Genius Act Rulemaking
Author: Dr. Rahul Dev: Director, Hashchain Consulting Group; international patent attorney, technology business lawyer, AI strategist, and crypto intelligence researcher with 20+ years of experience across digital assets, blockchain law, tokenisation, patent strategy, artificial intelligence, and international business.
Contact me on Twitter or LinkedIn. You can also message me on Telegram @ RahulDev or send a message on WhatsApp or email at rd (at) patentbusinesslawyer (dot) com or reach out via the contact page, or send a direct message here.
This content is provided for general information and research purposes only. It does not constitute legal, financial, investment, tax, regulatory, or other professional advice. Readers should obtain advice appropriate to their specific circumstances before acting.
The U.S. Treasury’s early moves on genius act rulemaking are already shaping how payment stablecoins will be issued, supervised, and integrated into the financial system. With an Advance Notice of Proposed Rulemaking published in 2025 and a joint Treasury, FinCEN, and OFAC proposal extending BSA/AML and sanctions obligations to permitted payment stablecoin issuers, the regulatory direction is no longer theoretical—it is operational and time-bound. At the center of this genius act rulemaking is Treasury’s approach to certifying whether state regimes are “substantially similar” to the federal framework, a determination that will influence market structure, licensing strategy, and supervisory alignment.
Dr. Rahul Dev brings a cross-border legal and technical perspective to this analysis, drawing on decades of experience advising on emerging technology regulation and financial innovation, including work in patent commercialization. His focus reflects a key reality: Treasury’s decisions will not operate in isolation, but alongside parallel rulemakings by the OCC and other federal regulators, creating a layered compliance environment with real execution risk.
For issuers, financial institutions, and technology providers, the implications are immediate. Compliance programs must evolve to meet anticipated AML and sanctions requirements, while legal teams assess whether state pathways remain viable or give way to federal oversight, often requiring technology law guidance. Strategic planning now requires tracking multiple rulemaking tracks, interpreting evolving standards, and preparing for transition thresholds that remain unsettled.
This article breaks down Treasury’s role section by section, clarifies what is known and unresolved, and equips readers to assess regulatory exposure, align compliance strategies, and navigate the next phase of GENIUS Act rulemaking with confidence.
Treasury published its Advance Notice of Proposed Rulemaking on GENIUS Act implementation in September 2025, opening a public comment period that closed on October 20, 2025. That ANPRM marks the formal starting point for Treasury’s rulemaking record and signals that the agency is moving on two fronts simultaneously: defining what makes a state stablecoin regime “substantially similar” to federal standards, and imposing anti-money laundering and sanctions obligations on permitted payment stablecoin issuers. For legal and compliance teams supported by regulatory intelligence, the question is no longer whether these rules are coming but how to prepare before final text is locked within the broader genius act rulemaking process.
Treasury’s Role in the GENIUS Act Rulemaking Framework
The GENIUS Act assigns implementation responsibilities across multiple federal agencies. Treasury’s specific mandate centers on two areas: evaluating state regulatory regimes under Section 4(c) and establishing illicit-finance compliance requirements for permitted payment stablecoin issuers (PPSIs). The OCC, Federal Reserve, and FDIC hold parallel responsibilities for chartering, prudential supervision, and examination of certain issuer categories.
This multi-agency structure creates a coordination challenge. Treasury’s rulemaking operates on its own timeline, but final rules from other agencies will determine chartering pathways, reserve examination standards, and supervisory expectations. Chapman and Cutler’s rulemaking tracker confirms that multiple agency deadlines fall within roughly one year of enactment, with the statute’s effective date tied to either 18 months after enactment or 120 days after final implementing regulations, whichever comes first.
Why Treasury matters most for state-regime viability
Treasury’s “substantially similar” determination under Section 4(c) will decide whether smaller nonbank issuers below the statutory threshold can continue operating under state supervision. If a state regime fails certification, issuers in that state face a forced transition to federal oversight with different capital, disclosure, and examination requirements.
Treasury’s substantially similar determination will decide whether state-supervised stablecoin issuers can continue operating or must transition to federal oversight.
