David’s key takeaways on what stablecoin issuers should be watching:

• The missed rulemaking deadline matters, but the shrinking compliance runway may be the bigger issue.
• If final rules are delayed past approximately Sept. 20, 2026, firms may have less than the 120-day implementation period built into the statute’s structure.
• Issuers should begin preparing now by assessing readiness, identifying no-regrets compliance steps and securing resources early.

Read the full article here.

The post The GENIUS Act’s Vanishing Compliance Window: Will Stablecoin Issuers Have Enough Time to Prepare? appeared first on Blockchain.

For a detailed analysis of the cryptocurrency tax, please see the article we published in Bloomberg Tax.

The post Illinois Enacts First-of-Its-Kind Cryptocurrency Transaction Tax appeared first on Blockchain.

The post FDIC Proposal Takes Bank-Like AML Approach to Stablecoins appeared first on Blockchain.

Tucked within the bill is a provision with potentially far-reaching consequences for the future of digital finance: a statutory prohibition on U.S. central bank digital currency (CBDC) through December 31, 2030. The bill bars the Federal Reserve from “issuing or creating” a CBDC or any substantially similar digital asset. With the bill now heading to the House of Representatives, where it is widely expected to pass, the United States is formalizing an increasingly firm policy stance against CBDCs, one that contrasts sharply with developments abroad.

What is a CBDC and Why is Congress Opposed?

A CBDC is a digital form of a country’s sovereign currency issued and backed directly by its central bank. CBDCs differ from existing payment mechanisms in several important respects. As compared to bank deposits, which are liabilities of commercial banks, a U.S. CBDC would be a direct liability of the Federal Reserve. CBDCs differ from cryptocurrencies in that the former are centrally issued and controlled, rather than decentralized and permissionless. And, unlike stablecoins—privately issued instruments typically backed by reserves—CBDCs constitute public money that may carry legal tender status.

Proponents argue that CBDCs could enable faster, cheaper, and more inclusive payments. However, a strong and increasingly cross-cutting coalition in Washington views them as posing significant legal and policy risks. The primary objections generally fall into three key categories:

• Privacy and Financial Surveillance: Critics argue that a retail CBDC could enable unprecedented visibility into consumer transactions, raising fears of government financial surveillance.
• Disruption to Credit Intermediation: Because a CBDC would represent a direct claim on the Federal Reserve, policymakers warn that widespread adoption could accelerate deposit flight from commercial banks during periods of stress, potentially disrupting traditional credit intermediation.
• Programmability and Centralized Control: The programmability of CBDCs has prompted concerns that, at least in theory, a digital dollar could be designed to condition or restrict how funds are spent, implicating broader questions about economic liberty and state power.

The 21st Century ROAD to Housing Act directly responds to these concerns. The text explicitly stipulates that the Fed may not issue or create a CBDC, directly or indirectly, through financial institutions or other intermediaries. Although the prohibition formally expires on December 31, 2030, it effectively establishes that the Federal Reserve cannot proceed with a retail CBDC absent explicit congressional authorization—ensuring that any future digital dollar would require affirmative legislative approval.

Codifying the Executive Branch Strategy

The Senate’s legislative action does not exist in isolation. It hardens a policy stance established early by the White House.

On January 23, 2025, President Donald Trump signed Executive Order 14178, “Strengthening American Leadership in Digital Financial Technology.” This sweeping directive marked a sharp departure from the prior administration’s exploration of a digital dollar. The Executive Order: (1) prohibited all federal agencies from undertaking any action to establish, issue, or promote a CBDC; (2) ordered the immediate termination of any ongoing digital currency creation initiatives within federal agencies (unless required by law); and, (3) promoted the growth of legitimate, private sector dollar-backed stablecoins to reinforce the dollar’s global role.

While an executive order can be easily revoked by a subsequent administration, the housing bill, when enacted, would codify these protections into federal statutory law.

The Federal Reserve’s Evolving Position

The Federal Reserve has historically taken a cautious, research-oriented approach to CBDCs. Its 2022 discussion paper highlighted both potential benefits and risks but stopped short of endorsing issuance.

That caution has hardened into opposition. During 2025 congressional testimony, then-Chair Jerome Powell stated unequivocally that the Fed would not develop a CBDC during his tenure, emphasizing that any such initiative would require clear congressional authorization. 

More recently, incoming Fed Chair Kevin Warsh has taken an even more definitive stance. In his 2026 confirmation process, Warsh described a U.S. CBDC as a “bad policy choice,” warning that it could pose systemic risks and undermine financial privacy. Rather than defending government-run infrastructure, Warsh’s Fed has signaled an approach that leans heavily into private sector innovation.

This alignment between the White House, Congress, and the Federal Reserve is notable; for the first time, all three institutional actors appear broadly convergent in opposing a U.S. CBDC—at least in the near term.

