New Treasury proposal requires US exchanges to conduct due diligence on foreign stablecoins to avoid delisting. Comments open until Oct. 19.
The US Treasury Department has recently announced a significant shift concerning foreign stablecoins and their accessibility on American exchanges. This comes under the proposed regulations stemming from the GENIUS Act, a law designed to oversee digital currencies.
As the demand for stablecoins continues to grow, regulators are increasingly focused on ensuring that issuers adhere to US laws. The new proposal dictates that US-based exchanges must undergo extensive audits of foreign stablecoin issuers to ensure compliance with American regulations or risk being delisted.
The GENIUS Act, which stands for "Guarding the Economy Through New and Innovative Stablecoins," aims to establish a regulatory framework for stablecoins and their issuers. Under this act, the Treasury Department seeks to create a secure environment for consumers while accommodating innovation in the cryptocurrency space.
While the act has opened the doors for stablecoin acceptance in the US market, the proposed regulations aim to tighten control over how foreign issuers interact with American customers. The Treasury's proposal focuses on requiring exchanges to conduct reasonable due diligence before they can rely on a foreign issuer's claims.
According to the proposal, exchanges could only trust a foreign issuer's commitments—such as the ability to comply with US enforcement actions—provided they can demonstrate reasonable diligence. This means exchanges will need to thoroughly vet foreign issuers before allowing their stablecoins to be available for trading or custody.
Under the new proposal, due diligence means that exchanges must actively verify an issuer's ability to comply with US laws. This includes, at a minimum, ensuring that the issuer is not explicitly prohibited under the GENIUS Act from engaging in secondary trading.
However, that verification alone is not sufficient. Exchanges will need to gather and evaluate all reasonably available information regarding the issuer to determine if they can reliably comply with US orders—for example, orders to freeze or seize tokens.
The burden of compliance will now rest on the platforms that facilitate transactions with these foreign stablecoins. The Treasury has not published a definitive list of qualifying stablecoins, and this absence of a clear guideline may lead to uncertainty among exchanges.
The implementation timeline for these regulations is critical. The initial regime for the GENIUS Act is expected to take effect on January 18, 2027, unless the final regulations are activated sooner. Overall, the final changes represent a two-phase compliance structure.
A stricter regulatory framework, including a more narrow range of relevant issuers, is set to kick in on July 18, 2028. By that time, US exchanges may only be able to list or trade stablecoins from a US issuer or a foreign issuer meeting specific criteria outlined in Section 18 of the act.
To qualify under these regulations, a foreign issuer must demonstrate that they are supervised under a framework deemed comparable by the Treasury, registered with the Office of the Comptroller of the Currency, and hold adequate reserves at a US financial institution to ensure liquidity for American customers. Additionally, the foreign jurisdiction must not fall under stringent US sanctions or be labeled as a primary concern for money laundering.
As the Treasury invites feedback on the proposed regulations, the crypto community is actively discussing what these compliance standards will entail. Key questions remain about the nature of adequate due diligence. Will written confirmations from issuers become mandatory? How often must these records be updated? What kind of technology audits are necessary?
The deadline for public comments regarding this proposal is set for October 19, 2026. Until the finalization of these standards, the future for foreign stablecoins on US exchanges hangs in the balance.
Although the new rules do not represent a complete ban on foreign stablecoins, they impose substantial requirements that exchanges must navigate to continue operations. For instance, direct peer-to-peer transfers between individuals and certain transactions involving a parent company’s different accounts may still proceed without strict scrutiny.
It remains to be seen how exchanges will specifically define the due diligence requirements, as the Treasury continues to seek input on various aspects of its proposal. In light of the rapidly evolving landscape of digital currencies, exchanges will need to adapt swiftly to maintain their operational capabilities.
As the Treasury finalizes its regulations and addresses these pressing questions, the decisions made in the coming months will have lasting implications for the future of stablecoin accessibility in the US market.
The Treasury's proposed changes reflect a significant shift in the regulatory landscape for stablecoins, especially concerning foreign issuers. With the ongoing emphasis on consumer protection and compliance, US exchanges must prepare for a new era of regulation that balances innovation with accountability.
Failure to comply with these upcoming regulations may lead to reduced options for US customers or potential delisting of certain foreign stablecoins. As the deadline for public comments approaches, the conversation around stablecoin regulation is set to intensify, shaping the future of how digital assets interact within the broader financial ecosystem.
As the sector evolves, companies, regulators, and consumers alike will have to engage in continuous dialogue to ensure that the stablecoin market remains resilient, transparent, and compliant with US laws.
The GENIUS Act is a legislative initiative by the US Treasury aimed at regulating stablecoins and their issuers to ensure compliance with US laws while fostering innovation.
The new proposal requires US exchanges to conduct due diligence on foreign stablecoin issuers and comply with US regulations, or risk delisting stablecoins from their platforms.
The deadline for public comments on the proposed standards is October 19, 2026, after which the Treasury will finalize the regulations based on received feedback.