The U.S. Treasury Department on Wednesday proposed new anti-money-laundering and sanctions-compliance rules for permitted payment stablecoin issuers, marking a major step in implementing the 2025 GENIUS Act and expanding federal oversight of the sector.

The joint proposal, issued by Treasury’s Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), would treat permitted payment stablecoin issuers, or PPSIs, as financial institutions for purposes of the Bank Secrecy Act. The notice of proposed rule-making (NPRM) is pending publication in the Federal Register and will be subject to industry commentary. 

Under the proposal, issuers would be required to establish and maintain risk-based anti-money-laundering and counterterrorist-financing programs, report suspicious activity, and maintain the technical capabilities, policies, and procedures needed to block, freeze, and reject transactions that violate federal or state law. PPSIs would also have to be able to comply with lawful orders and maintain effective sanctions-compliance programs. 

Treasury’s fact sheet says the AML/CFT program requirements would include internal controls, risk assessment processes, ongoing customer due diligence, independent testing, a designated AML/CFT officer based in the United States, employee training, and written program approval by a board or equivalent governing body or senior management. 

PPSIs would separately be required to retain certain records, comply with the Recordkeeping Rule for transfers of $3,000 or more, and follow the Travel Rule for transmitting information to other financial institutions participating in a transfer. 

The sanctions portion of the proposal would require five core elements: senior-management commitment, sanctions risk assessments, internal controls, testing and auditing, and training. Treasury said those controls would need to apply to all stablecoin-related payment activity and would cover both primary- and secondary-market activity where required, including the ability to identify, block, or reject transactions that may violate U.S. sanctions. 

FinCEN said it was not proposing a blanket suspicious-activity-reporting obligation for secondary-market activity. In the notice, the agency said it had preliminarily concluded that the burden of requiring such reporting could outweigh the likely benefits, given the limited information issuers may have about many secondary-market transfers, though it is seeking comment on that approach. 

Comments will be due 60 days after publication in the Federal Register. FinCEN and OFAC said they are proposing an effective date 12 months after issuance of a final rule to give issuers time to review and implement the requirements. Treasury also said the GENIUS Act’s customer-identification-program requirement is expected to be addressed in a separate rule-making. 

Wednesday’s NPRM follows the publication of a separate FinCEN proposal issued on Tuesday that would overhaul AML/CTF requirements for banks and other financial institutions by shifting compliance programs to focus on effectiveness against high-risk threats as opposed to meeting technical standards. FinCEN said the proposal, which would give the bureau a greater role in U.S. regulatory enforcement and focus bank penalties on large-scale violations, is meant to let firms devote more attention and resources to higher-risk activity while reducing unnecessary burden on lower-risk areas. 

Read more from the U.S. Treasury Department here