Global Divergence: China and the European Union

While the United States moves toward prohibition, much of the rest of the world is accelerating CBDC development. According to the Atlantic Council CBDC Tracker, more than 140 countries—representing over 98% of global GDP—are now exploring CBDCs in some form. That number was only 87 in 2022. There are 77 countries in the advanced phase of exploration, which includes development, pilot, or launch.

The People’s Bank of China remains a global frontrunner in the CBDC race among major economies. Beijing has aggressively scaled its digital yuan (e‑CNY), which has already processed substantial transaction volumes across retail and public-sector use cases. Through cross-border pilot programs and partnerships with foreign financial institutions, China is also exploring the international use of its CBDC. These initiatives are widely viewed as part of broader efforts to reduce reliance on traditional Western-dominated payment infrastructure and to promote the global role of the yuan.

The European Central Bank is moving more cautiously but steadily toward a digital euro. As of 2026, the project is in an advanced preparation phase, with a formal issuance decision anticipated.  The ECB frames the digital euro as a means of preserving “payment sovereignty” in an increasingly digital economy, particularly in light of the dominance of non-European payment platforms and the rise of private stablecoins.

Conclusion

The bill makes clear the U.S. opposition to a CBDC. At the same time, the U.S. ban is deliberately narrow in that it includes a crucial legal carve-out for private stablecoins, explicitly shielding any dollar-denominated currency that is “open, permissionless, and private.” The message is clear: in the United States, at least for the foreseeable future, the future of digital money will be shaped not by a government-issued digital dollar, but by a regulatory framework designed to facilitate private-sector innovation.

The post The Digital Dollar Freeze: Housing Bill Codifies the U.S. Anti-CBDC Stance appeared first on Blockchain.

The case, ABC Company, XYZ Company, and Noah Doe v. John Does 1–39,069 (Index No. 153119/2026), seeks a declaratory judgment awarding to a private claimant ownership of 39,069 inactive Bitcoin wallets. They collectively hold approximately 3.8 million Bitcoin, valued in the hundreds of billions of dollars.

The Plaintiffs’ Theory: “Finders Keepers” Meets the Blockchain

The case was originally filed in March 2026. Plaintiffs, led by a pseudonymous individual known as “Noah Doe,” assert that the targeted wallets constitute lost or abandoned property under New York Personal Property Law Article 7-B, a statute traditionally governing found items. Under that framework, a finder who reports lost property, attempts to locate the rightful owner, and receives no response within a statutory period, may ultimately claim title.

Here, Plaintiffs allege that they:

• Identified dormant wallets using a proprietary blockchain analysis algorithm;
• Reported the wallets to the New York Police Department;
• Provided notice to owners, including through on-chain “OP_RETURN” messages embedded in the Bitcoin blockchain; and
• Afforded a 90-day claim period, after which unresponsive wallets were deemed abandoned.

After this process, 39,069 wallets remained unclaimed and are now the subject of the action.

The lawsuit does not allege theft, fraud, or hacking. Instead, it seeks a judicial declaration of ownership—effectively asking the court to extend traditional abandonment doctrine into the realm of self-custodied digital assets. The Amended Complaint may be found here.

The Recent Twist in the Case

On May 29, 2026, a lawyer named Ian Cohen requested permission from the Court to submit an amicus curiae (friend of the court) brief in opposition to Plaintiffs’ claims, arguing that Plaintiffs’ theory fundamentally misapplies the lost-property statute to blockchain-based assets. Mr. Cohen states that he has no interest in the matter other than as “an advocate for the principled development of digital asset law.” The court entered an Order on June 5, 2026 staying further proceedings, including efforts to obtain default judgments, until July 14, 2026, at which time it will consider whether to accept the amicus brief.

The case raises numerous novel issues, including those in the proposed amicus brief.

1. Can Inactivity Constitute “Abandonment”?

Plaintiffs’ argument rests on the premise that prolonged inactivity supports an inference of abandonment. But traditional abandonment law typically requires intent to relinquish ownership, not mere nonuse. Dormant wallets may reflect lost private keys, deceased holders, or long-term “buy and hold” investment strategies. Recent events have underscored this point. Several wallets named in the lawsuit moved Bitcoin after years of dormancy, suggesting that at least some assets remain under active control.

In addition, notice from some private actor should not create a duty to speak when that actor has no relationship to the property.

2. Is a Blockchain Address “Property” That Can Be Found?

Article 7-B of the Personal Property Law was enacted when “property” meant tangible items, such as lost jewelry, cash, or other physical objects that can be delivered to authorities.

Applying that framework to Bitcoin raises conceptual difficulties. A wallet address is not a thing that can be physically secured; rather, control depends on cryptographic private keys, which Plaintiffs admit they do not have. In addition, Plaintiffs did not “find” anything as the word is commonly understood, but used an algorithm to scan the Bitcoin blockchain.

3. What Constitutes Adequate Notice in a Pseudonymous System?

Plaintiffs contend that they satisfied notice requirements through on-chain messages, public postings, and a defined claims process. However, the adequacy of such notice is far from clear. It is uncertain whether embedding a message in an OP_RETURN field satisfies due process standards for notifying unknown owners, especially as it relates to early Bitcoin addresses. There is also the issue of a global press release being in English, but many Bitcoin holders are foreign.