Section 4(c): The “Substantially Similar” Standard
Treasury’s ANPRM and a separate implementation document focused on Section 4(c) principles ask how the agency should evaluate whether a state payment stablecoin regulatory regime matches the federal framework’s core protections. The statute requires 1:1 reserves, redemption policies, reserve disclosure, and independent examination. A state regime must address each of these elements to qualify.
The unresolved question is how much variation Treasury will tolerate. Will a state regime need to replicate federal requirements nearly verbatim, or can it satisfy the standard through functional equivalence? Industry comment letters suggest issuers want flexibility, while Treasury’s framing emphasizes consistency in consumer protection and financial stability outcomes.
What state regulators and issuers should expect
State regulators will likely need to submit evidence packages demonstrating alignment with federal reserve, redemption, disclosure, and examination standards. Issuers operating under state regimes should prepare for the possibility that certification may not be granted for every jurisdiction, and should model the cost and operational impact of transitioning to federal supervision.
Treasury’s AML/CFT and Sanctions Rule for PPSIs
Treasury, FinCEN, and OFAC issued a joint proposed rule that would treat PPSIs as financial institutions under the Bank Secrecy Act. This means PPSIs must establish AML/CFT compliance programs, conduct customer due diligence, implement transaction monitoring, screen against sanctions lists, and maintain recordkeeping sufficient for regulatory examination.
This proposed rule is separate from the ANPRM on substantially similar standards. It applies to all PPSIs regardless of whether they operate under federal or state supervision. The practical effect is a compliance floor that every permitted issuer must meet within the genius act rulemaking framework.
The FinCEN/OFAC proposed rule creates a compliance floor that applies to every permitted stablecoin issuer, regardless of supervisory pathway.
I approach the GENIUS Act rulemaking as a problem that sits at the intersection of financial regulation, software architecture, and market access. Interpreting the treasury genius act requires more than statutory reading; it demands an understanding of how compliance obligations translate into system design, product constraints, and ultimately, competitive positioning across jurisdictions.
In my work advising blockchain and AI-driven platforms, including contributing to over 500 utility-token legal opinions and leveraging emerging technology legal analysis, I have seen how regulatory definitions shape technical build decisions. Under the genius act rulemaking, the classification of an entity as a permitted payment stablecoin issuer (PPSI) directly affects how teams design custody, transaction monitoring, and audit layers. For example, once Treasury and FinCEN treat PPSIs as financial institutions under BSA/AML rules, engineering teams must embed compliance logic—such as sanctions screening and recordkeeping—into core infrastructure rather than bolt it on later. That is not a legal adjustment; it is a product architecture decision.
A second issue I regularly address is cross-border market entry. Having advised expansion strategies across seven countries, I view Treasury’s “substantially similar” standard under Section 4(c) as a decisive factor in whether state-level regimes remain commercially viable. The uncertainty in how the treasury genius act rulemaking evaluates state frameworks introduces real strategic risk: companies may need to choose between scaling under a state regime or preparing early for federal supervision, each with different capital, disclosure, and examination implications.
A key 2025–2026 development is Treasury’s ANPRM initiating the rulemaking process and the parallel FinCEN/OFAC proposed rule imposing AML and sanctions obligations on PPSIs. This confirms that genius act compliance will be driven by coordinated, multi-agency rulemaking rather than a single regulatory track, often supported by platforms focused on legal service comparison.
Decision-makers should prioritise classification clarity, compliance-by-design, and jurisdiction strategy early. In my experience, combining AI regulatory compliance navigation with patent and product strategy is what determines whether a business can scale under evolving treasury rulemaking process constraints rather than react to them later.
Compliance and Operational Implications
Legal and compliance teams face a dual-track analysis. First, they must determine whether their issuer qualifies under a state regime or requires federal supervision. Second, regardless of that answer, they must satisfy the BSA/AML and sanctions requirements that Treasury, FinCEN, and OFAC are finalizing.
Key compliance workstreams include:
- Customer due diligence and transaction monitoring programs aligned with BSA requirements for financial institutions.
- Sanctions screening integrated into transaction processing infrastructure.
- Reserve controls and redemption policies meeting Section 4 standards for 1:1 backing and timely redemption.
- Public disclosure and independent examination of reserve composition and adequacy.
- Recordkeeping and governance documentation sufficient to support regulatory examinations.
