The U.S. Treasury's 62-day public comment window on its proposed rule implementing Section 3 of the GENIUS Act closed October 19, 2026, drawing 123 submissions from industry groups, consumer advocates, issuers, and exchanges. The rule, published in the Federal Register on August 18 (91 FR 2026-16...
"Treasury welcomes input from stakeholders as we work to provide the regulatory certainty businesses need." — Scott Bessent, U.S. Treasury Secretary
The U.S. Treasury's 62-day public comment window on its proposed rule implementing Section 3 of the GENIUS Act closed October 19, 2026, drawing 123 submissions from industry groups, consumer advocates, issuers, and exchanges. The rule, published in the Federal Register on August 18 (91 FR 2026-16796), addresses the statutory prohibitions and limitations on payment stablecoin issuance, offer, and sale — the operational core of Public Law 119-27.
With 91 days remaining before the Act's January 18, 2027, statutory effective date, no federal regulator has yet published a final implementing rule. The OCC has signaled publication "in the very near term," potentially by the end of October. The FDIC's and Federal Reserve's rulemakings remain at the proposed stage. The gap between the comment period's close and the law's activation leaves a compressed window in which the Treasury, OCC, FDIC, and Fed must reconcile 123 comment letters spanning 87 distinct questions, finalize text, and begin processing issuer applications — all while a $304 billion stablecoin market waits for clarity on who can issue, who can sell, and what must back these tokens.
This report examines the major fault lines exposed by the comment letters: the definition of digital asset service providers (DASPs), foreign issuer access, reserve composition enforcement, the yield prohibition, and the looming compliance timeline that may force exchanges to make delisting decisions before regulators finish writing the rules.
On August 18, 2026, the Department of the Treasury published a notice of proposed rulemaking to implement Section 3 of the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins), signed into law on July 18, 2025. The NPRM proposes a new 12 CFR Part 1523 governing who may issue, offer, or sell payment stablecoins in the United States.
The statute defines a payment stablecoin as a digital asset designed to be used as a means of payment or settlement, whose issuer is obligated to redeem it for a fixed amount of monetary value. The definition expressly excludes national currencies, bank deposits, and securities.
The proposed rule operationalizes three statutory categories:
Treasury posed 87 questions across issuer licensing, foreign stablecoin access, reserve composition, and exchange due diligence. The comment period ran August 18 through October 19, 2026.
The docket (TREAS-DO-2026-0496) received 123 submissions by the October 19 deadline. Of these, 77 had been published on regulations.gov as of October 20. Notable filers include:
The volume of responses — 123 on a single NPRM section — signals the degree of uncertainty the industry faces heading into 2027.
The GENIUS Act defines a DASP as a person that, for compensation or profit, engages in exchanging digital assets for monetary value, exchanging digital assets for other digital assets, transferring digital assets to a third party, acting as a digital asset custodian, or participating in financial services relating to digital asset issuance.
The Blockchain Association's central objection: Congress intended DASPs to be customer-facing businesses. Validators, self-custody software providers, and firms trading proprietary assets should not be swept into the definition. The association's 26-page letter argued that extending DASP obligations to infrastructure providers would impose know-your-customer and asset-freeze compliance burdens on entities that do not intermediate customer transactions.
The practical stakes are significant. If the final rule defines DASPs broadly, node operators, wallet developers, and proprietary trading firms could face registration requirements and ongoing compliance costs. If Treasury narrows the definition, permissionless protocols and DeFi infrastructure avoid new wallet identification obligations — a point the Blockchain Association raised explicitly, arguing that counterparties' locations "cannot reasonably be determined" in permissionless environments.
Treasury has not publicly indicated which direction it will take.
The proposed rule permits DASPs to offer foreign-issued stablecoins on U.S. platforms provided the foreign issuer has the "technological capability to comply, and will comply, with lawful orders" — including freeze and seizure orders — and the DASP conducts "reasonable due diligence."
Better Markets filed a direct challenge: the rule, as written, risks allowing foreign stablecoins to circulate in the U.S. without meeting domestic reserve, audit, or licensing standards. The organization argued that reliance on a foreign issuer's self-representation of compliance capability is insufficient.
The Blockchain Association took the opposite position: foreign issuer checks should rely on regulators' published prohibition lists rather than open-ended due diligence that imposes costly investigative burdens on exchanges.
According to analysis by Freshfields, Treasury proposes a "reasonable due diligence" standard but does not define what constitutes reasonable investigation — leaving exchanges to design their own compliance programs with no regulatory safe harbor.
This fault line has direct market consequences. Tether's USDT, with $183.4 billion in circulation and 60.4% stablecoin market share, is issued by a non-U.S. entity. Under the GENIUS Act, three years after enactment — July 18, 2028 — it becomes unlawful for DASPs to offer stablecoins not issued by a PPSI or properly registered FPSI. Tether launched USAT through Anchorage Digital Bank in January 2026 to address this, but USDT itself would need foreign registration or face delisting from U.S. platforms.
According to CoinDesk reporting, approximately one-quarter of USDT's reserves are backed by assets — bitcoin, precious metals, lending exposure — that would not qualify under the Act's reserve standards.
The GENIUS Act prescribes a narrow reserve composition for permitted issuers:
Corporate debt, commercial paper, and non-governmental securities are explicitly prohibited. Issuers must publish monthly reserve reports examined by a registered public accounting firm. Issuers above $50 billion in market capitalization face mandatory annual audits.