4. Can a Court Grant Relief it Cannot Enforce?

Even if Plaintiffs were to prevail, a practical obstacle remains: Bitcoin cannot be transferred without the corresponding private keys. As a result, any judgment would likely be symbolic rather than self-executing—at least absent involvement by regulated intermediaries.

The “Lost Bitcoin” litigation illustrates a broader dynamic confronting courts worldwide: how far can legacy legal doctrines be stretched to fit decentralized technologies? Here, Plaintiffs ask the court to treat blockchain data as discoverable property, inactivity as abandonment, and on-chain signaling as sufficient notice—all within a statutory framework developed long before digital assets existed.

Until Mr. Cohen’s intervention, these issues were on-course to be decided unopposed, and by a  judge whose biography does not seem to indicate any specific expereince with digital assets. It will be interesting to see what Justice King does now that there is a challenge to some of the basic tenets of Plaintiffs’ case.

The proposed amicus brief may be found here. For an in-depth analysis of the lawsuit, see:  Who Is Noah Doe? Inside an Audacious Lawsuit to Claim Satoshi’s Bitcoin | Galaxy

The post The “Lost Bitcoin” Litigation: Can Dormant Wallets (Such as Those Belonging to Satoshi) Be Claimed as Abandoned Property in New York? appeared first on Blockchain.

Enacted on July 18, 2025, the GENIUS Act creates a federal framework governing the issuance of payment stablecoins. At its core, the statute designates permitted payment stablecoin issuers (“PPSIs”) as financial institutions for purposes of the BSA and assigns primary prudential oversight to federal banking regulators, including the FDIC, Office of the Comptroller of the Currency (OCC), and the Federal Reserve. In doing so, the legislation clarifies the regulatory treatment of payment stablecoins and integrates them into the broader U.S. financial regulatory architecture.

The FDIC’s May 22, 2026 NPRM represents the financial-crime compliance pillar of this emerging regime. It follows earlier agency proposals addressing application procedures (December 2025) and prudential requirements such as reserve management and risk controls (April 2026). Taken together, these rulemakings reflect a coordinated effort to translate the GENIUS Act into a fully operational supervisory framework.

Under the NPRM, FDIC-supervised PPSIs—primarily subsidiaries of insured state nonmember banks and state savings associations authorized to issue stablecoins—would be required to implement robust, risk-based compliance programs. These programs would encompass core financial-crime controls, including AML and countering the financing of terrorism (CFT) measures, economic sanctions compliance administered by the Office of Foreign Assets Control (OFAC), and adherence to Treasury Department regulations enforced by the Financial Crimes Enforcement Network (FinCEN).

Importantly, the proposal does not create a bespoke or “light-touch” regime for stablecoin issuers. Instead, it brings them into alignment with the existing bank-grade BSA/AML compliance architecture. The NPRM would also formalize FDIC examination, oversight, and enforcement authority over PPSI compliance programs, creating a supervisory environment that closely resembles that applicable to traditional banking institutions. Routine examinations, heightened enforcement risk, and interagency coordination are therefore likely to become defining features of stablecoin regulation in the United States.

Although the NPRM is anchored in existing BSA requirements, it suggests that compliance programs will need to be calibrated to the characteristics of blockchain-based activity. In practice, this may require enhanced controls addressing features such as transaction speed and the relative anonymity of digital asset transfers, as well as customer due diligence tied to issuance and redemption activity and more continuous transaction monitoring.

For market participants, the direction of travel is clear. Stablecoin issuance within the United States is likely to require meaningful investment in compliance infrastructure, including transaction monitoring systems, sanctions screening, and, in practice, blockchain analytics capabilities. Entities that have historically operated outside the banking sector—or under less stringent regulatory regimes—may face substantial adjustments as they move into this framework.

The NPRM is open for public comment for 60 days following its publication in the Federal Register. That period will provide an important opportunity for industry participants, trade associations, and other stakeholders to shape the final contours of the rule.

Takeaway: The FDIC’s proposal would subject bank-affiliated stablecoin issuers to comprehensive BSA/AML and sanctions compliance obligations, firmly anchoring stablecoins within the U.S. financial regulatory perimeter.

The post FDIC Advances BSA/AML Rulemaking Under the GENIUS Act: A New Compliance Paradigm for Stablecoin Issuers appeared first on Blockchain.

The “Bitcoin Initiative,” a campaign to amend the Swiss Federal Constitution to require the SNB to hold Bitcoin (BTC) alongside its gold and foreign currency reserves, came to an end this month after failing to secure the 100,000 signatures needed to trigger a national referendum. Organizers ultimately gathered only about half that number, leaving the proposal to lapse without reaching the ballot.

Although the initiative never reached Swiss voters, its rise and fall offers a revealing window into the growing tension between traditional reserve management and the emerging role of digital assets.

