GENIUS Act: U.S. Treasury seeks public input on stablecoin monitoring tools

Key Takeaways 

U.S. Treasury’s public comment window on tracking stablecoin activity will end on the 17th of October. Meanwhile, the banking lobby wants to stop interest paid on payment stablecoins. 

The U.S. Treasury has opened a public comment window on tackling illicit activity involving stablecoins as stipulated in the GENIUS Act. 

According to the Treasury statement, the move would gauge the efficiency and cost of novel tools for monitoring such illicit activities. 

“Treasury will use public comments to inform research on the effectiveness, costs, privacy, and cybersecurity risks, and other considerations related to these tools.”

The public will be allowed to make relevant submissions by the 17th of October. It will set the stage for the implementation of the provisions under the stablecoin-focused GENIUS Act. 

Balancing safety and innovation

Scott Bessent, Treasury Secretary, said implementation of the Act was crucial to ensure American ‘leadership in digital assets.’ He added, 

“It’s a win-win-win for everyone involved: stablecoin users, stablecoin issuers, and the U.S. Treasury Department.”

Worth pointing out that stablecoin issuers will become key buyers of U.S. Treasury bills.

They will be used as part of the reserve backing for their issued digital dollars. In fact, Tether ranked the 18th largest buyer of T-bills in Q2, surpassing South Korea.

That said, after the October comment window, the Treasury will draft proposed rules under the GENIUS Act.

This would factor in the public input and include how firms should track stablecoin activity and the associated tools that balance costs and efficiency. 

Notably, the Act has a ‘lawful order’ provision that forces an issuer to seize, burn, freeze, or prevent stablecoin transfers based on a court or a regulator order. 

Overall, the draft and guidance by Treasury and other regulators could stretch to early 2026.

According to Latham and Williams LLP, the GENIUS Act will take effect 18 months after enactment or 120 days after regulators issue final guidances implementing the Act.  

As such, final rules could likely be issued by mid-2026, and enforcement for those flouting the compliance could begin from 2027. 

Meanwhile, the banking lobby, via the Bank Policy Institute (BPI), recently urged Congress to seal GENIUS Act ‘loopholes’ that allow payment of interest for stablecoins.

The lobby claimed that the loophole could trigger a capital flight worth over $6.6 trillion and dent banks’ lending capacity. 

“Incentivizing a shift from bank deposits and money market funds to stablecoins would end up increasing lending costs and reducing loans to businesses and consumer households.”

It remains to be seen whether any strict rules against yield on payment stablecoins will be issued by regulators.