Briefing
The U.S. Department of the Treasury has commenced the rulemaking process for the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) by issuing an Advance Notice of Proposed Rulemaking (ANPRM). This action formally begins the translation of the new federal stablecoin law into operational compliance requirements for Payment Stablecoin Issuers (PPSIs) and Foreign Payment Stablecoin Issuers (FPSIs). The primary consequence is the immediate need for firms to structure their capital and compliance programs around the Act’s core mandates, including 100% reserve backing with liquid assets and strict adherence to the Bank Secrecy Act (BSA).
This phase of implementation is critical because the Treasury is specifically soliciting input on the technical tools and methods financial institutions can use to detect illicit activity involving digital assets. The comment period for this foundational rulemaking is set to close on November 4, 2025.
Context
Prior to the GENIUS Act, the regulatory landscape for stablecoins in the U.S. was characterized by a patchwork of inconsistent state-level money transmission laws and ambiguous federal oversight, creating significant legal uncertainty. This lack of a unified framework led to inconsistent reserve standards, uneven consumer protection, and gaps in anti-money laundering (AML) and counter-terrorist financing (CFT) controls, forcing the industry to operate without clear regulatory legitimacy. The core compliance challenge centered on the legal classification of stablecoins and the absence of a clear, preemptive federal standard that could facilitate institutional adoption and provide a safe harbor for innovation.
Analysis
This ANPRM forces regulated entities to immediately update their risk and compliance frameworks to align with the forthcoming federal standards. Stablecoin issuers must re-architect their capital management systems to ensure and demonstrate the mandated 100% reserve backing using eligible liquid assets. Furthermore, the Act explicitly subjects issuers to the Bank Serecy Act, necessitating an overhaul of existing AML/KYC protocols to meet enhanced federal requirements for transaction monitoring and sanctions compliance.
The Treasury’s specific request for information on innovative illicit finance detection tools, such as AI and digital identity verification, signals that compliance will not be a static, check-the-box exercise but a dynamic, technology-integrated system. This rulemaking process effectively shifts the compliance burden from managing legal ambiguity to operationalizing a rigorous, federally defined standard.
Parameters
- Reserve Requirement Standard → 100% backing with liquid assets, such as U.S. dollars or short-term Treasuries, to ensure stability and redemption.
- ANPRM Comment Deadline → November 4, 2025, marking the window for industry influence on the final regulatory text.
- Illicit Finance Focus → Treasury seeks input on the use of AI, APIs, and digital identity tools for detecting illicit activity.
- Full Application Date → July 18, 2028, the date after which only authorized PPSIs or FPSIs can offer payment stablecoins to U.S. persons.
Outlook
The next phase involves the Treasury synthesizing public comments into a Notice of Proposed Rulemaking (NPRM), which will provide the first draft of the specific regulatory text. Strategic actors must engage with the ANPRM to shape the final rules on reserve eligibility, disclosure frequency, and the specific technology standards for AML/CFT compliance, particularly concerning foreign stablecoin equivalence. The resulting framework is poised to set a global precedent for stablecoin regulation, potentially accelerating institutional adoption by mitigating systemic risk and establishing a clear, durable legal foundation in the world’s largest financial market. The Act’s preemption of state laws will immediately streamline the operating environment for issuers, but the industry must prepare for the high capital and compliance costs associated with federal licensure.
