Treasury’s Stablecoin Draft Still Catches Parties Congress Exempted

The Blockchain Association filed a 26-page letter on October 19, 2026, asking Treasury to keep validators, self-custody software, and own-account traders out of GENIUS Act stablecoin rules. The comment window on the proposed issuance rule closed that night, leaving 91 days before the statute’s first prohibitions take effect on January 18, 2027.

The trade group backs Treasury’s core aim of reserve-backed coins issued by regulated firms. Its fight is over who gets treated as a digital asset service provider, and who can be charged for knowing participation in an unlawful issuance.

Three Groups Congress Already Cut Out of the Law

Ashok Pinto, executive vice president for legal and government relations, signed the 26-page comment letter to Treasury and addressed it to Acting General Counsel Rachel Miller. The docket is TREAS-DO-2026-0496, RIN 1505-AC95, published at 91 Fed. Reg. 53,368 on August 18, 2026, as a draft of 12 CFR Part 1523.

The association said it supports many of the draft’s design choices, including Treasury’s decision to follow the text of the GENIUS Act rather than force payment stablecoins into older securities or commodities boxes. It also said criminal standards should be written as simply as practicable so firms can actually follow them.

The people the letter is trying to pull out of the net are not the licensed issuers the law was written around. They are validators, self-custody software makers, and firms that trade their own inventory, plus market makers who could face criminal exposure for ordinary secondary trades, and platforms that list foreign coins without any contract with the issuer.

THE DOCKET AT A GLANCE

• Comment pile: Treasury’s public docket recorded 123 submissions when the window closed at 11:59 p.m. EDT on October 19, 2026.
• Time left: 91 days separate that close from January 18, 2027, the date the statute’s first prohibitions are set to apply.
• Criminal stakes: Section 3 allows fines of up to $1 million per violation and prison terms of up to five years, or both.
• Cost gap: The association said Treasury’s 40-to-80-hour workload estimate misses diligence, geolocation, monitoring, and legal review if the DASP net is drawn wide.

The Crypto Council for Innovation filed the same day and pushed a related point on foreign coins, arguing that issuers, not platforms, should carry the primary duty to meet the statute. That split inside industry still leaves Treasury holding a stack of letters and no final text.

1/ We filed comments today on @USTreasury's proposed rule implementing Section 3 of the GENIUS Act, covering who can issue, offer, and sell payment stablecoins in the U.S.

We applaud Treasury’s implementation efforts. Our letter seeks clearer lines so the final rule matches what… pic.twitter.com/EIhz5wcf4q

— Blockchain Association (@BlockchainAssn) October 19, 2026

Who Counts as a Digital Asset Service Provider?

Congress defined a digital asset service provider in the statutory digital asset service provider definition at 12 U.S.C. § 5901(7). A DASP is a person who, for pay or profit, engages in the business in the United States of exchanging digital assets for money or for other digital assets, transferring them to a third party, acting as a custodian, or taking part in financial services tied to issuance.

The same section then lists what that term does not include. The association asked Treasury to put those exclusions in the final rule in so many words, and to say that a firm trading only for its own account does not become a DASP because it earns a spread.

WHAT SECTION 2(7)(B) LEAVES OUT

• Open protocols: A distributed ledger protocol is not a DASP under the statute.
• Self-custody tools: Developing or operating self-custodial software interfaces is carved out, as is an immutable self-custodial interface itself.
• Validators: Developing, operating, or engaging in the business of validating transactions or running a distributed ledger is excluded.
• Pool liquidity: Participating in a liquidity pool or a similar peer-to-peer liquidity mechanism is excluded.
• Own-account desks: The association says Congress used “service provider” and “on behalf of customers or users,” so a treasury, a merchant that accepts a coin, or a proprietary desk is outside the definition even before the carve-outs apply.

Pinto’s letter puts the last point in blunt statutory language. “A person that is not a DASP under Section 2(7)(A) is not a DASP, period,” it said, “regardless of whether it is subject to a statutory exclusion under Section 2(7)(B).”

