Blockchain Association Urges Treasury to Clarify GENIUS Act DeFi Rules
The Blockchain Association submitted formal comments to the US Treasury requesting clearer definitions in the proposed GENIUS Act Section 3 rules, specifically around DeFi software liability, foreign stablecoins, and what constitutes unlawful participation. The dispute signals a shift from congressional debate to implementation details as regulators draft final guidance.
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The Association's Core Complaints
The Blockchain Association argued in comments filed with the Treasury that the proposed GENIUS Act rules risk over-capturing unrelated software and market participants. The group identified three main areas of concern: how the rules define a digital asset service provider, what standard applies to liability for knowing participation in unlawful stablecoin issuance, and how compliance requirements apply to foreign-issued stablecoins.
The association contends that a regulatory framework designed for payment issuers should not inadvertently sweep in infrastructure providers. It wants the Treasury to distinguish between customer-facing financial businesses and tools such as self-custody software and validators that do not offer the same services to end users.
Liability and Participation Standards
On the liability question, the Blockchain Association disputes how the rules might interpret ordinary secondary-market activity. The group argues that enforcement should require genuine knowledge and meaningful assistance, not treat routine trading or liquidity provision as evidence of involvement in unlawful issuance.
The association also flagged foreign-issued stablecoins as a compliance challenge. Rather than imposing blanket restrictions, it argues that requirements should rely on accessible regulatory information so market participants can conduct meaningful due diligence.
Regulatory Shift to Implementation
The comments reflect a broader shift in the stablecoin debate from congressional lobbying to the granular work of writing rules. With Section 3 of the GENIUS Act now in the Treasury's hands for implementation, the outcome will hinge on how narrowly or broadly regulators define key terms and where they draw liability lines.
Why It Matters
For Traders
Clarity on foreign stablecoin compliance and secondary-market liability rules could narrow trading restrictions or widen them; the Treasury's response will materially affect market structure.
For Investors
If the Treasury adopts the association's narrower liability standard, it reduces tail risk for DeFi protocol operators and infrastructure providers holding US assets or users.
For Builders
The Treasury's final definition of digital asset service provider will determine whether self-custody wallets, validators, and liquidity providers face GENIUS Act compliance obligations.
This article is for information only and is not financial advice. Read the full disclaimer.