For Circle's USDC ($72.7 billion in circulation), this is largely a non-event: its reserves already sit in short-dated Treasuries and cash at regulated institutions with monthly reporting in place. Circle applied for an OCC national trust bank charter in June 2025.
For Tether's USDT, the composition gap is material. A transition period and restructuring of reserves would be required to achieve compliance, and the timeline pressure is compounded by the absence of final rules.
The FDIC published its own proposed rule on April 10, 2026 (Federal Register 91 FR 2026-06974), addressing requirements for FDIC-supervised PPSIs. The Federal Reserve's proposed rule covers capital and reserve standards for Fed-supervised issuers. Neither has been finalized.
The GENIUS Act bars stablecoin issuers from paying interest or yield to token holders. The statutory rationale: Congress sought to prevent stablecoins from competing directly with insured bank savings accounts.
The provision created what Forbes described as a "Coinbase-shaped hole." Coinbase offers approximately 4% annual yield on USDC holdings through a revenue-sharing agreement with Circle on reserve income. Because the issuer (Circle) is not directly paying yield to holders, the arrangement falls outside the literal text of the prohibition. Kraken operates a similar structure.
The OCC moved to address this gap with a Notice of Proposed Rulemaking published in March 2026. The proposed rules expand the yield prohibition beyond issuers to affiliates and third parties, creating a rebuttable presumption that affiliate and third-party yield arrangements constitute prohibited interest payments. The OCC comment period on this specific rule closed May 1, 2026.
The Independent Community Bankers of America (ICBA) lobbied for these amendments, arguing the loophole creates an uneven playing field: banks cannot pay interest on certain demand deposit products without meeting regulatory capital requirements, while crypto platforms distribute yield without equivalent prudential oversight.
If the OCC finalizes its expanded yield ban alongside the GENIUS Act's effective date, platforms like Coinbase and Kraken may need to restructure their stablecoin rewards programs — potentially affecting user acquisition strategies built on yield incentives.
The GENIUS Act required federal regulators to finalize implementing rules by July 18, 2026 — 12 months after enactment. That deadline passed with zero final rules from Treasury, OCC, FDIC, or the Federal Reserve.
The current regulatory calendar:
| Regulator | Status | Expected Final Rule | |-----------|--------|-------------------| | Treasury | NPRM comment period closed Oct. 19 | TBD | | OCC | Comptroller Gould stated Oct. 15: "very near term" | Late October 2026 | | FDIC | Proposed rule published April 10 | TBD | | Federal Reserve | Proposed rule stage | TBD |
The Act's effective date is January 18, 2027, or 120 days after federal regulators issue final rules — whichever comes first. If the OCC publishes its final rule in late October, the 120-day clock would push the effective date to approximately late February 2027.
OCC Comptroller Jonathan Gould stated on October 15, at the Milken Institute's "Building the New Digital Economy" event during DC Fintech Week, that the agency expects to begin processing issuer applications in January 2027. This creates a sequencing problem: the law may be effective before any entity has completed the application process, meaning no stablecoin issuer would hold PPSI status on day one.
The stablecoin market stood at approximately $304 billion in total capitalization as of mid-October 2026, down from a $322 billion peak in May. USDT and USDC together represent 84.7% of the market at $256.1 billion combined.
The competitive dynamics are already shifting under regulatory pressure. USDC's supply grew 1.2% over the trailing 30 days ending September 29 — six times faster than USDT's 0.2% growth, according to market data. USDT's market share dropped approximately three percentage points year-over-year to 60.4%, while USDC climbed three points to 24.5%.
Transaction volume tells a starker story. Despite holding less than half of USDT's supply, USDC settled approximately $32 trillion in adjusted transfer volume through August 2026, accounting for 77% of all stablecoin flows measured by Coin Metrics. USDT settled $8 trillion (19%).
The regulatory framework's resolution will likely accelerate these trends. Issuers and platforms already aligned with GENIUS reserve and licensing standards — Circle and USDC chief among them — face lower compliance costs and faster time-to-market. Issuers requiring material reserve restructuring face uncertainty, transition costs, and potential loss of U.S. exchange access.
Samsung Electronics America's announcement that Samsung Wallet will support USDC transfers across 82 million Galaxy devices beginning late October 2026 illustrates the distribution advantage accruing to compliant issuers. Moody's assignment of a B3 issuer rating to Sky Protocol on October 7 — the first credit rating of any stablecoin protocol — signals that traditional financial infrastructure is beginning to price stablecoin risk, further advantaging issuers that can demonstrate regulatory compliance and reserve adequacy.
The GENIUS Act's implementation is, as of October 20, 2026, a rulemaking exercise running behind schedule against a hard statutory clock. The 123 comment letters filed on Treasury's Section 3 NPRM expose fundamental disagreements on the scope of regulated entities, the treatment of foreign issuers, and whether yield distribution through intermediaries should be permitted.
The economic consequences of these definitional choices are measurable. A $304 billion market, dominated by two issuers with sharply different compliance profiles, will reorganize around whatever framework emerges. The OCC's pending final rule will likely be the first concrete signal of how regulators intend to draw these lines.
What is certain: the statute takes effect regardless of whether final rules are ready. Exchanges, issuers, and platforms operating in the U.S. stablecoin market face a compliance window measured in weeks, not months. The comment period is over. The rulemaking clock is running.