FinCEN and OFAC Propose Rules to Implement the GENIUS Act on Stablecoin AML and Sanctions Compliance

Author: Zhonglun Law Firm Team – Fang Jianwei, Chen Yian, Chen Lin, Chen Guangpeng

Keywords: GENIUS Act, crypto assets, stablecoin regulation

On April 8, 2026, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), in conjunction with the Office of Foreign Assets Control (OFAC), jointly released the Proposed Rule on Implementing Anti-Money Laundering Obligations and Sanctions Compliance Program Requirements Under the GENIUS Act (the “Proposed Rule”), marking a substantive shift in the U.S. regulatory framework for payment stablecoins—from legislative authorization to strict enforcement. This article focuses on key provisions, clarifies the new compliance standards and requirements imposed on Permitted Payment Stablecoin Issuers (PPSIs) and related markets, analyzes the legislative intent behind these measures and their impact on the digital finance industry, and provides professional recommendations for Chinese enterprises on compliance pathways for cross-border investment and business operations.

On July 18, 2025, U.S. President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”), marking the systematic integration of compliant stablecoins into the U.S. financial system. [[1]] The Act defines the specific characteristics of payment stablecoins and balances dual objectives of consumer protection and financial stability. However, the text of the Act leaves gaps in specific implementation standards for anti-money laundering and countering the financing of terrorism (AML/CFT), as well as in the granularity of sanctions compliance screening; it has also been criticized for failing to adequately mitigate systemic financial risks and insufficiently safeguard consumer rights. To address these implementation shortcomings, FinCEN and OFAC have developed detailed implementing rules for the GENIUS Act regarding the prevention of money laundering and financial crime, as well as PPSI compliance, and released them for public comment in early April 2026. Meanwhile, federal regulatory agencies including the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) are advancing complementary regulations to gradually build a unified regulatory framework for stablecoins.

Compared to the GENIUS Act enacted in 2025, this Proposed Rule primarily features seven key aspects worth noting.

(1) Strengthen the AML/CFT governance structure and emphasize executive accountability

Previously, the GENIUS Act established that dollar-backed stablecoins must maintain a 1:1 full reserve and be redeemable within two business days. Additionally, under transparency requirements, PPSIs must publicly release asset custody reports at least monthly, undergo regular professional third-party audits and investigations, and proactively report outstanding stablecoin volumes and reserve asset composition. [[2]] Clearly, the Act aims to restrict high-leverage risk behaviors by PPSIs, providing institutional safeguards to purify the stablecoin trading market and ensure the stability of their 1:1 peg to fiat currency.

The proposed rule builds upon previous content by placing greater emphasis on strengthening the internal AML/CFT regulatory framework within PPSIs. First, the细则 requires PPSIs to develop AML/CFT programs and to provide copies of their anti-money laundering programs to FinCEN or its designated personnel upon request. [[3]] The rule also requires that AML/CFT programs be approved by the PPSI’s board of directors or appropriate senior management.

Second, the proposed rule establishes specific standards for PPSIs to develop effective AML/CFT implementation plans. PPSIs must establish and maintain existing plans and make certain updates, including a risk-based set of internal policies, procedures, and controls reasonably designed to ensure compliance with the BSA and FinCEN regulations. [[4]] These changes will ensure that PPSIs’ AML/CFT plans focus on providing law enforcement and national security agencies with the most useful information regarding the most serious threats.