The Goal: Amending Article 99

The core of the proposal was simple but consequential. Under Switzerland’s system of direct democracy, citizens may propose amendments to the Federal Constitution by gathering 100,000 valid signatures within an 18‑month period

The Bitcoin Initiative targeted Article 99, Paragraph 3, which governs the SNB’s reserve policy. The provision currently states: “The Swiss National Bank shall create sufficient currency reserves from its revenues; part of these reserves shall be held in gold.”

Campaigners proposed a minimalist but symbolically significant change — adding three words to the end of the sentence: “and in Bitcoin.” The amendment did not prescribe any minimum allocation. Instead, it would have required the SNB to recognize Bitcoin as an additional reserve asset, leaving the scale and implementation to the central bank’s discretion.

Why It Failed: The 50,000 Signature Gap

Despite Switzerland’s reputation as a global crypto hub, anchored by Zug’s “Crypto Valley,” the initiative struggled to build support beyond the core digital asset community. By the time organizers allowed the campaign to lapse in early May 2026, they had collected only about 50,000 signatures, roughly half of the threshold required to trigger a national referendum.

Several factors appear to have contributed to this shortfall.

Technical complexity was the first factor. Campaign founder Yves Bennaïm acknowledged that, from the outset, the effort was a “long shot.” Translating a proposal about central bank reserve composition into a message capable of mobilizing broad public support proved difficult, particularly within the constraints of a signature campaign.

Second, there was institutional resistance. The SNB maintained its longstanding opposition to holding cryptocurrencies in its reserves. SNB Chairman Martin Schlegel and other officials repeatedly emphasized that Bitcoin’s volatility and liquidity profile are incompatible with the central bank’s reserve management requirements and its mandate to preserve monetary stability.

A third factor was limited campaign infrastructure. As a largely grassroots effort, the initiative lacked the institutional backing and financial resources that typically underpin successful nationwide signature drives in Switzerland — an important practical constraint in a system that depends on sustained, large-scale voter mobilization.

The Pro‑Bitcoin Argument: Neutrality and Diversification

Supporters of the initiative framed Bitcoin as a strategic hedge within Switzerland’s reserve framework. Today, roughly three‑quarters of the SNB’s foreign currency reserves are concentrated in U.S. dollar‑ and euro‑denominated assets, a structure that reflects global financial realities but also exposes the balance sheet to fluctuations in a small number of major currencies.

Against that backdrop, campaigners argued that Bitcoin could serve as a diversifying asset. Because it operates on a decentralized network and is not issued by any sovereign, proponents described it as a “politically neutral” alternative (like Switzerland), one that could reduce dependence on the monetary policy decisions and geopolitical dynamics tied to the world’s dominant reserve currencies.

More broadly, supporters cast Bitcoin as a modern analogue to gold — a finite, non-sovereign asset that exists outside the control of any single government. In that framing, even a modest allocation could function as a hedge, less against day‑to‑day volatility than against longer-term risks to fiat currency regimes and the concentration of global reserves in a handful of jurisdictions.

The SNB’s Counterargument: Stability, Liquidity, and Institutional Mandate

If the proponents’ case rested on neutrality and diversification, the SNB’s response was grounded in the orthodoxy of the traditional criteria governing central bank reserve management. At the core of the SNB’s position is the straightforward proposition that reserve assets must be safe, liquid, and reliable stores of value. On each of these dimensions, the Bank concluded that Bitcoin fell short.

On the issue of volatility, Chairman Schlegel emphasized that Bitcoin’s price fluctuations are incompatible with the Bank’s mandate to preserve the real value of its reserves. Cryptocurrencies, he noted, exhibit “very, very high” volatility, an attribute that undermines their usefulness as a stabilizing component of a national balance sheet.

Just as critical is the question of liquidity. Central banks must be able to deploy reserves at scale, often on short notice, to intervene in foreign exchange markets or respond to financial stress. In the SNB’s view, crypto markets, despite their growth, do not yet offer the depth required to execute large transactions without significant price impact.

The SNB has also pointed to structural risks inherent in digital assets. Because Bitcoin is a software-based system, it carries potential vulnerabilities, such as technical flaws and security breaches, that are fundamentally different from those associated with traditional reserve assets such as sovereign bonds or gold.

Taken together, these objections reflect more than skepticism about a single asset class. They illustrate a deeper institutional view: central bank reserves are not investment portfolios designed to maximize return or hedge against tail risks. They are instruments of monetary policy, designed to function predictably in moments of stress. In that context, Bitcoin’s defining features—its volatility, independence, and market structure—were not seen as advantages, but, rather, as disqualifying characteristics.

Looking Ahead: A Failure or a First Step?

The Bitcoin Initiative will not appear on a Swiss ballot, at least not in its current form. But its failure at the signature stage has not ended the conversation. For its organizers, the campaign served a different purpose: placing the question of Bitcoin’s role in sovereign reserve management squarely into the public and institutional debate.

