The U.S. Treasury published a proposed rule on August 17 to implement section 3 of the GENIUS Act. The document seeks to define when a payment stablecoin is “issued in the United States,” when it is offered or sold to someone located in the country, and which activities may bring a foreign issuer or intermediary within scope.

This is not the operative rule yet. Comments are open until October 19, and the document asks 87 questions. That unfinished work is precisely why it matters: the U.S. boundary could turn on the location of the issuer, the first recipient and the controls that a business actually uses to keep activity outside the U.S. market.

What Treasury actually published

The official release accompanies an 87-page Notice of Proposed Rulemaking. It would add a new Part 1523 to Title 12 of the Code of Federal Regulations. Its scope is narrower than the full GENIUS Act: it covers the issuance, offer, sale and making available of payment stablecoins under section 3.

The proposal does not replace reserve rules, redemption obligations or anti-money-laundering requirements being developed by other authorities. Nor does it create a new licence today. It describes the geographic and transactional threshold at which the licences and restrictions written into the statute should apply.

The TREAS-DO-2026-0496 docket accepts comments until October 19, 2026 at 11:59 p.m. U.S. Eastern time. Treasury must then assess the submissions before it can publish a final rule, potentially with material changes.

This step follows an advance consultation opened in September 2025. The August 17 proposal is therefore more concrete than a general request for information, but less definitive than an adopted regulation.

“Issuance” would begin with the first transfer

The GENIUS Act generally bars an unauthorized person from issuing a payment stablecoin in the United States, without defining the exact moment at which issuance occurs. The Treasury proposal would use the first direct or indirect transfer by the issuer that gives another person the right to use, transfer or redeem the stablecoin.

That separates technical creation from economic circulation. A token minted on a blockchain but retained in the issuer’s treasury would not yet be “issued.” Crediting a customer’s account could qualify, however, even if the token remains in an issuer-controlled wallet because the issuer is also acting as custodian.

Using a distributor, custodian or other intermediary would not make the first transfer disappear. After redemption or reacquisition by the issuer, the next transfer would be treated as a new issuance even if the same digital object had not been burned and minted again.

This choice matters for issuers and infrastructure providers. Minting, custody, ledger crediting and redemption rights can arise at different times. Treasury proposes to focus on the moment when a third party gains enforceable use or redemption rights, rather than only on a visible transfer between two blockchain addresses.

The boundary would look at both sides of the transaction

The proposal treats a stablecoin as issued in the United States if, at issuance, the issuer is located there or the first recipient is located there. A U.S. company could not move its issuance legally offshore merely by serving a foreign customer. Conversely, a foreign company could enter the U.S. perimeter by issuing directly to a recipient located in the country.

For a business, “located in the United States” would mean that it is organized there or has its principal place of business there. For an individual, the proposed test rests mainly on physical presence. The document adds exceptions: a non-resident who is only temporarily in the United States would not automatically be treated as U.S.-located, while a U.S. resident temporarily abroad would be outside the perimeter in Treasury’s local-payment example.

Those distinctions are meant to stop travel from accidentally changing the regulatory treatment of a transaction. They also create a practical problem: how does an issuer know where a person is at the precise moment of the first transfer?

Treasury proposes conditional protection for some foreign actors that reasonably believe a recipient is outside the United States. It would depend on policies, procedures and controls that are designed and actually implemented to support that belief. Customer due diligence, account-opening information, geographic restrictions, device or network location, contractual representations and transaction monitoring could all be relevant.

Exchanges and distributors are in scope too

Section 3 reaches beyond initial creation. It also governs digital asset service providers — exchanges, custodians and other compensated intermediaries — that offer, sell or make a stablecoin available.

The proposal gives non-exhaustive examples. Directly soliciting a U.S. customer, advertising that a stablecoin is available in the United States, responding affirmatively to an unsolicited purchase inquiry, entering a sale contract or advising someone how to bypass location controls could count as an offer or sale in the country.

Conversely, a service provider might avoid being deemed in breach if it reasonably believes the person is outside the United States, actually applies appropriate controls and conducts no advertising or solicitation targeting the U.S. market. The proposal is still weighing this procedures-based approach against a stricter line where actual location would be enough.

Foreign-issued stablecoins face an additional condition from the Act’s expected effective date: the issuer must be technologically capable of complying, and agree to comply, with applicable lawful orders and reciprocal arrangements. 12 U.S.C. § 5916 also creates a route for some foreign issuers operating under a regime Treasury deems comparable, registered with the OCC and meeting liquidity and sanctions conditions.

From July 18, 2028, the statutory rule becomes broader. A service provider generally will not be able to offer or sell a payment stablecoin to a person located in the United States unless the issuer is permitted or qualifies for the foreign-issuer exception. That date does not mean every implementation detail has already been settled.

Why this matters now

The proposal’s significance lies less in a new prohibition than in defining its reach. A stablecoin moves without following the borders of a conventional banking network. Its issuer, custodian, trading platform, wallet and user may sit in five different jurisdictions. A rule must turn that global circulation into criteria that each participant can operationalize.

For businesses, that may force architecture decisions: separate U.S. flows, check location at the first transfer, preserve evidence of controls and reassess integrations with market makers, bridges or exchanges. Users may encounter the result as access restrictions, identity checks or geographic blocks.

GatherHub’s Stablecoins course explains why a stable token still depends on an issuer, reserves and redemption rules. Treasury’s proposal adds a fourth layer: deciding which supervisor can enforce those obligations when issuance and distribution cross borders.

Limits and risks to watch

Geolocation is imperfect evidence. An IP address can be masked, a phone can travel and a legal entity can operate across several countries. Weak controls could enable evasion; overly strict controls could block legitimate users, collect more personal data or fragment liquidity between markets.

The proposal acknowledges that tension. It asks whether an approach inspired by Regulation S, which governs some offshore securities offerings, would fit better. That alternative would examine whether the transaction is genuinely offshore and whether there are directed selling efforts into the United States. Treasury also warns that importing investment-law concepts wholesale could frustrate a product designed for cross-border payment and settlement.

There is another evidentiary limit. Reporting by CoinDesk and crypto.news corroborates the filing and timetable, but both analyses ultimately rest on the same official document. The central proof is the NPRM, not the number of articles repeating it.

What comes next

Four milestones will show what the proposal actually becomes: comments filed by October 19, Treasury’s response to the 87 open questions, the final rule and its effective date. Decisions recognizing foreign regulatory regimes as comparable, together with OCC registration arrangements, will also be material.

The GENIUS Act is currently expected to take effect on January 18, 2027, but the statute also provides for an effective date 120 days after certain final regulations if that arrives earlier. Until the process is complete, the August 17 proposal draws a possible boundary — not the final perimeter of the U.S. stablecoin market.

Sources consulted