U.S. Treasury Unveils Proposed Stablecoin Regulations Under GENIUS Act
The U.S. Department of the Treasury, through its Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), has proposed a new rule aimed at combating financial crime among stablecoin issuers. This initiative is a key component of the recently enacted Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which establishes a federal regulatory framework for stablecoins. Treasury Secretary Scott Bessent stated that the proposed regulations are designed to safeguard the U.S. financial system from national security threats while ensuring that domestic companies can continue to innovate within the payment stablecoin sector.
Key Takeaways
- FinCEN and OFAC have jointly issued a proposed rule targeting financial crimes in the stablecoin industry.
- This rulemaking is part of the broader implementation of the GENIUS Act, with a compliance deadline set for January 2027.
- The proposed rules focus on Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) compliance for stablecoin issuers.
- The GENIUS Act mandates that stablecoins be fully collateralized by U.S. dollars or equivalent liquid assets and requires annual audits for certain issuers.
- Other federal agencies, including the FDIC and OCC, have also released proposed rules related to stablecoin regulation.
The proposed rule from FinCEN and OFAC specifically addresses concerns regarding the financing of terrorism and money laundering activities within the digital asset space. The GENIUS Act, enacted as part of this broader regulatory push, mandates that stablecoins must be fully backed by U.S. dollars or similarly liquid assets and introduces requirements for annual audits for designated issuers. These measures are part of a concerted effort by federal agencies to meet the January 2027 compliance deadline established by the act.
This regulatory action follows similar proposals from other federal bodies. Last Tuesday, the Federal Deposit Insurance Corporation (FDIC) put forth a rule outlining requirements for reserves, clarifying that stablecoins would not be eligible for federal deposit insurance. In the preceding month, the Office of the Comptroller of the Currency (OCC) also issued a proposed rule asserting its jurisdiction over specific stablecoin issuers, particularly those that are subsidiaries of national banks or federal savings associations.
The new proposed rulemaking from OFAC and FinCEN would apply to “permitted payment stablecoin issuers.” The GENIUS Act defines this category as issuers that are either subsidiaries of insured depository institutions or have obtained authorization to issue stablecoins from a federal or state regulator. These entities would be required to implement and maintain comprehensive AML and CFT programs, which include robust measures for identifying and mitigating associated risks.
FinCEN has indicated an intention to adopt a measured supervisory approach. The agency stated that it would refrain from initiating enforcement actions or significant supervisory actions unless a permitted payment stablecoin issuer demonstrates a “significant or systemic failure” to maintain its AML/CFT program. According to a fact sheet released by the Treasury Department, the proposed rule aims to ensure FinCEN’s central role in AML/CFT supervision, incorporating a notice and consultation framework between primary federal payment stablecoin regulators and FinCEN concerning substantial supervisory actions.
In parallel, OFAC’s proposed requirements would mandate that stablecoin issuers establish and maintain an “effective sanctions compliance program.” This includes the implementation of risk-based internal controls and the execution of regular auditing and testing procedures to ensure compliance with sanctions regulations.
Public comments on the proposed rule are being accepted for a period of 60 days.
Potential Regulatory Precedent and Legal Stakes
The joint rulemaking by FinCEN and OFAC under the GENIUS Act represents a significant development in the regulation of stablecoins within the United States. The focus on AML and CFT compliance, coupled with the explicit requirements for sanctions compliance programs, sets a clear precedent for the operational standards expected of stablecoin issuers operating within the U.S. financial ecosystem. The legal stakes for companies involved are substantial, as failure to comply with these proposed regulations could result in significant penalties, including enforcement actions and reputational damage. This initiative signals a heightened scrutiny of digital assets by U.S. financial authorities, aiming to integrate them more securely into the existing regulatory framework. The collaborative approach between FinCEN, OFAC, and other agencies like the FDIC and OCC suggests a coordinated effort to establish a comprehensive and robust regulatory regime, which could influence global regulatory trends for stablecoins.
Original article : www.theblock.co