#BlockchainAssociationBacksGENIUSAct

#WCTCS9 The Blockchain Association backs the GENIUS Act, but wants four dials turned: a plain-English reading of its Treasury letter

The headline says the Blockchain Association backs the GENIUS Act, and that is true. The more useful reading is what it asked Treasury to change. I broke the letter into four dials, so each point makes sense on its own.

The facts first

The Blockchain Association filed a 26-page comment letter on October 19, 2026, urging Treasury to sharpen its GENIUS Act stablecoin rules before the January 18, 2027 effective date. The comment period closed on October 19, drawing 123 total submissions. By my count, the effective date is about 90 days from today. The rule would implement Section 3 of the law, which sets the ground rules for payment stablecoins, and Treasury's proposal was published around August 18, 2026.

The tone matters. The Association supports Treasury's core goals of safe, reserve-backed stablecoins issued by regulated entities. The letter is about the details, not about opposing the law.

Dial one: who counts as a service provider

This is the biggest question. The association recommends clarifying the scope of digital asset service providers to exclude self-custody software, validators and businesses that only trade their own assets. It also says corporate treasuries holding stablecoins and merchants accepting them should stay outside that category. The reason is practical: a broad definition could place obligations on infrastructure that never offers or sells stablecoins to the public.

Dial two: who can be held liable

The letter challenges the standard for criminal exposure. Under the proposed rules, routine market-making activities for newly issued stablecoins could be classified as knowing participation in illegal issuance. The association recommends basing liability on actual knowledge and substantial assistance coordinated with the issuer. It adds that firms may lack access to the issuer representations the proposal would require. For traders, this matters because market-makers supply the liquidity that keeps stablecoin pairs tight.

Dial three: which coins are in scope

The issue is foreign-issued stablecoins. The association says the proposal requires open-ended due diligence for foreign issuers, while many exchanges have no business dealings with them. Its alternative is to let service providers check an issuer's approved registration and confirm that no effective trading prohibition, rescission or revocation applies. As of mid-October, no foreign issuer comparisons had been issued under the framework, so the process is still unclear.

The group also asks for clarity on when issuance happens. It supports tying issuance to an issuer's first transfer of a stablecoin and asks Treasury to confirm that later trades between independent holders do not create a new issuance. That distinction is what keeps normal secondary trading outside the issuance rules.

Dial four: where the user is

The association is challenging Treasury's proposed standard for determining whether a stablecoin recipient is located inside the United States. It says additional identification and geolocation requirements would be difficult to implement in some settings. Location tests are tricky for decentralized protocols, where there is no front end to check.

The smaller asks

The letter also recommends eliminating the open-ended functional equivalent test for currency value, reassessing cost estimates, and aligning the effective date with other GENIUS Act rules. It wants the open-ended monetary equivalence test replaced with a fixed list. Coordination matters because other agencies are moving too: the Federal Reserve has also unveiled two proposals for stablecoin issuers covering reserves, capital and custody requirements.

Not everyone agrees

The Association is one voice. The National Cryptocurrency Association submitted its own comments to Treasury on October 19, raising separate concerns, and the law has drawn criticism from consumer advocates over fraud protections. Reading the debate as industry versus regulators misses the range of views.

Why traders should care

Stablecoins are the base currency of crypto trading, so rule details affect liquidity, listing decisions and access. Liquidity has already been tightening: stablecoin supply fell by roughly $900 million recently, and outstanding Aave loans dropped 4.3%. Clear, workable rules could support confidence, while overly broad ones could push some activity offshore or into narrower venues. Which outcome happens depends on Treasury's final text, which has not been issued.

What to watch next

First, whether Treasury narrows the service-provider definition. Second, whether the liability standard moves to actual knowledge. Third, how foreign stablecoins are handled, which affects which tokens exchanges can list for US users. Fourth, whether the effective date stays at January 18 or shifts to align with other rules.

I would treat the letter as a preview of the fine print, not as a final answer. I would follow the final rule, check the list of permitted foreign issuers when it appears, and keep stablecoin exposure diversified across reputable, reserve-backed issuers. @Gate_Square