(2) Implement risk-based customer due diligence and ongoing monitoring

The previously passed GENIUS Act established broad regulations regarding the compliance capabilities of PPSIs, primarily encompassing the following three aspects: (1) Foreign PPSIs must comply with U.S. anti-money laundering (AML), “Know Your Customer” (KYC), and sanctions regulations, and must possess the ability to monitor, intercept, or freeze transactions involving specific illegal financial activities to detect violations promptly during individual transactions; (2) PPSIs are explicitly brought under the AML regulatory scope of the Bank Secrecy Act, thereby enhancing transparency in financial transactions, effectively curbing illegal fundraising activities conducted via stablecoins, and contributing to the fight against financial crime; (3) PPSIs are explicitly required to adopt a sanctions compliance program that meets the standards set forth in the GENIUS Act, thereby establishing a unified regulatory framework for stablecoin circulation. [[5]]

Compared to the GENIUS Act, the Proposed Rule adds specific risk assessment and due diligence obligations for PPSIs. First, PPSIs are required to identify, assess, and document risks related to money laundering, terrorist financing, and other illicit financial activities through their risk assessment process, which includes: (1) evaluating the risks of the PPSI’s business activities; (2) reviewing and, where appropriate, incorporating AML/CFT priorities; and (3) immediately updating the assessment once the PPSI knows or has reason to know of any changes that would materially alter the PPSI’s risk profile. [[6]] Additionally, the rule introduces an ongoing due diligence obligation for PPSIs. PPSIs must conduct ongoing customer due diligence to understand the nature and purpose of customer relationships, establish customer risk profiles, and perform continuous monitoring. [[7]]

Second, the proposed rule requires PPSIs to develop a risk-based AML/CFT program. According to the details of this provision, the AML/CFT program should be appropriately risk-based, guiding PPSIs to allocate more resources to high-risk clients and activities. [[8]] This proposal reflects FinCEN’s view that financial institutions are best positioned to identify and assess their risks related to money laundering, terrorist financing, and illicit finance, and therefore, corresponding compliance obligations and expectations should focus more on effectiveness.

Finally, the proposed rule requires PPSIs to establish due diligence programs (including enhanced due diligence programs when necessary) to enable them to detect and report any known or suspected money laundering activities involving correspondents and private banking accounts. [[9]] It also requires PPSIs to comply with special measures authorized by FinCEN to mitigate money laundering risks posed by foreign financial institutions.

(3) Strengthen sanctions compliance programs and information sharing mechanisms

The Proposed Rule outlines the Financial Crimes Enforcement Network’s potential enforcement and oversight policies regarding AML/CFT. Specifically, FinCEN generally will not take enforcement action if the corresponding PPSI has established an AML/CFT program under the Proposed Rule, unless the PPSI has made material or systemic failures in maintaining that program. [[10]] At the same time, the Proposed Rule will ensure FinCEN plays a central role in AML/CFT oversight and establishes a notification and consultation framework between the primary federal payment stablecoin regulators and financial regulators to enhance interagency coordination.

(4) Clarify the retention of transaction records and the applicability of the Travel Rule

The proposed rule would require PPSIs to create and maintain certain records. The proposal would require PPSIs to comply with recordkeeping rules mandating the collection and retention of records for fund transfers and transmissions of $3,000 or more. The proposal also requires PPSIs to comply with the Travel Rule, which mandates that PPSIs transmit specific information about fund transfers to other financial institutions involved in the transfer. [[11]] The proposed rule also requires PPSIs to submit records of all reportable or blocked violations to their primary regulator or state regulator, in accordance with the GENIUS Act, to demonstrate that the PPSI has implemented an effective sanctions compliance program. [[12]]

(5) Establish an information sharing mechanism

The Proposed Rule applies certain information-sharing provisions to PPSIs. Upon receiving a request from FinCEN, a PPSI must search its records to determine whether it has opened or maintained any accounts for, or engaged in any transactions with, the individual or entity identified in the request. [[13]]

(6) Strengthen risk and compliance training for PPSI employees

The Proposed Rule requires PPSIs to establish and maintain a risk-based sanctions compliance training program that shall be conducted as follows: (1) at least annually, with a frequency appropriate to the specific PPSI’s risk assessment and risk profile; (2) provided to all relevant personnel and stakeholders; (3) appropriately tailored to each participant’s role and responsibilities; (4) updated as needed to reflect risk assessment findings and identified deficiencies within the sanctions compliance program, including results from testing and audits; and (5) designed to ensure that all relevant personnel and stakeholders can easily access relevant compliance resources and materials. [[14]] This provision helps enhance employees’ ability to identify risks during daily business operations and minimizes the cost of regulating financial crime.

