On September 19, 2025, the US Department of the Treasury (Treasury) issued an Advance Notice of Proposed Rulemaking (ANPRM), seeking public comment related to its implementation of the Guiding and Establishing National Innovation for US Stablecoins Act (the GENIUS Act), a comprehensive framework for the federal regulation of payment stablecoins enacted on July 18, 2025 (for more information, see this Latham Client Alert).
The GENIUS Act directs the Treasury Secretary (as well as the primary federal payment stablecoin regulators and each state payment stablecoin regulator) to promulgate implementing regulations through notice and comment procedures within one year of enactment of the GENIUS Act. According to the ANPRM, the GENIUS Act “tasks Treasury . . . with issuing regulations that encourage innovation in payment stablecoins while also providing an appropriately tailored regime to protect consumers, mitigate potential illicit finance risks, and address financial stability risks.”
The ANPRM, which builds on the Request for Comment on Innovative Methods to Detect Illicit Activity Involving Digital Assets issued by Treasury on August 18, 2025,1 is open for public comment until October 20, 2025. The ANPRM poses 58 questions spanning a broad range of topics that will assist Treasury in implementing the GENIUS Act.
Issuance and Treatment of Payment Stablecoins
Under Section 3 of the GENIUS Act, only a permitted payment stablecoin issuer (PPSI) may issue a payment stablecoin in the US, subject to certain exceptions and safe harbors. Further, it is unlawful for a domestic or foreign digital asset service provider to offer or sell a payment stablecoin to a person in the US unless the stablecoin is issued by a PPSI.
Treasury may issue regulations providing safe harbors from this general limitation, if they are: (i) consistent with the purposes of the GENIUS Act; (ii) limited in scope; and (iii) apply to a de minimis volume of transactions, as determined by Treasury.
Among other considerations, Treasury is seeking input regarding the implementation of Section 3 on whether:
- Treasury should adopt safe harbor regulations;
- Safe harbors should be issued immediately or after observing Section 3’s operation;
- The definitions of “payment stablecoin,” and “digital asset service provider,” and other terms used in Section 3 are clear enough or need further clarification;
- The extraterritorial application of Section 3 is sufficiently clear, or if further clarification is needed;
- In the context of how non-PPSI-issued stablecoins should be treated for accounting, margin and collateral, and settlement asset purposes, additional regulations or guidance are needed to clarify the GENIUS Act’s treatment provisions; and
- Additional regulations or guidance are needed to clarify the scope of the transactions exempted by the GENIUS Act from the restrictions under Section 3.
Requirements for Issuing Payment Stablecoins
The GENIUS Act mandates that permitted issuers maintain and disclose detailed reserve information to ensure transparency and financial stability. The payment of interest on stablecoins is prohibited, and marketing practices are restricted to prevent misleading representations about a stablecoin’s status as legal tender or as a government-backed instrument. In addition, it sets conditions under which non-financial companies can issue stablecoins and requires Treasury to evaluate state-level regulations for alignment with federal standards. Finally, a product may not be marketed in the US as a payment stablecoin unless it is issued pursuant to the GENIUS Act, and knowing and willful violations can result in significant penalties.
Treasury is seeking responses to various questions regarding these provisions, such as:
- Are regulations or guidance necessary to clarify the scope of the reserve requirements, the requirement to publish the composition of the reserves, or the holding of reserve assets (particularly regarding custody)?
- How will foreign payment stablecoin issuers (FPSIs) determine the liquidity demands of US customers to maintain compliance with the obligation to hold reserves in US financial institutions?
- Should any regulations be issued to clarify the meaning of “pay,” “interest,” “yield,” “solely,” or any other terms relevant to this section?
- Is additional clarification necessary on the risks and scope of restrictions on non-financial companies issuing stablecoins?
- What principles should be considered in determining whether a state-level regime is “substantially similar” to the federal regulatory framework, and is such a determination similar to or different from a determination that it “meets or exceeds” federal standards?
Illicit Finance
The GENIUS Act mandates that PPSIs comply with all US federal laws related to economic sanctions, anti-money laundering (AML), customer identification, and due diligence. Treasury is responsible for issuing regulations to implement these requirements, including the development of effective AML and sanctions programs, as well as procedures to monitor and report suspicious activities. The GENIUS Act also requires FPSIs to comply with lawful orders, with noncompliance potentially leading to prohibitions on their stablecoins in the US market.
