The U.S. Department of the Treasury wants to hear from you. The commenting period has opened for the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act). Specifically, the GENIUS Act requires public comment to identify innovative or novel methods, techniques or strategies that regulated financial institutions use, or have the potential to use, to detect illicit activity, such as money laundering involving digital assets.
The GENIUS Act
The GENIUS Act is a federal law regulating payment stablecoins in the U.S. Stablecoins are a class of cryptocurrency designed to maintain a stable value by pegging their worth to traditional assets, like the U.S. dollar. This helps reduce the volatility associated with other kinds of cryptocurrencies, like Bitcoin.
The value of stablecoins is linked to an underlying asset, meaning that for every stablecoin in circulation, there is an equivalent amount of the asset held in reserve to back it. These coins are stored and exchanged on decentralized networks (blockchains), essentially ledgers that record transactions. Unlike traditional payment systems like credit cards, decentralized networks don’t require intermediaries. This allows consumers to transfer funds quickly without extra intermediary or exchange fees. It also means there might not be a reporting trail.
The GENIUS Act establishes a federal regulatory framework that clarifies rules for operation, issuance, and reserve requirements. That includes a requirement to maintain a 1:1 backing in U.S. dollars or other highly liquid, low-risk assets like short-term Treasury bonds, as well as regular audits and disclosures. The law also permits payment stablecoin issuers to be treated as financial institutions for purposes of the Bank Secrecy Act—that includes rules related to economic sanctions, money laundering, customer identification, and due diligence.
On the tax side, the IRS considers stablecoins, like other cryptocurrencies, a capital asset. That means that capital gains rules apply to any gains or losses. The GENIUS Act didn’t change that classification. It’s notable that the 1:1 backing requirement may reduce or eliminate capital gains when stablecoins are redeemed—if purchased and redeemed at the same price, there may be little to no taxable gain or loss.
The bill had bipartisan support in the House and Senate and was signed into law by President Trump on July 18, 2025.
GENIUS Act Comment Specifications
Treasury is looking for feedback on innovative methods, techniques, or strategies that financial institutions could use to detect illicit activity involving digital assets.
Additionally, the GENIUS Act identifies four technologies for specific comments on: application program interfaces (APIs), artificial intelligence (AI), digital identity verification, and the use of blockchain monitoring.
Treasury will evaluate and consider several aspects of these technologies, including improvements in how effectively financial institutions can detect illicit activity involving digital assets, the costs to regulated financial institutions, the amount and sensitivity of information collected or reviewed, and the privacy risks associated with that information. Treasury will also consider operational challenges, efficiency considerations, cybersecurity risks, and the effectiveness of the methods, techniques, or strategies used to combat illicit finance.
Application Program Interfaces (APIs) Allow different software applications to communicate and interact with each other. APIs can be used to share data automatically and facilitate access to transaction information. Once deployed, they can also be used to help enforce strict access controls, monitor transactions and activities, and strengthen the security and integrity of financial institutions providing digital asset services.
Artificial Intelligence (AI) means, for purposes of the GENIUS Act, a “machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations, or decisions influencing real or virtual environments.” When it comes to financial institutions, AI can help analyze significant amounts of data and identify illicit finance patterns, risks, trends, and typologies.
Digital identity verification, also known as identity proofing, is the process of confirming and verifying that a person is who they claim to be. This may involve using government-issued identity documents or biometrics. Digital identity verification tools can also be used by regulated digital asset intermediaries to assist with onboarding or by decentralized finance (DeFi) services to verify a credential before processing a transaction.
Blockchain monitoring involves observing, tracking, and analyzing public blockchain data. The U.S. government, like many financial institutions offering digital asset services, uses public blockchain data and analytics to trace and attribute illicit activities in digital assets. Financial institutions also utilize this data to assess high-risk counterparties and activities, analyze transactions across multiple blockchains, monitor transaction activities, and identify patterns suggesting potential illegal transactions.
Why Is Treasury Asking About the GENIUS Act?
Regulations are official interpretations of the law. Since they are so important, federal law generally allows for public comment on proposed regulations. Agencies consider those comments before publishing any final rule.
How To Leave A Comment
You can submit comments electronically via the Federal eRulemaking Portal. Click on the blue Comment button to leave a comment.
Remember that comments are public. Do not include any personally identifiable information (such as name, address, or other contact information) or confidential business information that you do not want publicly disclosed. Comments will not be deleted, modified, or redacted. (You can, however, submit comments anonymously.)
Comments must be received on or before October 17, 2025. Eighty-four comments had been submitted as of the date of this article.
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