That debate is unlikely to dissipate. Across jurisdictions, policymakers and market participants continue to explore whether—and in what form—digital assets might play a role in national balance sheets. The United States government holds Bitcoin via seizures, though not part of its national reserve. El Salvador accumulated Bitcoin as part of its national reserve strategy. In November 2025, the Czech Republic purchased about $1 million in Bitcoin in a test portfolio, but not for its official national reserves. On the other side, it has been reported that European Central Bank President Christine Lagarde has stated that she is confident that Bitcoin will not enter the reserves of any of the central banks of the General Council of the ECB.

While no major central bank has embraced Bitcoin as a reserve asset, the underlying questions driving the Swiss initiative—currency concentration, geopolitical risk, and the search for non-sovereign stores of value—remain live issues. For now, the SNB’s position is clear. Its reserves will continue to be composed of gold and foreign currency assets governed by traditional principles of safety, liquidity, and stability.

The post The End of the Campaign to Amend the Swiss Federal Constitution to Require the Central Bank to Hold Bitcoin appeared first on Blockchain.

The Yield Question That Stalled a Market Structure Bill

The CLARITY Act is intended to do something the U.S. crypto industry has sought for years—establish a durable federal market structure that allocates regulatory authority among the SEC, CFTC, and other agencies, and replaces enforcement‑driven rulemaking with statutory categories. The House passed its version of the bill in 2025. In the Senate, however, progress stalled for months, with the largest obstacle being a narrow, but symbolically charged, question: can stablecoins pay yield?

Banks and banking regulators argued that yield‑bearing stablecoins functionally resemble interest‑bearing deposits without prudential oversight, creating incentives for deposit flight and undermining traditional funding models. Crypto firms countered that rewards tied to platform activity are not the same thing as bank interest, and that banning them outright would cripple legitimate products already widely used by consumers. This disagreement became the chief pressure point preventing the Senate Banking Committee from even scheduling a markup.

What the Compromise Actually Does

The final compromise draws a bright but carefully hedged line between passive interest and active utility rewards:

• No Passive Interest: Cryptocurrency firms are strictly prohibited from offering rewards or yields on stablecoin balances in a manner that is “economically or functionally equivalent to the payment of interest on an interest-bearing bank deposit.” This directly addresses the banking industry’s core anxiety that high-yield stablecoins would siphon deposits out of legacy institutions.
• Activity-Based Rewards Protected: Platforms can still offer incentives tied to “bona fide activities,” such as payments, transfers, trading, and other genuine platform usage. Importantly, token balances and duration of holding can still factor into reward calculations, provided the overall structure does not cross the “deposit equivalence” line.

For crypto operators, the era of simple “buy and hold” yields on stablecoins is effectively ending. To comply with the new rules, firms will have to pivot toward a “buy and use” model.

A Win, a Loss, or a Draw?

Reactions to the deal have been unusually aligned, if not uniformly enthusiastic. Major industry players, including Coinbase and Circle, quickly endorsed the language. They emphasized that it preserves activity-based incentives and allows U.S.-regulated platforms to reward real use of on-chain systems. Coinbase CEO Brian Armstrong summarized the industry’s relief succinctly on social media: “Mark it up.”

Banking interests, for their part, secured exactly what they were seeking most—statutory confirmation that stablecoins cannot become synthetic savings accounts.

However, some trade groups have sounded the alarm. The Crypto Council for Innovation (CCI) cautioned that the prohibition is significantly broader than framework language used in prior legislation, such as the GENIUS Act, and could chill innovation depending on how regulators define “equivalence” in practice. Even so, CCI endorsed the bill.

The compromise looks less like a win-loss binary and more like a reclassification exercise. Stablecoins are being anchored more firmly as payment and settlement instruments, not yield products. Whether that distinction holds over time will depend on how Treasury and the CFTC write the rules.

Why This Matters Beyond Stablecoins

The significance of the yield compromise extends beyond stablecoins themselves. First, it removes the largest procedural roadblock that had effectively frozen the CLARITY Act in the Senate since January. Following the release of the final compromise on May 1, the Senate Banking Committee is now positioned to schedule a formal markup as early as mid-May—a move that seemed entirely out of reach just weeks ago.

Second, the episode serves as a case study in how Congress plans to police the boundary between crypto and legacy finance. Rather than banning new asset classes outright, lawmakers are leaning heavily on “functional equivalence.” By asking whether a crypto product mimics a regulated financial instrument, Congress has established an analytical frame that will almost certainly reappear in future debates over staking, tokenization, and crypto lending.

Third, the compromise implicitly recognizes and entrenches a growing divide between centralized and decentralized finance. The CLARITY Act’s stablecoin yield restrictions apply to regulated intermediaries. On‑chain DeFi protocols, which do not involve U.S.‑licensed custodians or issuers, fall largely outside its scope. The result may be to channel more yield‑seeking behavior into less regulated venues—a policy tradeoff that Congress appears willing, at least for now, to accept.

What Comes Next

Even with the yield issue resolved, the CLARITY Act is not yet law. It must still clear a formal Senate Banking Committee markup, survive a full Senate floor vote requiring a 60‑vote threshold, and be reconciled with competing House legislation. Other unresolved issues—particularly around DeFi, ethics rules, and agency coordination—remain politically sensitive.

