Treasury proposes GENIUS rule requiring US exchanges to audit foreign stablecoins

The U.S. Treasury has released a proposed rule under the GENIUS Act that would let U.S. exchanges and other digital‑asset service providers continue offering certain foreign‑issued payment stablecoins, but only if they can demonstrate due diligence that the issuer can comply with lawful U.S. orders.

Key requirements for platforms

Under the proposal, a platform may rely on a foreign issuer’s representation that it has the technology and intent to obey valid orders to freeze, seize, or otherwise restrict tokens. That reliance is prohibited if the platform knows, has reason to know, or should know that the representation is false or that the issuer cannot or will not comply.

Minimum due‑diligence steps include confirming that the issuer is not subject to a public GENIUS Act prohibition on secondary trading and reviewing all reasonably available information about the issuer.

Timeline and thresholds

The general regime of the GENIUS Act is slated to take effect on January 18, 2027, unless final rules trigger an earlier date. A stricter offering limit would begin on July 18, 2028, at which point a covered provider could offer a payment stablecoin to U.S. customers only if it originates from a permitted U.S. issuer or a foreign issuer that meets Section 18 requirements.

Section 18 criteria include supervision under a comparable regulatory regime, registration with the Office of the Comptroller of the Currency, sufficient reserves at a U.S. financial institution for U.S. customer liquidity (unless a reciprocal arrangement applies), and no comprehensive U.S. sanctions or primary money‑laundering designations.

Exemptions and open questions

The proposal does not ban holding or direct peer‑to‑peer transfers of foreign stablecoins. Exemptions cover lawful direct transfers between individuals, certain same‑parent transfers between a person’s U.S. and foreign accounts, and transactions conducted through software or hardware wallets owned by the individual.

The Treasury is still seeking input on whether the final rule should require written issuer representations, record‑keeping, smart‑contract reviews, or checks of seize, freeze, and burn functions. Comments close on October 19, 2026.