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This article was first published on TurkishNYR.
In order to win its battle against illicit finance, the U.S. Treasury’s April 2026 proposal, which fell under the GENIUS Act rules, made payment stablecoin issuers the drivers of that fight for all Americans.
The joint FinCEN/OFAC rule further implements Congress’s GENIUS Act by treating permitted payment stablecoin issuers (PPSIs) as financial institutions under the Bank Secrecy Act (BSA).
This meant that in reality; dollar-backed stablecoin firms were required to build a complete anti-money laundering (AML) and countering the financing of terrorism (CFT) programs like those of banks, customized for their decentralized technology.
The proposed rule states that PPSIs must implement comprehensive AML/CFT programs; undertake customer due diligence, report suspicious activity and even have the technical capability to block or freeze illicit transactions on their networks.
Overview of Proposed GENIUS Act Rules
The proposed rule; which was announced on April 8, 2026, is the first formal regulation implementing the GENIUS Act’s requirements for payment stablecoins. It governs “permitted payment stablecoin issuers” (PPSIs); which is defined as those that issue U.S. dollar-denominated stablecoins for payments and allow on-demand redemptions. Key elements include:
AML/CFT Program: PPSIs should develop and maintain an anti-money laundering and countering the financing of terrorism program. This involves risk assessments; policies and procedures, internal controls and ongoing training; in other words; replicating what banks are doing under the BSA.
Customer Due Diligence: Issuers must identify and verify customers, as well as conduct enhanced due diligence on high-risk clients. This puts PPSIs on the same level as traditional financial institutions’ “know your customer” standards.
Suspicious activity reports: PPSIs have to file Suspicious Activity Reports (SARs) on transactions above $5,000; the same threshold banks follow. Suspicious transfers or patterns (including on blockchain networks) must also be reported to FinCEN.
Transaction Monitoring and Controls : In addition to on-chain commerce, PPSIs for the first time will have technical capabilities to block; freeze and reject illicit transactions. Which gives them control over token issuance and transfers; basically making it so they can undo illegal stablecoin transactions on-chain.
Sanctions Compliance: The proposal includes a requirement that PPSIs keep an effective sanctions compliance program. They are required to screen transactions against OFAC lists; block or reject any transaction lending involving sanctioned individuals and report willful violations.
Compliance with Lawful Orders: PPSIs should be fully capable of complying with lawful orders (e.g. court orders, subpoenas). The rule specifies that issuers must adhere to any legal blocking or asset seizure orders right down to the destruction of tokens (burning) to return value to crime victims if necessary.
Independent Testing and Governance: Like banks; PPSIs would be required to have their compliance programs tested independently at regular intervals, as well as qualified U.S.-based AML officers without disqualifying history.
In essence, the GENIUS Act regulations bring stablecoin issuers in line with traditional financial players but with some tweaks for their cryptographic nature. The Treasury and FinCEN emphasize a risk-based strategy. Issuers should focus resources to higher-risk users and transactions.
The rule recognizes that stablecoin markets are interwoven between public blockchains and secondary exchanges, meaning that PPSIs will be required to consider on-chain information as well as off-chain elements when assessing risk.
If, for instance, a stablecoin’s transactions suddenly spike on a foreign exchange known for poor AML, the PPSI should flag this risk into its compliance program.
Requirements for Stablecoin Issuers Under the GENIUS Act
Under the proposed framework; PPSIs receive virtually all of the AML/CFT requirements applicable to banks; tailored for their operations.
Table 1 below summarizes how key compliance duties will apply:
| Compliance Obligation | Banks / MSBs / FIs (BSA rules) | PPSIs (Proposed GENIUS Act Rules) |
| AML/CFT Program | Required: risk-based program with policies, CDD/KYC, SAR reporting. | Required: establish/maintain robust AML/CFT program. Equivalent scope but adapted to digital assets. |
| Customer Identification (KYC) | Required: Customer identity verification. | Required: same KYC/CDD standards as banks to verify stablecoin users. |
| Suspicious Activity Reports (SARs) | Required for $5,000+ transactions. | Required: file SARs on $5,000+ transactions as per BSA. |
| OFAC Sanctions Program | Required: effective sanctions compliance with OFAC rules. | Required: maintain effective sanctions program, screen customers and transactions. |
| Transaction Monitoring | Required: monitor for illicit activity within bank’s accounts. | Required: monitor on-chain and off-chain transfers; must have ability to block or freeze illicit stablecoin transactions. |
| Lawful Orders Compliance | Required: comply with all subpoenas, warrants, and FIRAs. | Required: comply and technically implement all lawful orders on transactions. |
| Independent Testing | Required: independent audit of AML program (Fed/FinCEN rule). | Required: must conduct independent testing of AML/CFT program. |
| Compliance Officer | Required: designated AML officer with qualifications. | Required: designate U.S.-based AML officer (no major convictions). |
| Recordkeeping | Required: maintain records of transactions, due diligence. | Required: maintain records of stablecoin transactions, smart contract interactions etc. |
Importantly, a PPSI should possess technical systems to “burn” or re-issue tokens when necessary. This, American Banker explains, requires issuers to be able to destroy tokens and refund victims of fraud. This is new for regular banks but mimics how law enforcement already “seizes” crypto addresses.
PPSIs would have to guard against risk in the large peer-to-peer stablecoin market. Holders can transact on permissionless blockchains or via unregulated exchanges, meaning PPSIs will be expected to follow secondary-market flows.
Although the rule does not explicitly require such a policing of all blockchain transactions, it indicates that issuers are strongly encouraged to consider such activity in the PPSI’s development and maintenance of a customer risk profile.