Still, the yield compromise marks a genuine inflection point. Polymarket odds of the bill passing in 2026 jumped into the 60% range immediately after the text dropped, reflecting renewed confidence that the bill is no longer trapped in procedural limbo.

For industry participants and observers alike, the lesson is less about yield itself and more about governance strategy. The Senate’s deal suggests that the path to U.S. crypto legislation will run not through sweeping endorsements of innovation, but through the careful delineation of boundaries—especially where crypto products begin to resemble traditional pillars of the financial system. Whether that trade ultimately delivers the true regulatory “clarity” its drafters promise remains the next major question.

The post The CLARITY Act’s Yield Compromise: What the Senate Actually Agreed To—and Why It Matters appeared first on Blockchain.

Notably, through OFAC’s proposed creation of a new 31 CFR Part 502, the Proposed Rule would for the first time impose a binding regulatory obligation—rather than mere guidance—requiring a specific category of US Persons (permitted payment stablecoin issuers (“PPSIs“)) to adopt and maintain an effective sanctions compliance program. While OFAC’s 2019 Framework for OFAC Compliance Commitments (“OFAC Framework“) “strongly encourages organizations to develop, implement and routinely update a Sanctions Compliance Program,” the OFAC Framework is guidance, not regulation. No existing part of OFAC’s regulations currently mandates that any other category of persons maintain a sanctions compliance program. Non-PPSIs can nonetheless gain insights about OFAC’s expectations for a sanctions compliance program from the agency’s detailed comments about the implementation of the OFAC Framework.

The Proposed Rule represents less of a change for PPSIs that have been complying with FinCEN regulations that apply to Money Services Businesses (“MSBs”), including the need to implement an AML program. FinCEN expects that most PPSIs that have been complying with those regulations should be able to adapt to the Proposed Rule.

The Proposed Rule represents a significant step in Treasury’s ongoing implementation of the GENIUS Act, which was enacted on July 18, 2025 and provides a comprehensive framework for the federal regulation of payment stablecoins. The Treasury press release, FinCEN press release, fact sheet, and notice of proposed rulemaking (“NPRM“) are linked. Comments on the Proposed Rule will be accepted until June 9, 2026.

Background: The GENIUS Act

The GENIUS Act requires that a PPSI “be treated as a financial institution for purposes of the Bank Secrecy Act (“BSA“), and as such, shall be subject to all Federal laws applicable to a financial institution located in the United States relating to economic sanctions, prevention of money laundering, customer identification, and due diligence.” The GENIUS Act directs the Secretary of the Treasury to issue regulations implementing this provision tailored to the size and complexity of the PPSI’s operations and business.

The GENIUS Act specifies that a PPSI’s obligations include, among other things, maintenance of an effective AML program, suspicious transaction reporting, technical capabilities to block or freeze impermissible transactions, an effective customer identification program, and an effective economic sanctions compliance program.

On September 19, 2025, Treasury issued an advance notice of proposed rulemaking concerning the GENIUS Act, and since then a number of federal agencies—including the FDIC, NCUA, and OCC—have proposed their own implementing regulations. The OCC’s NPRM noted that BSA, AML, and OFAC sanctions-related requirements would be addressed in a separate rulemaking in coordination with Treasury; this Proposed Rule is that rulemaking.

Proposed Anti-Money Laundering Obligations

AML/CFT Program Requirement

The Proposed Rule would require PPSIs to establish and maintain AML and countering the financing of terrorism (“CFT“) programs. The proposed AML/CFT program for PPSIs largely mirrors the AML/CFT program obligation FinCEN recently proposed for the 11 types of existing financial institutions. FinCEN expects that most PPSIs that have been complying with existing regulations applicable to MSBs should be able to adapt their current AML/CFT programs to meet the Proposed Rule’s requirements. Under the proposal, AML/CFT programs should be appropriately risk-based, with PPSIs directing more resources toward higher-risk customers and activities, rather than toward lower-risk customers and activities.

The Proposed Rule would require a PPSI’s internal policies, procedures, and controls to be reasonably designed to ensure compliance with the BSA and FinCEN regulations. Key elements include:

• Risk assessment of the PPSI’s money laundering, terrorism financing, and other illicit finance risks, incorporating the AML/CFT Priorities (which identify the most significant AML/CFT threats, including corruption, cybercrime, terrorist financing, fraud, and proliferation financing, among others) and updated as risks materially change;
  
• Ongoing customer due diligence, including developing customer risk profiles, monitoring for suspicious transactions, and maintaining and updating customer and beneficial ownership information on a risk basis;
  
• Independent testing of the AML/CFT program against objective criteria;
  
• Designation of an AML/CFT Officer located in the United States responsible for day-to-day program implementation and compliance; and
  
• An ongoing employee training program and a written AML/CFT program approved by the PPSI’s board of directors or equivalent governing body, or appropriate senior management.