(7) Appoint a dedicated anti-money laundering compliance officer

The Proposed Rule requires PPSIs to designate a compliance officer responsible for developing and implementing an anti-money laundering and counter-terrorist financing program, as well as coordinating and overseeing daily compliance. This officer must be located in the United States and must not have been convicted of a felony involving insider trading, corruption, cybercrime, money laundering, terrorist financing, or financial fraud. [[15]] It can be understood that the U.S. federal program enhances the professionalism and intensity of daily oversight by appointing dedicated anti-money laundering compliance officers, enabling timely awareness of financial institutions’ real-time AML controls and vulnerabilities.

The proposal of the rule reflects lawmakers' increased focus on ensuring transaction security and the stable operation of the crypto market, with the primary aim of bringing crypto market trading under a more robust legal framework to preserve America's leading position in the global financial market.

(1) Eliminate regulatory arbitrage and establish a unified federal enforcement standard

Due to the independent legal traditions and jurisdictions of individual U.S. states, financial regulatory policies and requirements vary across states. The proposed rule emphasizes specific risk assessment and due diligence obligations for PPSIs, helping to dismantle "implicit barriers" and policy biases between states, and preventing "disparate regulation" in enforcement caused by the absence of clear AML standards for PPSIs. Furthermore, compared to the 2025 version of the GENIUS Act, the proposed rule places greater emphasis on PPSIs establishing standardized AML/CFT programs and reporting procedures, effectively addressing prior shortcomings in anti-money laundering cooperation standards and closing gaps that allowed fraud and illicit fund transfers through anonymous transactions. Additionally, clear, uniform, and transparent regulatory requirements will enhance market predictability for PPSIs, encourage innovation, and attract foreign investment into the U.S. crypto market. [[16]]

(2) Break down information silos and build a joint anti-money laundering network between public and private sectors

Currently, money laundering in global financial markets is increasingly characterized by diverse, professional, and concealed activities, while the chains of fund transfers are becoming more international and technologically advanced. Enhancing relevant compliance information sharing aims to break down data silos among PPSIs, enabling dynamic identification of potential money laundering and terrorist financing risks through cooperation between PPSIs and law enforcement agencies, comprehensively detecting complex money laundering schemes involving stablecoins, and improving the efficiency of identifying illicit funds. From a post-event regulatory perspective, this not only strengthens risk management and accelerates case investigations, thereby meeting compliance requirements and helping to establish a joint prevention mechanism against cross-border and cross-market financial crimes, but also encourages entities involved in stablecoins to promptly conduct self-inspections and continuously refine their risk lists and key monitoring targets. [[17]]

(3) Move risk control upstream by integrating sanctions compliance into business processes

Unlike traditional luxury goods used to hide wealth, stablecoins are easy to store and transfer, and difficult to trace. Generally, if AML/CFT activities are not promptly monitored at the initial stages of issuance and purchase, it significantly increases the difficulty of post-facto tracking and regulation. According to a Chainalysis survey, over the past decade, criminals such as smugglers and drug traffickers have used stablecoins to transfer millions of dollars across borders, posing a substantial threat to the stability of the U.S. financial system and increasing the investigative burden on U.S. law enforcement agencies. [[18]] Strengthening PPSI frameworks by building risk assessment and investigation mechanisms, enhancing staff capabilities to identify risks, and mandating the appointment of dedicated AML compliance officers enables each PPSI to implement proportionate regulatory measures based on actual risk profiles, effectively reducing enforcement costs and minimizing unnecessary market interference. Additionally, allowing FinCEN to directly assume regulatory oversight when PPSIs fail in their duties helps quantify specific regulatory standards while respecting PPSI autonomy, standardizing enforcement practices, and achieving truly effective suppression of financial crime.

