Blockchain Association Submits GENIUS Act Comments, Seeks Clearer Rules

October 20, 2026 MM Crypto Team

The fight over how America’s new stablecoin law gets implemented is heating up. The US Blockchain Association said it has submitted comments on the Treasury Department’s proposed implementing rules for Section 3 of the GENIUS Act. The Blockchain Association GENIUS Act submission is a detailed attempt to shape the final regulation before it hardens into rules that exchanges, issuers and software developers will have to live with for years.

Comment letters can sound like procedural paperwork, but in financial regulation they are often where the real boundaries are drawn. A statute passed by Congress sets the broad direction. The implementing rules decide who is covered, what counts as a violation, how much compliance costs and when the obligations begin. For stablecoins — digital tokens designed to hold a steady value, usually against the US dollar — those details will determine which business models remain viable in the United States.

Four pressure points in the Blockchain Association GENIUS Act letter

According to ChainCatcher and PANews, the association’s letter focused on four main issues. Each one addresses a different way that an overly broad rule could sweep in participants Congress never intended to regulate as stablecoin platforms, or punish businesses for actions they could not reasonably have prevented. Understanding the four points together shows a consistent theme: the industry wants liability and obligations to follow actual control and actual knowledge.

Who counts as a platform. The group wants “digital asset service provider” limited to entities that actually serve customers — excluding self-custody software, validators, other infrastructure, and businesses trading only their own assets. This is the foundational question. A wallet that never takes custody of user funds, a validator that simply processes network transactions, and an exchange that actively lists tokens for customers play very different roles. Treating them identically would confuse responsibility and could discourage open-source development in the United States.

Criminal liability. Liability for participating in unlawful stablecoin issuance should require actual knowledge and substantial assistance coordinated with the issuer. In plain terms, the association argues that a platform should not face criminal exposure merely because a bad actor used its services. There should be a meaningful mental-state requirement and a real connection to the unlawful issuance, not accidental or purely technical involvement.

Foreign issuers. Trading platforms should be able to assess foreign stablecoin compliance using official issuer lists and trading prohibitions. Rather than forcing every platform to conduct its own deep investigation of every offshore issuer, the group wants clear official reference points that businesses can rely on in good faith.

Decentralised environments. The letter addressed how location-based tests should work for permissionless protocols that don’t map neatly onto borders. A decentralised protocol may have users, validators and developers in many countries at once, with no single headquarters that controls it. Rules written for centralised companies need careful adaptation before they are applied to such systems.

Why the definition of digital asset service provider matters

The phrase digital asset service provider may sound like dry legal terminology, but it functions as a gate. Fall inside the definition and a business faces registration, compliance systems, record-keeping and potential enforcement. Fall outside it and the business may still be subject to other laws, but not to this specific stablecoin regime. Getting the gate in the right place is therefore one of the most consequential choices Treasury will make.

Self-custody software illustrates the stakes. A non-custodial wallet lets users hold their own private keys and interact directly with blockchains. Its developer typically cannot freeze user funds, reverse transactions or decide which tokens a user holds. Imposing platform-style duties on such software would demand powers the developer does not have. Validators raise a similar issue: they order and confirm transactions according to network rules, without a customer relationship with every token holder whose transaction they process.

Businesses trading only their own assets present a third case. A firm using stablecoins for its own treasury or trading activity is a market participant, not a service provider to the public. The association’s position is that the definition should track that distinction — service to customers — rather than expanding to cover every entity that touches a stablecoin in any capacity. Clear definitions also help honest businesses plan, because they can determine their obligations without guessing how an agency might interpret an ambiguous term years later.

Stablecoin implementation rules and the knowledge standard

The criminal liability argument goes to fairness and practicality. Modern platforms process enormous volumes, and automated systems cannot perfectly identify every unlawful scheme in advance. A standard based on actual knowledge and substantial assistance coordinated with the issuer would focus enforcement on participants who knowingly helped wrongdoing happen. That focus, supporters argue, deters real misconduct without turning every intermediary into a guarantor of every issuer’s behaviour.

