U.S. Treasury Sets Deadline for Foreign Stablecoins to Comply with U.S. Regulations

The U.S. Department of the Treasury has released detailed regulations for the implementation of the GENIUS Act, proposing measures that will effectively restrict the circulation of stablecoins issued outside the United States within the U.S. starting July 18, 2028. According to these regulations, digital asset service providers operating in the United States will be prohibited from offering or selling payment stablecoins issued by companies not authorized under the law to U.S. customers after that date. This regulation does not prohibit the tokens themselves. Off-chain stablecoins can continue to circulate on the blockchain, and peer-to-peer transfers are still possible. However, access through regulated entities such as exchanges, custody providers, and digital asset transfer services is blocked. Holding personal wallets, peer-to-peer transfers, and software that supports the storage of personal assets are not subject to this regulation. The Ministry of Finance broadly interprets the phrase "providing or selling," including advertising, sales agreements, and expressions of intent to trade, and explicitly states that actions that facilitate geolocation circumvention may also be included. The implementation is divided into two phases. Starting January 18, 2027, inclusion in the GENIUS system will be mandatory for the issuance of payment stablecoins within the United States. This requirement also applies to U.S. businesses that handle tokens issued by foreign entities, requiring them to demonstrate compliance with the issuer's lawful instructions and adhere to initial requirements related to relevant mutual agreements. Starting July 18, 2028, service providers will only be allowed to handle tokens issued by authorized issuers or qualified foreign issuers. For foreign issuers to maintain access to the U.S. market, they must receive a determination from the Treasury Department that their domestic stablecoin system is equivalent to the U.S. system, as stipulated in Article 18 of GENIUS, and they must register with the Office of the Comptroller of the Currency (OCC) to demonstrate their ability to comply with applicable U.S. regulations. The Ministry of Finance is also seeking public opinion on whether to include a final regulation regarding due diligence for smart contracts. This concerns whether exchanges should review smart contracts issued by foreign companies to verify their ability to comply with legal mandates, such as freezing or burning specific addresses. The proposed regulation suggests that smart contract control mechanisms, along with reserve reports and redemption policies, could be a key condition for access to U.S. exchanges. The most prominent token is USDT. As of August 21st, its market capitalization is approximately $183 billion. It is issued in El Salvador and is currently offered on major US exchanges such as Coinbase and Kraken, under each platform's own standards. Tether has already cooperated with US authorities, demonstrating its ability to freeze addresses. In January of this year, it launched USA₮, a US-regulated stablecoin, and announced its intention to comply with the GENIUS standard for USDT. USDC, with a market capitalization of approximately $73 billion, is expected to follow the domestic licensing process, as Circle has received final approval from the OCC for Circle National Trust Bank. PYUSD, issued by Paxos Trust, has a market capitalization of approximately $2.9 billion and is also expected to follow the domestic route. The Treasury Department, while acknowledging that this approach could exacerbate market concentration, rejected a broad, temporary "safe harbor" for smaller foreign stablecoins. The public comment period ends on October 19, 2025, and the Treasury Department plans to revise the definitions and due diligence standards accordingly before finalizing the regulations.