In addition to the questions set forth in the August 18, 2025, Request for Comment on Innovative Methods to Detect Illicit Activity Involving Digital Assets, Treasury is seeking public input regarding the following related topics:
- What should Treasury consider when developing regulations for AML and sanctions programs, monitoring suspicious activity, and customer identification for PPSIs?
- How do payment stablecoin issuers plan to implement technical capabilities, policies, and procedures to block, freeze, and reject illicit transactions?
- What regulations or guidance would clarify the obligations for PPSIs to have the technological capability to comply with lawful orders, including in the context of economic sanctions?
- What factors should Treasury consider in determining whether a noncompliant FPSI has resolved its noncompliance, and what evidence or commitments should be required?
Foreign Payment Stablecoin Regimes
The GENIUS Act authorizes Treasury to evaluate whether a foreign regulatory regime for stablecoins is comparable to the US framework established by the Act. This assessment is crucial for determining if FPSIs can operate in the US market, subject to additional conditions. The GENIUS Act also emphasizes the importance of interoperability between US and foreign stablecoin systems and outlines the information requirements for FPSIs to ensure US customers can redeem their stablecoins effectively.
Treasury is seeking input regarding the following FPSI-related topics:
- Are there characteristics of a payment stablecoin recognized in foreign markets that differ from the GENIUS Act’s definition?
- Are there existing or developing foreign regulatory regimes for stablecoins that are comparable to the GENIUS Act, or do any materially differ?
- What differences from the GENIUS Act’s regime could create “market frictions” in international digital asset activities?
- What specific factors should Treasury consider when determining if a foreign jurisdiction’s regulatory regime is comparable to the GENIUS Act, and are there factors that should disqualify a jurisdiction?
- How should Treasury interpret and implement requirements for “interoperability” with US-dollar denominated stablecoins issued overseas?
- What information should FPSIs be required to provide to US authorities to ensure US customers understand how to redeem stablecoins?
- Are any regulations or guidance needed to clarify the prohibition on offers and sales of stablecoins by foreign issuers in the US, including the requirement for FPSIs to have the “technological capability” for compliance?
Taxation
Treasury is seeking input on the necessity and scope of IRS guidance to clarify the classification of payment stablecoins, to ensure that market participants have a clear understanding of the tax implications and their obligations.
Insurance
Treasury is seeking input on how the GENIUS Act might affect the insurance industry, particularly regarding the development of insurance markets and the role of insurers as stablecoin issuers.
Economic Data
This section of the ANPRM concerns the costs and benefits associated with compliance under the GENIUS Act for PPSIs and FPSIs. Treasury is seeking input on the financial implications of meeting regulatory requirements, such as licensing, disclosure, and AML and sanctions programs, as well as the potential legal and enforcement costs. Further, it covers the benefits of regulatory clarity as provided by the GENIUS Act, including the potential for improved compliance efficiency, market participation, startup formation, venture investment, and product innovation.
Treasury is also interested in understanding how the regulatory framework established by the GENIUS Act may influence the broader economic landscape, including the effect on consumer protection, payment processing, alignment with foreign regimes, and demand for Treasury securities.
Miscellaneous Topics
The ANPRM invites comments on potential risks associated with the resolution of a bankrupt or failed PPSI, conflicts of interest that may arise for stablecoin issuers, and any other topics addressed or not addressed in the ANPRM that may be important for Treasury to consider in establishing the GENIUS Act’s regulatory framework.
Conclusion
The ANPRM represents a significant step towards establishing a comprehensive regulatory framework for payment stablecoins under the GENIUS Act. By soliciting public input on a broad array of topics, Treasury aims to ensure that any final regulations it promulgates are based on well-informed knowledge from industry participants and balanced, taking into account financial stability, illicit finance, extraterritorial application and foreign comparability, consumer protection, and innovation.
Treasury noted, however, that before adopting any final regulations under the GENIUS Act, it expects to invite further public comment on proposed regulations.
ENDNOTE
- The comment period on Innovative Methods to Detect Illicit Activity Involving Digital Assets remains open until October 17, 2025. ↩︎
This post comes to us from Latham & Watkins LLP. It is based on the firm’s memorandum, “Treasury Invites Public Input on GENIUS Act Implementation,” available here.