GENIUS Act Amendment: Mandates Due Diligence for Foreign Stablecoins Listed on U.S. Exchanges

The U.S. Department of the Treasury has released a draft of regulations under the new stablecoin law, the GENIUS Act, stating that exchanges and digital asset service providers operating in the United States must conduct their own reasonable due diligence on issuers if they wish to continue handling foreign-issued payment stablecoins. Reliance solely on the issuer's self-declaration is not permitted, and handling of a token is prohibited if the platform knows or should know that the declaration is false. As a minimum requirement for due diligence, the Treasury Department requires verification of whether the issuer is subject to the secondary trading ban under the GENIUS Act. However, this verification alone is not sufficient, and all reasonably obtainable information about the issuer must be comprehensively reviewed. Specific aspects of the due diligence process being considered include written issuer certifications, regular updates, record retention, smart contract reviews, and checks for freezing, seizure, and burning functionalities. However, these are currently not mandatory but rather items for consideration as the Treasury Department solicits public comments. The implementation schedule consists of two phases. The Treasury Department anticipates that the general framework of the GENIUS Act will take effect on January 18, 2027, although this date may be advanced depending on the final implementing regulations. Beginning July 18, 2028, stricter requirements will be added. From that point forward, covered providers can only offer or sell stablecoins issued by U.S.-approved issuers or foreign issuers that meet the requirements of Section 18 of the GENIUS Act within the United States. Foreign issuers that meet Section 18 requirements must be subject to a regulatory regime that the Treasury Department deems comparable, be registered with the OCC, maintain adequate reserves for U.S. customers in a U.S. financial institution, and the country in which they are based must not be subject to comprehensive U.S. sanctions or designated as a jurisdiction of primary money laundering concern. In this proposal, the Treasury Department does not explicitly state whether certain tokens, including USDT, are permitted. Whether a token remains listed is up to the platform's own judgment, based on category-specific criteria and evidence of compliance, and the Treasury Department does not plan to publish a list of approved foreign stablecoins. Furthermore, this proposal does not prohibit peer-to-peer transfers or self-custodial transactions through personal wallets, and certain exceptions are recognized. The deadline for submitting comments on this draft regulation is October 19, 2026, according to the Federal Register. Until the Treasury Department finalizes the standards and regulatory agencies make decisions on a per-issuer basis, the availability of foreign stablecoins in the United States will depend on category-specific criteria and evidence of compliance, rather than a list of approved entities.