A joint proposed rule from FinCEN and OFAC would require permitted stablecoin issuers to run full AML programmes, screen every transaction against the SDN list, and face strict-liability penalties for failing to freeze sanctioned funds. Comments are due by 9 June.
FinCEN and the Office of Foreign Assets Control published a joint notice of proposed rulemaking on 8 April that would, for the first time, impose bank-grade anti-money-laundering and sanctions compliance obligations on stablecoin issuers operating under the GENIUS Act — the federal framework Congress enacted in July 2025 to regulate payment stablecoins and the companies that issue them.
The proposed rule is dense — 87 pages in the Federal Register — but its core message is simple: if you issue a permitted payment stablecoin, you are a financial institution for the purposes of the Bank Secrecy Act, and you will be regulated as one. That means written AML and counter-terrorism-financing programmes, a designated compliance officer, independent testing, ongoing training and — the part that will concentrate minds — a binding obligation to screen every transaction against OFAC's Specially Designated Nationals list and take action when sanctioned persons hold or trade your tokens.
The sanctions component is where the rule's teeth are sharpest. Permitted payment stablecoin issuers would be required to maintain technical capabilities to block, freeze and reject transactions involving sanctioned persons or jurisdictions. They would need the ability to seize, freeze, burn or prevent the transfer of stablecoins when necessary to comply with a lawful order. And the enforcement standard is strict liability — meaning the Treasury doesn't need to prove the issuer knew about the sanctioned transaction, only that it happened. Criminal and civil penalties both apply.
For an industry that has spent years arguing stablecoins are just software and their issuers are not banks, the proposed rule is a blunt rebuttal. FinCEN's position is that the moment you issue a token pegged to the dollar and redeemable on demand, you have created a payment instrument, and the entity that created it bears responsibility for how it circulates — including on secondary markets where the issuer is not a direct party to the transaction.
That secondary-market obligation is the most novel and contentious element. The rule distinguishes between primary market activities — issuing, redeeming, burning and converting stablecoins — and secondary market activities, which encompass every transfer that doesn't directly involve the issuer. Under the proposal, issuers would be responsible for monitoring and screening secondary-market transactions to the extent they have the technical capability to do so. Given that most major stablecoins run on public blockchains where every transaction is visible, 'technical capability' is likely to be interpreted broadly.
Circle and Tether — which together account for more than 90 per cent of stablecoin market capitalisation — will feel the rule's weight differently. Circle has positioned itself as the compliance-first issuer, obtaining licences and building infrastructure that anticipates exactly this kind of regulation. Tether, headquartered in the British Virgin Islands with reserves held across multiple jurisdictions, faces a more complex path. The GENIUS Act already requires non-US issuers to meet comparable standards if their stablecoins circulate within the United States, and the FinCEN rule adds operational specificity to that requirement.
The CLARITY Act, which is still working its way through the Senate, addresses market structure — defining which tokens are securities and which are commodities, delineating SEC and CFTC oversight. The GENIUS Act addresses stablecoins specifically. Together, they form the two pillars of what would be the first comprehensive federal framework for digital assets in the US. The FinCEN rule is the first major piece of implementation guidance under the GENIUS Act, and it sets the tone for everything that follows.
Morgan Stanley's recent launch of a money-market fund designed specifically for stablecoin issuers begins to make more sense in this context. If issuers are going to be regulated as financial institutions, they'll need institutional-grade reserve management — and Wall Street is positioning to provide it before the rules are even finalised.
Comments on the proposed rule are due by 9 June 2026. FinCEN and OFAC have proposed a 12-month implementation period after the final rule is published, giving issuers roughly until mid-2027 to build or upgrade their compliance infrastructure. For the large issuers, that's tight but manageable. For the dozens of smaller issuers that have launched or announced stablecoins in the past year — many of them operating on the assumption that lighter regulation was coming — the clock just started, and it's running faster than they expected.
