As the United States works on detailed implementation rules for stablecoin regulation, user protection and individuals’ authority to hold assets in personal wallets have emerged as key issues. The industry has accepted a 100 percent reserve requirement for stablecoin issuers, but argued that regulatory changes must not lead to users’ funds being frozen or non-custodial wallet services facing excessive regulation.

According to blockchain outlet U.Today on Oct. 20 local time, the National Cryptocurrency Association (NCA) set out that position in comments submitted to the U.S. Treasury on rulemaking related to Section 3 of the GENIUS bill. The submission was signed by NCA President and Ripple chief legal officer Stuart Alderoty (스튜어트 알데로티).

While acknowledging the legal framework, including reserve requirements for stablecoin issuers, the NCA stressed that specific safeguards are needed so retail users are not harmed during implementation. The group said the broad direction of the regime is set by law, but the Treasury should design detailed operating rules that directly affect access to assets and support for transactions.

The first task it raised was to ensure users’ access to funds is not abruptly cut off even if an issuer’s legal status changes. The NCA argued that users’ funds should not be automatically frozen even if an issuer misses the deadline set as July 18, 2028, or loses its licence.

To that end, it proposed a safe-harbor system that allows users, for a certain period, to redeem, sell or convert stablecoins they hold. It said users should be given time to wind down positions during regulatory transitions, and related businesses such as exchanges should be able to provide necessary technical support without taking on excessive legal risk of being seen as supporting illegal transactions.

It also cited procedures for returning stolen or wrongly transferred stablecoins as a key issue. The NCA asked for clear grounds in the rules so that reissuing payment stablecoins can be carried out lawfully when there is a court order. It said an exception provision for necessary actions under lawful orders should include such reissuance procedures.

On freezing procedures, it proposed ensuring consistency with standards of the Financial Crimes Enforcement Network (FinCEN) under the Treasury, and requiring issuers to promptly notify users affected by asset freezes. It said rules to prevent money laundering and respond to illegal transactions should remain, but procedures should be specified so lawful asset returns are not unnecessarily blocked.

It also called for clarifying the scope of regulation for personal wallets and software developers. The NCA said non-custodial wallets or simple interface providers should not be regarded as intermediaries or sellers if they do not hold or control users’ private keys.

It warned that including services that only display users’ balances or provide transaction interfaces, without controlling actual assets, could excessively expand technology providers’ liability. It therefore argued that direct peer-to-peer transfers, transactions between personally owned accounts, and transactions occurring within personal wallets should be clearly excluded from regulatory restrictions.

The core issue, it said, is ensuring users’ self-custody right to hold and transfer stablecoins directly. Even if oversight is applied to transactions and custody through regulated entities, it said the option for individuals to manage their own wallets and assets directly should not be restricted.

The submission shows the crypto industry is focusing on reducing user harm and legal uncertainty that could arise during implementation rather than rejecting stablecoin regulation itself. While accepting the 100 percent reserve requirement, the NCA presented three tasks: protecting users when an issuer’s regulatory status changes, returning stolen assets, and defining the regulatory scope for non-custodial services.

Attention is now on the Treasury’s decisions as it drafts detailed implementation rules. Depending on how the scope of safe-harbor provisions, asset reissuance procedures, and regulatory standards for non-custodial wallets and software providers are set, operating practices could change for stablecoin issuers, exchanges and wallet services. In particular, finding a balance between users’ self-custody rights and controls on illicit funds is cited as a key variable for the future regulatory framework.