GENIUS Act Update: BA Seeks Protections for DeFi Infrastructure and Foreign Issuers

The Blockchain Association (BA) filed a 26-page comment letter on October 19, 2026, urging the U.S. Treasury Department to sharpen its GENIUS Act stablecoin rules.

The filing targets Treasury’s proposed rule on payment stablecoin issuance, offering, and sale, and calls for clearer definitions before the framework takes full effect on January 18, 2027.

The BA said its letter aims to ensure the final rule stays faithful to “what Congress wrote.”

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BA Wants Narrower Liability and Clearer Definitions

The Blockchain Association supports Treasury’s core goals, safe, reserve-backed stablecoins issued by regulated entities. But it raised three pointed concerns that could reshape the final rule.

First, on Digital Asset Service Providers (DASPs), the BA argued that Congress defined DASPs as businesses serving customers.

Firms trading their own assets, along with core infrastructure such as validators and self-custody software, should not be swept into that definition.

The Association warned that an overbroad reading would impose compliance burdens on entities Congress never intended to cover.

Second, on liability, the BA took aim at the proposed “knowing participation” standard. As currently written, ordinary secondary-market trading or market-making could carry criminal penalties.

The BA asked Treasury to limit liability to cases involving “actual knowledge and substantial assistance in coordination with the issuer.”

Regulators had already delayed the statutory GENIUS Act deadline, and firms warn that vague liability rules risk chilling market-making activity as the January 2027 date approaches.

Third, on foreign issuers, the BA opposed open-ended due diligence requirements for foreign stablecoin issuers. Many DASPs have no direct relationship with those issuers.

The BA proposed letting firms rely on regulators’ public prohibition lists instead, a standard based on actual knowledge, not a broad “reasonably believes” test.

This matters significantly given that USDT holds $183B and USDC holds $73B, and both are deeply embedded in global secondary markets where DASPs often see only wallet addresses.

The comment period closed on October 19, drawing 123 total submissions.

Earlier, Treasury had opened public comment on stablecoin issuance to implement the GENIUS Act, a process that has since expanded across multiple agencies, with the Federal Reserve also unveiling two proposals for stablecoin issuers covering reserves, capital, and custody requirements.

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What This Means for the Stablecoin Market

Greater clarity on DASPs and liability would directly reduce compliance uncertainty for issuers, exchanges, and infrastructure providers.

Narrower liability rules, in particular, protect secondary trading and market-making, both essential for stablecoin liquidity in a $302B market.

The GENIUS Act has been reshaping the legislative landscape since Congress debated it alongside the broader CLARITY Act for on-chain banking.

The BA’s filing also calls for Treasury to reject an open-ended “functional equivalent” test for monetary value, and to align the rule’s effective date with related GENIUS agency rules.

The broader stablecoin industry has been active in shaping implementation since the law passed.

125 crypto firms previously defended stablecoin rewards against bank pushback, while controversy emerged when Bo Hines’ firm received $6.3M from Tether while he helped shape the law.

Meanwhile, the Trump administration has weighed promoting dollar-backed stablecoins overseas, a push that makes the foreign issuer question even more politically loaded.

The U.S. has also been briefing the UK on GENIUS Act implementation, signaling that Treasury’s final rule will have cross-border consequences.

Treasury will now review all 123 submissions before issuing a final rule.