If Treasury reads the term to cover anyone who exchanges, transfers, or holds digital assets, the association warned, the affected population would include thousands of companies and the cost-benefit analysis would have to be redone. It pointed to a 2014 FinCEN ruling that a person buying and selling virtual currency solely for its own account is not in the business of exchanging for other persons, and to the European Union’s split between client services and own-account dealing.

On X, the association boiled the ask down to a single line: “Congress wrote that definition for businesses serving customers, and excluded core infrastructure like self-custody software and validators.”

Market Making Could Trigger Criminal Penalties

The second fight is not about licenses. It is about who can be charged as a knowing participant in an unlawful issuance. The association said the draft could treat ordinary market making in newly issued stablecoins as participation, and it wants that door closed in the final text.

Liability should require actual knowledge and substantial assistance in coordination with the issuer.

Blockchain Association, comment letter to the U.S. Treasury, October 19, 2026

The group asked Treasury to let firms rely on an issuer’s representations, and to say that secondary-market trading, distribution, or market making is not participation unless a person gives affirmative, substantial help in concert with the issuer. It also said a coin’s age, or how close a trade sits to the mint, should not be treated as proof of knowing help.

That is the quiet risk for desks that keep a peg intact. A market maker can have mint and redeem access without agreeing to place new coins for the issuer. If that inventory work can be read as criminal participation, the people who actually stand in the book have a reason to step back before January 18, 2027, even though Congress gave platforms until July 18, 2028, to stop offering coins that lack a permitted issuer.

The association told Treasury not to use the knowing-participation clause to pull that 2028 date forward. Secondary trading is how a payment stablecoin stays usable between the mint and the next redemption. Writing it as a crime would hit a different set of firms than the ones Section 3 was sold as covering.

Homework for Platforms With No Issuer Contract

Foreign payment stablecoin issuers sit in a separate bucket. From the law’s effective date, a DASP generally may not offer, sell, or make available in the United States a foreign-issued payment stablecoin unless the issuer has the technical ability to comply with lawful U.S. orders, and will comply, including any reciprocal arrangement under Section 18.

Treasury’s draft would have platforms do open-ended due diligence on those issuers. The association said many firms that could be called DASPs have no contract with the foreign issuer at all and cannot get the representations the draft assumes. On permissionless rails, a firm may see only a wallet address.

The letter’s fix is a public-list test. Congress already created Section 18 and Section 8 lists of approved registrations and trading bans. The association wants DASPs to be able to rely on those lists, and on notices of rescission or revocation, unless they have actual knowledge of contrary material facts.

It also asked Treasury to drop the “reasonably believes” test for whether a person is located in the United States, and to replace it with actual knowledge plus information gathered in the ordinary course of a trade. There should be no extra duty to identify counterparties when that information is not readily available, including on DeFi venues, on-chain protocols, and automated settlement.

A January 23, 2025, executive order set a policy of promoting lawful dollar-backed stablecoins worldwide. The foreign-issuer diligence fight is where that policy meets the plumbing. If U.S. platforms cannot rely on a government list, the conservative move is to delist coins they cannot diligence, which is a problem for any dollar token whose issuer sits outside the permitted-issuer box.

The association also asked Treasury not to adopt an open-ended “functional equivalent” test for monetary value, and to keep algorithmic tokens that lack an issuer redemption duty outside the payment-stablecoin definition. On issuance itself, it supports Treasury’s first-transfer test, so long as secondary trades, ordinary technical functions, and many bridge, custody, collateral, and settlement movements are not recast as new issuances or new issuers.

What January 18, 2027 Turns On

President Donald Trump signed the GENIUS Act on July 18, 2025, as Public Law 119-27, after Sen. Bill Hagerty of Tennessee introduced the bill. The law takes effect on the earlier of 18 months after enactment or 120 days after primary federal regulators finish their rules. Agencies missed the mid-2026 rulemaking mark, so January 18, 2027, is the date on the calendar.

That date is not a single switch. Unlicensed issuance in the United States becomes unlawful. Platforms face a separate, earlier test on foreign-issued coins. The broader ban on offering a payment stablecoin to a person in the United States unless it comes from a permitted issuer waits until July 18, 2028.