Financial institutions and service providers that interact with PPSIs should also revisit contracts, onboarding procedures, and counterparty risk assessments. Issuer status, reserve transparency, and redemption controls will become standard diligence items.
Key Risks and Open Questions
Several issues remain unresolved before final rules take effect. Treasury has not yet defined the precise test for “substantially similar,” and comment-driven changes could shift the standard in either direction. The scope of AML/CFT obligations may also change between proposed and final rule stages.
Coordination risk across agencies is real. If Treasury finalizes its rules on a different timeline than the OCC or Federal Reserve, issuers may face interim periods of regulatory uncertainty. Threshold and transition issues for state issuers approaching the federal asset boundary require close monitoring, particularly around timing of mandatory supervisory transitions.
If agencies finalize rules on different timelines, issuers may face interim periods where supervisory expectations are unclear.
Conclusion
Treasury’s genius act rulemaking will shape the competitive landscape for stablecoin issuers through two mechanisms: the substantially similar certification for state regimes and the BSA/AML/sanctions compliance floor for all PPSIs. Both tracks are active, with the ANPRM comment period closed and the FinCEN/OFAC proposed rule under review. The most consequential unresolved issue is how Treasury defines substantial similarity, which will determine whether state pathways remain viable or effectively narrow.
Legal and compliance teams should begin now by mapping each business line to GENIUS Act issuer categories, conducting a compliance gap analysis against the proposed AML and sanctions requirements, and preparing evidence packages for any state-regime certification process. Firms with material stablecoin exposure should also model transition scenarios. Given the multi-agency nature of this treasury rulemaking process, monitoring all parallel dockets is essential to avoiding surprises when final rules take effect.
Need Crypto, Blockchain, or Digital-Asset Research Support?
Dr. Rahul Dev works with founders, companies, investors, professional advisers, and technology teams on crypto intelligence, blockchain and digital-asset strategy, AI strategy, tokenisation, patent strategy, regulatory research, international market entry, compliance analysis, and technology commercialisation. If you require structured research or strategic analysis for a crypto, blockchain, artificial intelligence, intellectual property, regulatory, or international business matter, get in touch to discuss the scope of work.
Frequently Asked Questions
What is the GENIUS Act Rulemaking?
The GENIUS Act Rulemaking refers to the Treasury’s process of creating rules for implementing the GENIUS Act, which regulates payment stablecoins in the U.S. This involves issuing guidelines for state regimes to be considered “substantially similar” to federal standards and addressing compliance for permitted payment stablecoin issuers (PPSIs). Recent developments include an Advance Notice of Proposed Rulemaking and public commentary in 2025.
What is the “substantially similar” standard in the GENIUS Act?
The “substantially similar” standard defines criteria for state stablecoin regulatory regimes to be accepted under the GENIUS Act. This allows state-regulated issuers to operate within federal boundaries if their frameworks align closely with Treasury guidelines. The Treasury is currently gathering public opinions to finalize this framework, highlighting its significance for state-federal operational continuity in the stablecoin sector.
What are the compliance obligations for Permitted Payment Stablecoin Issuers (PPSIs)?
Permitted Payment Stablecoin Issuers must adhere to the Bank Secrecy Act’s anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements. The Treasury, FinCEN, and OFAC jointly proposed rules to ensure PPSIs maintain compliance programs. This ensures financial integrity and regulatory alignment with the GENIUS Act’s financial institution standards, promoting stablecoin issuer accountability in the evolving regulatory landscape.
What is the Treasury’s ANPRM related to the GENIUS Act?
The Advance Notice of Proposed Rulemaking (ANPRM) is Treasury’s initial call for public input on the GENIUS Act’s implementation. It addresses issues like the “substantially similar” certification for state regimes. The ANPRM, published in September 2025, outlines potential rules for stablecoin regulation, seeking feedback to shape final rule proposals in step with the GENIUS Act.
What role does coordination play in the GENIUS Act Rulemaking?
Coordination is crucial in the GENIUS Act Rulemaking, as Treasury works with federal agencies like the OCC, Federal Reserve, and FDIC. This synchronizes rulemaking efforts, ensuring unified regulatory approaches across financial entities. Effective coordination mitigates risks of inconsistent regulations, maintaining stablecoin market stability while facilitating innovation within the Act’s statutory deadlines.