The U.S. Treasury has issued a draft regulation that would impose strengthened due diligence obligations on domestic cryptocurrency exchanges and digital asset service providers that handle stablecoins issued overseas. If a company cannot prove the basis for concluding the issuer will cooperate with U.S. law enforcement, handling of the stablecoin in the United States could be restricted.

On Aug. 30, blockchain media outlet CryptoSlate reported that the draft was prepared as a subordinate regulation under the U.S. stablecoin law known as the GENIUS Act.

The key point is that platforms must reasonably check an issuer's ability to cooperate with law enforcement to continue offering payment stablecoins issued overseas to U.S. customers. The Treasury told platforms to verify whether the issuer has the technical ability and willingness to freeze or seize tokens under lawful U.S. orders and whether a reciprocal cooperation framework is in place. It also stipulated that if a platform knew or could have known that an issuer's assurance was false, it would not recognize that assurance as a due diligence basis.

The Treasury said platforms should first confirm whether an issuer is included on a publicly disclosed list of those prohibited from secondary trading under the GENIUS Act. It added that this step alone is not sufficient and required platforms to review issuer-related information they can obtain.

As a result, businesses that list, sell, custody or otherwise provide stablecoins to U.S. customers are expected to effectively decide whether market access is permitted. The draft did not present a list of eligible tokens and did not decide whether handling of specific stablecoins, including USDT, would be maintained. This means handling in the United States is not automatically allowed solely because a stablecoin is issued overseas.

The implementation timeline is also split into 2 stages. The Treasury said it expects the GENIUS Act's general regulations to take effect from Jan. 18, 2027. It left open the possibility that the final implementing rule could trigger an earlier date. More restrictive regulations start from July 18, 2028.

From that point, covered businesses must ensure the token is issued by an approved U.S. issuer or by an overseas issuer that meets the requirements of Section 18 of the GENIUS Act. An overseas issuer must be under a supervisory regime the Treasury recognizes as equivalent, must register with the Office of the Comptroller of the Currency, and, if there is no reciprocity agreement, must hold sufficient reserves at a U.S. financial institution to secure liquidity for U.S. customers. The jurisdiction must also not be subject to comprehensive U.S. sanctions or designated as a major money laundering concern.

Separately, the draft did not choose an approach that would completely ban foreign stablecoins. It provided exceptions for transactions involving direct peer-to-peer transfers without intermediaries, certain transfers between a person's U.S. account and overseas account under the same parent company structure, and transactions through software and hardware wallets that individuals hold directly.

It has not yet been finalized how far exchanges must check to be sufficient. The Treasury is seeking views on whether the final rule should require an issuer's written statements or periodic renewal obligations, mandate recordkeeping, and include smart contract reviews or checks of seizure, freezing and burning functions. For now, these are issues under review rather than fixed obligations.

In the market, the type of issuer and compliance documentation are expected to matter more for the time being than whether specific foreign stablecoins are permitted. The deadline to submit comments on the proposal published in the Federal Register is Oct. 19, 2026. Until the Treasury finalizes its standards and regulators make issuer-by-issuer determinations, the possibility of distribution in the United States is expected to hinge on categories and due diligence results rather than an approval list.