Treasury proposes GENIUS Act definitions for stablecoin issuers

Treasury has put out its first concrete rule under the GENIUS Act, proposing federal definitions for a U.S. stablecoin and for the issuers that must seek a license. A 60-day comment period closes in mid-October. The proposal follows the advance notice the department issued in September.

In a statement reported by CoinDesk, Treasury Secretary Scott Bessent said Monday the administration is moving quickly to give businesses regulatory certainty, cement the dollar's role as the world's reserve currency, and keep America the 'crypto capital of the world.'

The rulemaking is already running late. The September advance notice was meant to start a tight timeline, but the GENIUS Act's first-year implementation target passed last month. The law's effective date is January 18. Treasury is one of several agencies, including the banking and markets regulators, that must finish rules before the statute is fully in force.

Treasury looked to securities law, especially its treatment of offshore activity, but it is not proposing to graft that framework onto stablecoins. The department reads the act as treating payment stablecoins as a means of payment and settlement across borders. 'Application of traditional investment rules to payment stablecoins may frustrate that goal,' the proposal says.

That framing decides what institutional holders get. A payment-focused regime would place stablecoins alongside cash and settlement infrastructure. A securities-style regime would strap on registration, disclosure, and custody obligations.

The proposal does not answer that question; it raises dozens of them, each left for the final rule. The comment deadline is mid-October, and the industry will watch most closely how Treasury treats foreign issuers — with Tether, the industry leader, at the center of the debate.

The rulemaking runs alongside the Digital Asset Market Clarity Act, which would rewrite parts of GENIUS, especially its treatment of rewards programs. If the bill moves before the effective date, a final Treasury rule could be overtaken by statute. The legislative calendar may resolve the open questions before the statutory deadline arrives.

For institutional money, the same boundary is being drawn elsewhere. This week, SEC staff allowed Franklin Templeton to run its tokenized money fund, FOBXX, under Rule 17f-2's cash and collateral framework, as Digital Capital Daily reported. Custodians and asset managers are starting to treat onchain cash and payment stablecoins as different instruments. Treasury's final definitions will set the legal boundary between payment stablecoins and investment products.

No regulator expects the full rulebook to be done by January. Treasury alone will need months to review comments, and the other agencies are further behind. Final rules typically come with transition runways, so the industry will not face an abrupt cutoff.

The comment period and the Clarity Act may cross paths. A Treasury rule finalized this fall could still be amended before it takes effect. Issuers and the institutions holding their liabilities will spend the next several months reading both tracks and preparing for either direction.