The foreign issuer proposal reflects a similar desire for workable stablecoin implementation rules. If Treasury or another authority maintains official lists of issuers and trading prohibitions, platforms can build compliance checks around those lists, document their reliance and update systems when lists change. Without such reference points, each platform must invent its own assessment method, producing inconsistent outcomes where the same token is available on one venue and blocked on another for opaque reasons.

The group also urged Treasury to drop an open-ended “functional equivalent” test, revisit its compliance cost estimates, and align effective dates with related GENIUS Act regulations. A functional equivalent test asks whether something is effectively the same as a regulated activity even if it does not match the formal definition. Supporters of dropping it worry that open-ended tests create uncertainty: businesses cannot know in advance whether a new product will later be judged equivalent to something regulated. Cost estimates matter too, because underestimated costs can lead to timelines and requirements that smaller firms cannot meet, pushing the market toward only the largest incumbents.

Location, decentralisation and the limits of borders

Location-based tests assume a business or transaction happens somewhere identifiable. Permissionless protocols challenge that assumption. Code can be deployed on a global network, governance token holders can be scattered worldwide, and users can access an interface from many jurisdictions. The association’s comments ask Treasury to confront that reality directly rather than applying a test that produces arbitrary results depending on where a server, developer or user happens to be.

This is not an argument that decentralised activity should sit outside all law. It is an argument that the rule must identify a responsible actor and a meaningful connection before obligations attach. Without that discipline, compliance may fall on parties with no ability to comply, while the parties who actually control a service escape attention. Well-designed rules for decentralised environments would distinguish between protocol code, front-end operators, governance participants and custodians, and assign duties according to control.

What happens next with GENIUS Act rulemaking

Treasury will review comments from industry groups, consumer advocates, banks, issuers and the public before issuing a final rule. The Blockchain Association GENIUS Act letter is one voice in that process, albeit an influential one representing a broad industry membership. Officials may accept some recommendations, reject others and modify the proposal in ways that reflect competing concerns about illicit finance, consumer protection and market competitiveness.

Timing will matter. Aligning effective dates with related GENIUS Act regulations, as the group urged, would give platforms a coherent compliance calendar instead of a patchwork of overlapping deadlines. Businesses need time to build screening tools, revise terms of service, train compliance staff and, where necessary, delist or restrict tokens. Rushed or misaligned dates increase the chance of errors that help neither regulators nor customers.

For investors and users, the practical effects will appear gradually: clearer disclosures from platforms, possible changes in which foreign stablecoins are available, and more formal compliance language around issuance and trading. For developers of self-custody software and infrastructure, the definition fight could determine whether the United States remains a welcoming place to build. That is why a comment letter about Section 3 deserves more attention than its technical framing might suggest.

There is also a transparency benefit when these debates happen through public comment files. Anyone can read the industry position, compare it with submissions from banks and consumer groups, and see exactly which definitions are contested. That openness makes the final rule easier to scrutinise and helps smaller businesses, who cannot lobby privately at scale, understand the direction of travel early and prepare their own compliance plans accordingly.

Frequently asked questions

What did the Blockchain Association submit?

The US Blockchain Association submitted comments on the Treasury Department’s proposed implementing rules for Section 3 of the GENIUS Act. According to ChainCatcher and PANews, the letter focused on four main issues covering platform definitions, criminal liability, foreign issuers and decentralised environments.

How should digital asset service provider be defined, in the group’s view?

The group wants the term limited to entities that actually serve customers, excluding self-custody software, validators, other infrastructure and businesses trading only their own assets. It also urged Treasury to drop an open-ended functional equivalent test.

What liability standard does the association support?

For unlawful stablecoin issuance, it argues liability should require actual knowledge and substantial assistance coordinated with the issuer. On foreign issuers, it wants platforms to be able to rely on official issuer lists and trading prohibitions when assessing compliance under stablecoin implementation rules.

Source: PANews / TradingView

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