(1) Small and medium-sized enterprises face survival challenges

The issuance of the proposed rules marks the stablecoin industry's formal entry into the era of "compliance," subjecting it to more transparent and comprehensive regulation. The requirements under the proposed rules—such as maintaining a dedicated compliance officer in the U.S., conducting annual independent audits, and building real-time monitoring systems—will raise annual compliance costs for PPSIs to the millions of dollars range. Small- and medium-sized, offshore PPSIs lacking economies of scale and technological reserves will be forced out of the U.S. market due to their inability to afford compliance infrastructure, further consolidating the market around established players with regulatory licenses (such as USDC and PYUSD).

(2) International participants exhibit a "polarized" trend

Due to the more complex regulatory framework and procedures for stablecoins, developing countries, which started later in enacting legislation related to anti-money laundering and other compliance measures or still have gaps at the implementation level, typically lack mature risk awareness and generally do not have professional compliance teams or systems. As a result, they will reassess the risk-reward profile of entering the U.S. stablecoin market. In contrast, developed countries have generally established multi-layered legal systems comprising criminal law, dedicated anti-money laundering laws, administrative regulations, and industry-specific regulatory rules; corresponding large financial institutions possess more systematic anti-money laundering and compliance processes, making them better adapted to U.S. regulatory requirements. These large financial institutions and companies will find it easier to participate in the U.S. stablecoin market and leverage stablecoins to enable fast, low-cost global cross-border transfers.

(3) Higher market entry barriers: Advantages of bank-affiliated entities become more pronounced

Since 2025, the GENIUS Act has established the eligibility requirements for becoming a PPSI, primarily including: (1) subsidiaries of insured depository institutions, leveraging the risk management and compliance systems of traditional financial institutions; (2) federally approved PPSIs authorized by the OCC; and (3) state-approved PPSIs. [[19]] The GENIUS Act permits non-bank entities or organizations to co-issue stablecoins alongside bank subsidiaries. Compared to traditional banks, non-bank entities face higher entry barriers. Moreover, the Proposed Rule places greater emphasis on safeguarding the security of the U.S. financial market. In contrast, banks such as JPMorgan and Telcoin have already established comprehensive internal compliance frameworks for the stablecoin market and developed relatively mature issuance and operational mechanisms. [[20]] Considering the combined factors of compliance costs and revenue stability, non-bank entities may increasingly rely on large banks for stablecoin issuance in the future.

(4) Cooperation in the international stablecoin market has become closer

As the proposed rules enhance anti-money laundering and compliance regulations, strengthened regulatory oversight will steadily promote the circulation of stablecoins in international markets. Currently, the European Union’s Markets in Crypto-Assets Regulation (MiCA) and Hong Kong’s Stablecoin Ordinance both provide detailed provisions on the eligibility criteria and anti-money laundering mechanisms for PPSIs. These developments create essential conditions for establishing a unified international stablecoin regulatory framework. In the future, the international stablecoin market will primarily focus on balancing the prevention of global financial risks—such as money laundering, capital flight, and terrorist financing—with improving settlement efficiency, while strengthening cross-border enforcement and combating transnational financial crime. As the stablecoin market becomes increasingly standardized and transparent, and as stablecoins gain wider adoption across more countries and regions, they will gradually become the primary base currency for transactions among major economies, eliminating the need for prior currency conversion when buying or selling other digital assets (such as Bitcoin) or conducting cross-border payments. This trend will also compel financial institutions in developing countries to transform their investment structures and internal risk controls to keep pace with the rapid development of the stablecoin market.

For Chinese enterprises engaged in cross-border fintech or with USD settlement needs, under the current landscape of regulatory differences between China and the U.S., we propose the following prudent compliance strategies:

(1) Strictly adhere to domestic legal boundaries and completely avoid any involvement in issuance activities.