Technical Capabilities and Lawful Orders

The Proposed Rule would require PPSIs to have the technical capabilities, policies, and procedures to block, freeze, and reject specific or impermissible transactions that violate Federal or State laws, rules, or regulations as provided in the GENIUS Act. It would also require PPSIs to have the technical capabilities to comply, and to in fact comply, with the terms of any lawful order.

Suspicious Activity Reports, Recordkeeping, and Information Sharing

Under the Proposed Rule, PPSIs would be required to file suspicious activity reports (“SARs“) for any suspicious transaction relevant to a possible violation of law or regulation. Notably, while the Proposed Rule’s technical capabilities and lawful order requirements would apply to both primary and secondary market activity (as discussed above), the SAR obligation would only apply to a PPSI’s primary market activity (i.e., the issuance and redemption of payment stablecoins) and would not extend to secondary market transactions (i.e., subsequent transfers of payment stablecoins between holders).

The Proposed Rule would also require PPSIs to comply with the Recordkeeping Rule (for funds transfers and transmittals of $3,000 or more) and the Travel Rule (requiring transmission of information to other financial institutions participating in a transfer or transmittal). PPSIs would additionally be subject to certain information sharing provisions, including mandatory record searches upon FinCEN request and the ability to participate in FinCEN’s voluntary information sharing program.

Proposed Sanctions Compliance Program Requirements

In addition, PPSIs would need to fulfill an obligation under the Proposed Rule to implement a sanctions compliance program, drawing on the same five-element structure set forth in the OFAC Framework (and also aligned in many ways with AML/CFT program requirements discussed above). PPSIs would be required to adopt a sanctions compliance program including five key elements:

1. Senior Management and Organizational Commitment: Senior management must review, approve, and actively support the sanctions compliance program, including by ensuring it applies to all payment stablecoin-related activity, is adequately resourced, is integrated into ongoing operations, and routinely provides risk updates to appropriate personnel.
   
2. Risk Assessment: PPSIs must conduct holistic risk assessments of their payment stablecoin-related activities — spanning products, customer segments, geographies, transaction channels, and counterparties — to inform the design and updating of the sanctions compliance program.
   
3. Internal Controls: PPSIs must maintain policies and procedures to identify, interdict, escalate, and report potential sanctions issues and maintain related records, functioning across both primary and secondary market activities.
   
4. Testing and Auditing: PPSIs must conduct independent testing and auditing of their sanctions compliance programs, separate from the team responsible for day-to-day compliance.
   
5. Training: PPSIs must maintain a risk-based sanctions compliance training program, with OFAC expecting sanctions-specific training periodically for all appropriate personnel, and at a minimum annually.

PPSIs implementing a sanctions compliance program will need to consider how to take into account the 10-year statute of limitations that applies under certain US sanctions programs authorized by the International Emergency Economic Powers Act and the Trading with the Enemy Act, which we wrote about here and here.

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The Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act” or “Act”) creates the first comprehensive federal licensing framework for “permitted payment stablecoin issuers,” while deliberately preserving the ability to alternatively operate under a State-level authorization. Specifically, Section 4(c) allows issuers with $10 billion or less in outstanding payment stablecoins to opt for State supervision as an alternative to federal authorization, provided the applicable State regulatory regime is substantially similar to the federal regime.

Whether an issuer may rely on a State‑level pathway depends not on issuer choice alone, but on whether the relevant State regime is ultimately found to satisfy the Act’s substantial similarity standard. Until now, there was little guidance on how that determination would be made. The Treasury NPRM fills that gap by translating the Act’s high‑level directive into an evaluative framework that will guide how State regulatory regimes are assessed for certification under the Act – and, in turn, when a permitted payment stablecoin issuer may remain under State supervision rather than transition to federal oversight.

The proposal also forms part of a coordinated series of GENIUS Act rulemakings across the federal banking agencies. While the Office of the Comptroller of the Currency’s (“OCC”) proposed rules address the substantive requirements applicable to certain federally supervised issuers, the Treasury NPRM focuses on the complimentary question of how existing and future State regulatory regimes will be measured against that same federal framework as it comes into force.

At a practical level, the Treasury NPRM seeks to answer two closely related questions that will shape the future of State‑regulated payment stablecoins in the United States:

1. what “substantially similar” means in practice, and
2. which State frameworks can realistically support a durable State‑level regulatory pathway under the GENIUS Act.

By articulating the principles that will guide those determinations, Treasury provides clearer direction for State regulators evaluating certification under the Act and for issuers assessing the viability of a State‑based regulatory strategy going forward.

What the Treasury NPRM Says About “Substantial Similarity”

At a high level, the Treasury NPRM adopts a principles‑based, outcome-focused approach to evaluating whether a State-level stablecoin regulatory regime is “substantially similar” to the federal framework under the GENIUS Act. Rather than requiring States to replicate federal rules line‑by‑line, the Treasury NPRM emphasizes substantive alignment and equivalent regulatory outcomes across the Act’s core requirements.