For example, a compliance team might review on-chain data (public addresses associated with high-risk entities) as part of KYC.
Regulatory Framework with State Oversight Option
The GENIUS Act rules go beyond just AML and sanctions. It gives smaller issuers (up to $10 billion supply) the option to enter into state-level oversight rather than be covered by federal authorities, as long as the state scheme is “substantially similar” to the federal standards.
On April 1, 2026, Treasury published a separate Notice of Proposed Rulemaking to establish criteria for assessing state frameworks. The concept is to allow a budding state-based licensing regime like Wyoming or Colorado to verify that they satisfy the GENIUS Act principles.
Under the GENIUS Act rules however, all PPSIs, whether federally or state-regulated, must still comply with core AML/sanctions requirements. States can not set a lower bar than the BSA standards.
Effectively, the GENIUS Act constructs a two-track regime. Circle or Coinbase, as well as new entrants beyond the $10B threshold, must all comply with the other federal rules outlined above.
Smaller new entrants have the option of a federal or qualifying state regime. Either way, the Treasury’s AML rule would effectively cover any federally-licensed PPSI.
Industry Response and Analysis
The Treasury proposal drew responses from industry and advocacy groups. Many in the crypto industry have long wanted clear rules, and some welcomed the legal clarity. A Forbes analysis pointed out that the GENIUS Act regime could unlock a sizable market (potentially $300+ billion in stablecoins) by encouraging banks to issue coins under known rules.
In fact, large banks like Bank of America, JPMorgan are preparing stablecoin pilots in anticipation of these rules.
However, some fintech boosters say that tightening the screws too much could stifle innovation. Critics worry that the compliance burden of operating blockchain nodes, filtering blockchain transactions and complying with traditional KYC could put established firms at an advantage over startups.
The American Bankers Association (ABA) and others have warned that the proposal could help already-regulated banks that maintain strong AML programs, while making it harder for crypto-native firms to compete.
One Wall Street analyst says that the rule “turns every stablecoin issuer into a bank for BSA purposes”.
Groups in the crypto industry will likely comb over the details. Two main questions are how the Treasury will define a “covered transaction” for it to freeze, and how the tailored rule will approach pseudonymous blockchain data.
Some advocates of decentralized finance claim that it is practically difficult to impose real-name KYC on blockchain addresses. Consumer advocates counter that they’re glad to see a crackdown on fraud, since stablecoins have been used in ransomware and sanctions evasion, so plugging those holes is going to make things safer.
Banks largely view the measures as sensible, given the risks to financial stability. Stablecoin AML “should align with what we do in traditional finance”, a banking source told American Banker.
In fact, the FDIC and OCC had just put out parallel rules to require that banks and state-licensed payment providers meet the same GENIUS Act obligations.
It is widely expected among stakeholders that AML requirements for stablecoin projects will develop through both negotiations during the comment period (which will be open for 60 days) and interagency consultations.
Conclusion
The proposed Treasury regulation would treat payment stablecoin issuers as similar to banks for AML and sanctions purposes. They are required to establish comprehensive AML/CFT compliance programs, submit suspicious activity reports and acquire the technical capacity to halt illicit transactions.
Essentially, the GENIUS Act rules expand the BSA to digital payments, ensuring that the stablecoin market conforms with the same anti-crime expectations that govern traditional finances.
Policymakers say this will safeguard the U.S. financial system against money laundering, fraud and terrorism financing, but won’t hinder legal innovation.
In any case, the draft makes it clear that when it comes to illicit finance, no issuer is above the law, crypto included.
Disclaimer: This article is for informational use only and should not be used as legal or financial advice. Regulatory changes will happen and stake-holders must also navigate the world according to the new normal.
Glossary
PPSI (Permitted Payment Stablecoin Issuer): An entity approved to issue U.S. dollar-pegged stablecoins strictly for payments and redemption.
AML/CFT Program: Anti-Money Laundering / Countering the Financing of Terrorism program Policies and procedures that financial institutions must have in place; to detect and prevent money laundering and terrorist financing.
Suspicious Activity Report (SAR): A report submitted by financial institutions to FinCEN that is triggered when suspicious transactions are detected.
Sanctions Compliance Program: A system to ensure an institution does not transact with persons or countries subject to U.S. sanctions.
Block/Freeze Transactions: The ability for a PPSI to block or freeze illicit stablecoin transfers. This can include denying a blockchain transaction; freezing an account’s on-chain balance or “burning” tokens to take them out of circulation.
Know Your Customer (KYC): The process of verifying the identity of a customer, assessing their risk profile, and monitoring their transactions.
FAQs About Proposed GENIUS Act Rules
What is the GENIUS Act?
The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) is a 2025 law that created a federal framework for dollar-pegged payment stablecoins. It mandates that stablecoin issuers adhere to U.S. financial rules if they provide payment services. Under this framework; the Treasury has to issue rules treating payment stablecoin issuers as banks under Bank Secrecy Act.
Who is required to comply with the GENIUS Act Rules?
The scope has been extended to include Permitted Payment Stablecoin Issuers (PPSIs). These are the entities that issue stablecoins backed by U.S. dollars for payments and redemption.
What AML/CFT requirements will apply to stablecoin issuers?
The proposed rule would require PPSIs to maintain complete AML/CFT compliance programs just like banks do. This includes: customer identity verification (KYC), ongoing customer due diligence, monitoring transactions, and submission of reports for suspicious transfers.
What is the difference between this and existing bank rules?
It conceptually puts stablecoin issuers on the same level as banks but with added crypto-specific provisions. Public ledgers do not block transactions, for example, but PPSIs do.
