign stablecoins, the group opposes open-ended due diligence requirements on exchanges that lack direct relationships with issuers.
Instead, it wants firms to rely on public registration and prohibition lists, absent knowledge of contrary material facts. Its letter says those firms may lack access to issuer representations needed under the proposal.
Location requirements raise another objection because permissionless protocols may reveal only a wallet address.
The association wants actual knowledge and information obtained during ordinary transactions to replace Treasury’s proposed reasonable belief standard. It also opposes additional identification duties when counterparties’ locations are not readily available.
GENIUS Act: Holder Protections and Implementation Changes
Meanwhile, the National Cryptocurrency Association submitted separate comments focused on people holding stablecoins as regulations change. It asked the US Treasury to provide time for holders to redeem, sell, or convert affected tokens.
The group also sought mechanisms for returning stolen funds and protections for self-custody and peer-to-peer transfers. Stuart Alderoty echoed those priorities, saying the US Treasury’s rules should protect Americans from becoming stranded with their holdings.
The Blockchain Association also wants Treasury to replace an open-ended monetary equivalence test with a fixed list. It wants compliance cost estimates to include diligence, location checks, monitoring, recordkeeping, and legal review.
The group also urged regulators to coordinate effective dates across related GENIUS Act rules. It wants Treasury to preserve service providers’ July 18, 2028, compliance deadline.
