The U.S. Department of the Treasury on April 8, 2026 published a 303-page joint proposed rule from the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) that would reclassify permitted payment stablecoin issuers (PPSIs) as a new category of financial in...
"These proposed rules will protect the U.S. financial system from national security threats without hindering American companies' ability to forge ahead in the payment stablecoin ecosystem." — Scott Bessent, U.S. Secretary of the Treasury
The U.S. Department of the Treasury on April 8, 2026 published a 303-page joint proposed rule from the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) that would reclassify permitted payment stablecoin issuers (PPSIs) as a new category of financial institution under the Bank Secrecy Act (BSA). The rule, implementing provisions of the GENIUS Act signed into law in July 2025, imposes bank-grade anti-money laundering (AML), counter-terrorism financing (CFT), and sanctions compliance obligations on an industry that currently manages $320 billion in outstanding stablecoin supply.
Six days later, on April 14, Treasury issued a second notice of proposed rulemaking (NPRM) establishing the criteria by which state regulatory regimes will be assessed for "substantial similarity" to the federal framework — determining whether smaller issuers (those with $10 billion or less in outstanding supply) may remain under state oversight. Together, the two proposals constitute the most comprehensive regulatory framework yet imposed on stablecoin issuers in any jurisdiction. Public comment periods close on June 2 and June 9, 2026, respectively, with implementing regulations due by July 18, 2026 and full enforcement no later than January 18, 2027.
The proposed rule designates PPSIs as financial institutions separate from money services businesses (MSBs), creating an entirely new regulatory category. This classification carries specific obligations that mirror those applied to banks and broker-dealers.
Under the AML/CFT program requirements, each PPSI must:
One notable exemption: secondary market transactions between third parties that merely interact with a PPSI's smart contract are not subject to SAR filing obligations. FinCEN determined that issuers cannot reliably assess suspicion in peer-to-peer transactions where they are not a direct counterparty.
The $5,000 SAR threshold is lower than the $10,000 currency transaction reporting threshold applied to banks, reflecting Treasury's assessment that stablecoin transactions present distinct risk profiles due to their speed, pseudonymity, and cross-border reach.
The OFAC component of the proposed rule extends the compliance perimeter beyond primary issuance and redemption into secondary market activity — a first for U.S. financial regulation applied to digital asset issuers.
PPSIs must build and maintain sanctions compliance programs incorporating OFAC's five-element framework:
The secondary market provisions are the most technically demanding. According to Elliptic's analysis published April 15, 2026, PPSIs cannot "allow OFAC-sanctioned persons, or parties located in OFAC-sanctioned jurisdictions such as Iran, to interact with its smart contracts to facilitate payments, including in peer-to-peer (P2P) transactions between unhosted wallets."
This means issuers bear liability for prohibited conduct occurring via their stablecoin during wallet-to-wallet transfers — even where the issuer is not a transacting party. The Treasury's proposed rule explicitly encourages issuers to leverage blockchain analytics tools and to program smart contracts that can automatically detect and block interactions with wallets linked to sanctioned parties.
According to Elliptic, the rule creates a functional obligation for issuers to maintain "the technical capability to freeze, block or reject funds in secondary markets in response to lawful orders, such as a request by a law enforcement agency or court to seize stablecoins." This requirement applies to all transfers on any blockchain where the issuer's stablecoin circulates.
The proposed rule codifies technical mandates that some issuers — notably Tether and Circle — have implemented on a voluntary or semi-voluntary basis. Under the GENIUS Act framework, these capabilities become legally binding:
These requirements apply to both federally and state-supervised issuers. The technical burden is nontrivial: issuers must deploy infrastructure capable of monitoring all on-chain activity involving their stablecoin across every blockchain on which it circulates, and must respond to lawful orders within operationally reasonable timeframes.
Tether has historically frozen wallets at law enforcement request — the company reported freezing over $1.8 billion in assets linked to illicit activity through 2025. Circle maintains a similar capability via its smart contract architecture. The proposed rule formalizes these ad hoc practices into legally enforceable obligations with specific penalties for non-compliance.
