The US Treasury Department’s proposed anti-money laundering and sanctions compliance system for stablecoin issuers is heading toward its June 9, 2026 comment deadline, and the gap between what regulators want and what the industry can absorb is proving substantial. Law firms, fintech lobbyists, and some of the largest stablecoin issuers have filed detailed objections arguing that several provisions – particularly around transaction monitoring obligations and travel rule thresholds – are disproportionately burdensome and could push issuers offshore.
The rulemaking, issued by Treasury’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC), implements the anti-money laundering and sanctions compliance requirements baked into the GENIUS Act – the landmark stablecoin legislation signed into law on July 18, 2025. The GENIUS Act gave Treasury 180 days to promulgate the AML rules, and the proposed system arrived on April 9, 2026.
What the Proposed Rules Require
The Treasury’s proposed system would require all Permitted Payment Stablecoin Issuers (PPSIs) – both bank and non-bank entities – to:
- Establish AML and countering-the-financing-of-terrorism (CFT) programmes equivalent in rigour to those required of federally chartered banks
- Set up the travel rule for transfers above $3,000, requiring both sending and receiving institutions to collect and transmit originator and beneficiary information
- Screen all transactions against OFAC’s Specially Designated Nationals (SDN) list in real time
- Conduct improved due diligence on high-risk customers, including foreign correspondent relationships
- File suspicious activity reports (SARs) with FinCEN for transactions meeting specified risk thresholds
The travel rule threshold of $3,000 has attracted the most industry opposition. Under traditional bank rules, the travel rule applies at this level, but critics argue that stablecoin transactions are structurally different – they occur on public blockchains where immutable transaction records already exist, potentially making traditional travel rule compliance both redundant and technically impractical for decentralised issuers.
Industry Pushback: Key Arguments
Threshold calibration: The Blockchain Association, the Digital Currency Group, and Circle Internet Financial have all filed comments arguing the $3,000 threshold is too low for on-chain transactions and should be raised to at least $10,000 to match the AML reporting threshold for cash transactions. They also want an exemption for peer-to-peer wallet transfers that don’t pass through a licensed intermediary.
Decentralised issuers: A coalition of DeFi-focused lawyers argues that the system as written can’t apply to truly decentralised stablecoin protocols – those governed by DAOs with no central issuer – without an explicit clarification of who bears compliance responsibility. Absent such clarification, they warn, decentralised protocols face existential legal uncertainty.
State vs federal divide: The GENIUS Act created a dual-track regulatory system allowing state-regulated issuers to substitute state-level compliance regimes for federal rules if Treasury certifies the state regime as “substantially equivalent.” Several states – including New York, Wyoming, and California – have already begun drafting their equivalency frameworks, and industry groups want Treasury to set a high but achievable equivalency standard rather than one that effectively forces all issuers to choose federal oversight.
Implementation timeline: The rules as proposed would take effect 12 months after finalisation. Payment processors and compliance technology firms have told Treasury that 12 months is insufficient to build the infrastructure required for real-time OFAC screening at the transaction volumes stablecoin networks currently process.
What Supporters Say
Supporters of strong AML requirements – including some law enforcement associations and a bipartisan group of senators – argue that the proposed rules are precisely because stablecoins have become a favoured instrument for sanctions evasion and illicit finance. They point to Tether’s own disclosure that it froze $514 million in USDT across 370+ wallets in a single 30-day period as evidence that the sector has a serious compliance problem that market participants can’t self-regulate their way out of.
“Stablecoins now process more daily transaction value than Visa and Mastercard combined on some days,” said Senator Cynthia Lummis in remarks supporting the rules. “The idea that they should operate under a lighter compliance regime than a community bank isn’t serious policy.”
What Comes Next
The comment period closes June 9. Treasury is under no statutory obligation to publish a final rule by any specific date after that, but the GENIUS Act’s overall implementation timeline – and political pressure from both Congress and the industry – is expected to push Treasury toward a final rule before the end of 2026.
The most likely outcome, according to legal analysts at Mayer Brown and Chapman and Cutler who have reviewed both the proposed rule and the comment letters, is a final system that retains the bank-equivalent AML standard but adjusts the travel rule threshold upward to $10,000 and provides clearer guidance on how DeFi protocols should handle compliance obligations.
Whether that guidance will be enough to keep major stablecoin issuers domiciled in the US – or whether it’ll accelerate the migration of some protocols to more permissive jurisdictions – remains an open question that the final rule will need to address directly.
FAQ
what’s the GENIUS Act and why does it matter for stablecoins? The GENIUS Act, signed in July 2025, is the first complete US federal law specifically regulating payment stablecoins. It created a licensing category for Permitted Payment Stablecoin Issuers, set reserve and redemption requirements, and directed Treasury to create AML and sanctions compliance rules – which are now in the public comment phase.
Who needs to comply with the proposed GENIUS Act AML rules? Any entity that issues a “payment stablecoin” – a blockchain-based token pegged to a fixed monetary value and used for payments – must obtain PPSI status and comply with the rules. This includes both bank-affiliated issuers and non-bank fintechs like Circle (USDC) and, if it operates in the US market, Tether.
What happens if issuers don’t comply? Non-compliance with GENIUS Act AML requirements can result in revocation of PPSI status, civil monetary penalties, and – in cases involving wilful violations – criminal referrals to the Department of Justice. The rules are enforced jointly by FinCEN, OFAC, and the primary federal regulator assigned to each issuer (FDIC, OCC, or Federal Reserve, depending on charter type).