The notice "On Further Preventing and Handling Risks Related to Virtual Currencies and Other Matters" explicitly prohibits domestic entities from issuing virtual currencies, including stablecoins, overseas without prior lawful approval from relevant authorities. Until the approval and filing procedures for such overseas issuances are clearly defined, domestic enterprises must still avoid, as much as possible, directly or indirectly participating in plans related to the issuance, investment, or trading of U.S. stablecoins, and must not circumvent regulation through methods such as establishing physical entities in the U.S., investing in licensed issuers, or using on-chain settlement.

Meanwhile, industry participants can systematically review the long-arm jurisdiction, sanctions screening, and anti-money laundering requirements of the U.S. GENIUS Act and the Proposed Rule, assess whether existing cross-border businesses (settlement, supply chain, technical services) are at risk of being passively entangled in stablecoin regulation or OFAC sanctions, and conduct a thorough,穿透式排查 of cross-border fund channels, partners, and technical systems to eliminate any financial or business dealings with unlicensed PPSIs or virtual asset platforms.

(2) Build compliance capabilities and align with international standards

The proposed rules establish leading frameworks for anti-money laundering, customer due diligence, ongoing monitoring, sanctions compliance, and internal control officers. Companies can use these rules as reference material for cross-border financial compliance research to enhance their traditional cross-border financial, trade settlement, and foreign exchange management internal compliance systems, and build a risk-based internal control framework covering KYC/CDD, transaction monitoring, employee training, and compliance accountability, aligning with global financial compliance trends. At the same time, maintain proactive communication with domestic regulatory authorities to stay informed about regulatory developments and enforcement activities, thereby improving domestic compliance standards.

(3) Shift toward compliance-focused channels and concentrate on legitimate cross-border financial services

Chinese enterprises with cross-border settlement needs are still advised to prioritize official, compliant channels such as licensed financial institutions, SWIFT, and cross-border RMB digital payment systems, and to limit cooperation strictly to large licensed traditional financial institutions and compliant listed companies, ensuring full compliance with cross-border financial regulations and foreign exchange management rules.

(4) Participate in global governance and promote alignment with compliance standards

Under the reshaping of global regulation, the industry can leverage trade associations and research institutions to actively participate in research on global monetary regulatory rules, anti-money laundering standards, and cross-border regulatory coordination, providing references for improving China’s digital financial regulation. At the same time, collaborate to align the digital RMB with international compliance payment standards, enhance cross-border payment efficiency through official digital currency channels, and avoid non-compliant use cases.

[1] See: How the GENIUS Act Is Reshaping Stablecoin Regulation and Emerging Financial Disputes, https://www.jamsadr.com/insight/2025/how-the-genius-act-is-reshaping-stablecoin-regulation.

[2]GENIUS Act, Sec. 4(a)(1)(A).

[3] Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions

Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf

[4] See: Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf

[5] See: GENIUS Act, Sec. 4(a)(5)(A).

[6] Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions

Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf.

[7]Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf.

[8] Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf.

[9]Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf.

[10] Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions

Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf.

[11] Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf.

[12] Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf.

[13]Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf.

[14] Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf.

[15] Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions

Compliance Program Requirements, https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf.

[16] See Giovanna M. Cinelli: Interpretation of the New Rules on US Foreign Investment—Little Short-term Impact, But More Changes Remain to be Seen.

[17]FinCEN Director Emphasizes Importance of Information Sharing Among Financial Institutions, https://www.fincen.gov/news/news-releases.

[18] See: The Chainalysis Money Laundering and Cryptocurrency Report, https://go.chainalysis.com/cryptocurrency-money-laundering-report.html.

[19] GENIUS Act, Section 2(23).

[20] See Will Canny: Wall Street Bank JPMorgan Chase Says the Stablecoin Market May Grow to $600 Billion by 2028, https://www.coindesk.com/zh/markets/2025/12/19.