Defining the Federal Benchmark

A threshold aspect of that analysis is what Treasury considers the relevant “federal regulatory framework.” Treasury proposes that “substantial similarity” is measured not only against the GENIUS Act’s statutory text, but against the full federal regulatory framework implementing the Act, including:

• OCC regulations and interpretations issued under the GENIUS Act (reflecting the OCC’s role as the primary prudential regulator for most nonbank federal payment stablecoin issuers),
• Treasury rules addressing BSA/AML, sanctions, and lawful‑orders compliance, and
• Federal Reserve interpretations, regulations, and orders implementing the Act’s anti‑tying provisions.

Importantly, Treasury proposes to exclude informal guidance, such as FAQs or interpretive materials not published in the Federal Register, from the definition of the federal regulatory framework. This choice is designed to give States a clearer, more stable benchmark against which to design and evaluate their own regimes, while avoiding the need to continuously track evolving federal guidance.

The Treasury NPRM also explains why the federal benchmark is anchored largely to the OCC framework. In Treasury’s view, this approach reflects both the statutory structure of the Act and the reality that most State‑qualified issuers will ultimately transition to OCC supervision if they exceed the $10 billion issuance threshold. Grounding the substantial similarity analysis in the OCC’s published framework is therefore intended to promote continuity and easier administration.

Uniform vs. State‑Calibrated Requirements

To operationalize the substantial similarity standard, Treasury divides the Act’s core prudential requirements into two categories:

1. Uniform Requirements

Certain GENIUS Act requirements are treated as effectively uniform, meaning they must be implemented consistently with the federal framework in all substantive respects. These include, among other things:

• reserve backing requirements,
• prohibitions on rehypothecation,
• reserve reports and related disclosures,
• BSA/AML and sanctions compliance obligations,
• anti‑tying restrictions, and
• prohibitions on deceptive stablecoin names and misrepresentations.

Under the Treasury NPRM, States may not materially narrow, reinterpret, or selectively enforce these requirements. High‑level statutory alignment alone is not sufficient where a State framework diverges meaningfully from the substance of federal prudential expectations, and non‑enforceable guidance will not count toward substantial similarity.

2. State‑Calibrated Requirements

By contrast, the Act affords States discretion with respect to certain requirements, including capital, liquidity, reserve‑asset diversification, interest‑rate risk management, and operational and IT risk controls. Treasury refers to these as State‑calibrated requirements.

That discretion, however, is expressly bounded. To qualify as substantially similar, a State‑level regime must produce regulatory outcomes that are at least as stringent and protective as those under the federal framework. Treasury indicates that the OCC’s implementing rules will function as the primary reference point for evaluating those outcomes, even where States adopt different structures or metrics.

Authority, Supervision and the Regulatory Lifecycle

Treasury also makes clear that substantial similarity is not limited to prudential standards alone. A qualifying State regime should also address the full regulatory lifecycle contemplated by the Act, including:

• licensing and application review,
• ongoing supervision and examination,
• enforcement powers and remedial actions,
• transition to federal oversight once the $10 billion threshold is exceeded, and
• custody and insolvency protections, including priority treatment for payment stablecoin holders.

Here, Treasury draws an important distinction. Unlike the GENIUS Act’s core prudential requirements, which must meet or exceed federal standards, these other elements are evaluated under a substantial similarity standard focused on comparable authority and protections, not identical procedures or outcomes. States are not required to mirror federal forms, timelines, or supervisory processes, provided that the relevant regulators have sufficient legal authority and tools to achieve similar regulatory objectives.

Practical Takeaways

Although the Treasury NPRM is framed in terms of State‑level regimes, its practical relevance is squarely at the issuer level. For payment stablecoin issuers evaluating the viability of a State‑based regulatory strategy, the proposal highlights several points that merit close attention:

• Statutory alignment alone will not be sufficient. State regimes must demonstrate enforceable alignment with federal prudential outcomes, particularly for uniform requirements.
• OCC rules matter – even for State issuers. Because Treasury anchors substantial similarity primarily to OCC‑issued regulations published in the Federal Register, changes between the OCC’s proposed and final rules may directly affect how State regimes are assessed.
• State discretion exists, but it is bounded. States retain flexibility in areas such as capital and liquidity, but only where alternative approaches produce outcomes that are at least as protective as the federal framework.
• Form matters less than authority. Treasury is explicit that substantial similarity turns on substantive authority and enforceability.

Taken together, the Treasury NPRM reinforces that the State pathway under the GENIUS Act remains viable, but not open‑ended. For issuers, the durability of a State‑based approach will depend less on legacy classifications and more on how closely a given State regime can align, in substance and effect, with the federal framework as it is finalized.

Comments on the Treasury NPRM will be due 60 days after publication in the Federal Register, and issuers with a stake in State‑level regulation may wish to engage in that process.

The post How Similar Is “Substantially Similar”? Treasury’s Principles for Evaluating State Stablecoin Regimes Under the GENIUS Act appeared first on Blockchain.