In its 26-page comment, the Blockchain Association urged the U.S. Treasury Department to clarify the definition of DASP and the rules for foreign stablecoin issuers.

The crypto asset industry is seeking to shape the final details of the U.S. stablecoin regulatory framework. On Monday, the Blockchain Association submitted a 26-page comment on the U.S. Treasury Department’s proposed rules implementing Section 3 of the GENIUS Act. This provision defines which entities are permitted to issue, offer, and sell payment stablecoins in the United States.

The GENIUS Act was signed into law last year and is expected to take effect in January 2027. According to the federal rulemaking portal, the public comment period on the draft closed on Monday, with 123 comments submitted in total. In its comment letter, the association supports the Treasury Department’s core goal of ensuring that payment stablecoins are safe and reliable, issued by supervised businesses, and backed by sufficient reserves. However, the association argues that the legal boundaries need to be defined more clearly so the final rules reflect Congress’s intent.

The first recommendation concerns the definition of a digital asset service provider (DASP), which determines which businesses fall within the scope of the rules. The association argues that Congress crafted this definition for businesses providing services to customers and excluded core infrastructure components such as self-custody wallet software and validator nodes. Therefore, businesses that trade only with their own assets should not be subject to regulation.

The association is also concerned about how the draft addresses knowingly participating in the unlawful issuance of stablecoins, which could lead to criminal penalties. In the association’s view, legal liability should arise only when a party has actual knowledge of the violation and provides substantial assistance or coordination to the issuer. Ordinary transactions on the secondary market should not be considered participation in unlawful issuance.

Due diligence burden for foreign stablecoins

The third set of recommendations focuses on stablecoins issued by foreign entities. The association argues that the Treasury Department should not require DASPs to conduct unlimited due diligence on foreign issuers, since many service providers have no direct relationship with them. Instead, DASPs should be allowed to rely on lists of prohibited entities published by regulators to meet their due diligence obligations.

The comment letter also recommends replacing the “reasonably should know” standard, used to determine whether a counterparty is located in the United States, with a standard based on actual knowledge and information gathered in the ordinary course of business. The association argues that on permissionless blockchains, participants often interact only with a wallet address and have no other information. This makes identity and location verification requirements difficult to meet in practice.

These recommendations reflect the familiar tension between regulators’ goal of controlling risk and the decentralized nature of blockchain infrastructure. How the U.S. Treasury Department balances these two considerations in its final rules will directly affect the scope of operations for DeFi businesses and the ability of foreign stablecoins to circulate in the United States once the law takes effect.