The April 14 NPRM establishes a dual-track regulatory architecture. Issuers with $10 billion or less in outstanding stablecoin supply may elect state-level supervision, provided their state's regulatory regime meets Treasury's "substantial similarity" test.
The framework distinguishes between two categories of requirements:
Uniform requirements (states must align precisely with federal standards):
State-calibrated requirements (states may tailor if outcomes match federal robustness):
Once an issuer's outstanding stablecoins exceed $10 billion — absent a waiver — it must either transition to federal supervision or cease issuing. As of April 2026, this threshold would capture all but two of the top stablecoin issuers: Tether (USDT, $185.5 billion market cap) and Circle (USDC, $78.6 billion) both exceed the threshold and would fall under mandatory federal oversight.
The remaining issuers — including Sky Dollar (USDS, $8.6 billion), Ethena's USDe, and MakerDAO's DAI — currently fall below the $10 billion line and could opt for state-level regulation. This creates a competitive dynamic: state regimes could attract smaller issuers with more proportionate compliance costs, while the $10 billion threshold acts as a de facto gate to federal regulation for any issuer that achieves meaningful scale.
The enforcement teeth are significant. The proposed rule establishes:
FinCEN stated it "generally would not take enforcement action against an issuer with a compliant AML/CFT program absent a significant or systemic failure." However, this safe harbor does not extend to OFAC sanctions compliance enforcement, where strict liability principles apply. An issuer can face OFAC penalties regardless of the quality of its compliance program if a sanctioned party successfully transacts using its stablecoin.
The $320 billion stablecoin market — which grew from $130 billion at the start of 2025 — faces its first comprehensive compliance cost baseline. The OCC projects that payment stablecoin issuance could reach $500 billion by end of 2026, meaning the regulatory framework is being built to accommodate significant additional growth.
Treasury Secretary Bessent has separately projected that stablecoins could grow into a $3.7 trillion market by end of decade, driven partly by private-sector demand for U.S. Treasuries used as reserve backing. The GENIUS Act mandates that stablecoin reserves be held in eligible assets including short-term Treasury bills, creating a structural link between stablecoin growth and Treasury demand.
PwC's analysis, published April 13, noted that the joint proposal "significantly reduces ambiguity for stablecoin issuers, creating specific and enforceable requirements with substantial daily penalties." PwC advised issuers to enhance their compliance programs immediately rather than waiting for the final rule.
Circle, which received a conditional OCC national trust bank charter in December 2025, has publicly stated its USDC product is designed for compliance with the GENIUS Act. Tether, which announced its U.S.-focused USAT stablecoin in January 2026 with Anchorage Digital Bank as issuer, has positioned the new product as federally regulated under the GENIUS Act framework — while USDT continues to operate primarily from offshore jurisdictions.
The compliance cost differential between the two tracks — federal and state — may reshape market structure. Smaller issuers operating under state supervision face lower but still substantial compliance burdens. The requirement for independent audits, U.S.-based compliance officers, and blockchain monitoring infrastructure creates fixed costs that favor larger, better-capitalized issuers.
The Treasury's twin proposals mark the operational beginning of the GENIUS Act's regulatory framework. For the first time, stablecoin issuers face codified obligations comparable to those imposed on banks: suspicious activity reporting, beneficial ownership collection, correspondent account due diligence, and independent compliance audits. The extension of sanctions compliance into secondary markets — requiring issuers to monitor and control peer-to-peer transfers of their stablecoins — goes further than any obligation imposed on traditional payment instrument issuers.
The 55-day comment period will test industry consensus. The core question is not whether compliance is required — the GENIUS Act settled that in July 2025 — but whether the proposed implementation is technically feasible at scale, particularly for secondary market sanctions monitoring across multiple blockchains. The January 2027 enforcement deadline gives issuers approximately nine months from the expected final rule to build or upgrade the required infrastructure.