THE GENIUS ACT CLOCK

1. July 18, 2025: The GENIUS Act is signed as Public Law 119-27, 18 months before the statutory backstop.
2. August 18, 2026: Treasury publishes the Section 3 proposed rule on issuance, offer, and sale at 91 Fed. Reg. 53,368.
3. September 24, 2026: The Federal Reserve Board issues companion proposals for the issuers it supervises.
4. October 19, 2026: The Treasury comment window closes; the Blockchain Association files and the docket shows 123 submissions.
5. January 18, 2027: The Act’s effective date; unlicensed U.S. issuance is barred and the foreign-coin platform test applies.
6. July 18, 2028: Digital asset service providers generally may not offer or sell a payment stablecoin to a person in the United States unless it is issued by a permitted issuer.

Congress passed this stablecoin statute while a broader market-structure bill, the CLARITY Act, was still in play. That companion track later ran into a Senate fight over the CLARITY Act and ethics questions around the president’s own crypto holdings, which is why GENIUS is the law with a date and CLARITY is not.

The association asked Treasury to set Part 1523’s effective date in line with the other GENIUS Act rules the section depends on, rather than let this piece go live while neighboring rulebooks are still drafts.

Tether Still Dominates a $302 Billion Market

DefiLlama’s total stablecoin market cap data for October 19, 2026, the day the docket closed, put the sector at $302.291 billion. Tether’s USDT accounted for $183.424 billion, or 60.68 percent. Circle’s USDC accounted for $72.587 billion. Together those two coins were $256.011 billion of the total.

STABLECOIN SUPPLY ON OCTOBER 19, 2026

USDT is a foreign-issued dollar token in the statute’s terms unless and until its issuer qualifies as a permitted issuer or clears the foreign-issuer path. That is why the association’s public-list ask is not a technical footnote. Most of the $302.291 billion market is one coin whose issuer U.S. platforms often do not sit across a table from, and whose holders on open networks are wallet addresses.

USDC, issued by a U.S. firm, lives in a different compliance story. The January 18, 2027, foreign-coin test does not treat those two products as equals, even though both are used as dollar cash on the same venues. A diligence standard that a listing firm cannot actually meet is, in practice, a listing standard.

Federal Reserve Proposals Remain Open Through November

Treasury is not writing this rulebook alone. On September 24, 2026, the Federal Reserve Board issued two proposals for Board-supervised issuers of payment stablecoins. One would require full backing with short-term Treasury bills and other high-quality liquid assets, set capital rules, and write risk-management standards. The other covers applications from insured state member banks that want a subsidiary to issue. Comments on both are due November 30, 2026.

WHAT IS STILL OPEN

• Treasury Section 3: Comments are in; a final rule on issuance, offer, and sale has not been published.
• Federal Reserve: Reserve, capital, custody, and application proposals remain open through November 30, 2026.
• State certification: Treasury, for the Stablecoin Certification Review Committee, has an interim procedure for judging whether a state regime is substantially similar to the federal one, with comments also due November 30, 2026.
• Comparability: No Section 18 finding that a foreign regime is comparable has been issued, which is the door foreign issuers need for the longer 2028 path.

The association asked Treasury to coordinate across those workstreams so firms are not asked to comply with Part 1523 against a set of neighboring rules that have not landed. Until a final Section 3 rule exists, the people the letter names, validators, wallet makers, own-account desks, market makers, and platforms that only see addresses, are reading a draft that can still move.

Treasury now has 123 letters and 91 days on the statute’s clock. The Federal Reserve’s window stays open through November 30, 2026, which is a shorter fuse than the one Congress wrote into the Act itself.

Disclaimer: This article is news reporting and analysis of a proposed U.S. Treasury rule and an industry comment letter. It is for information only and is not legal, investment, tax, or trading advice, and it is not a recommendation to buy, sell, hold, or list any stablecoin or other digital asset. Readers who must apply the GENIUS Act or any final rule to a business, listing, or personal holding should consult a qualified attorney and, where money is at stake, a licensed financial adviser. Figures, docket counts, and agency timelines reflect the public sources named in the article as of the dates given there and will change when Treasury and other agencies issue final rules.