The US Treasury has proposed sweeping new AML rules that reclassify stablecoin issuers as "financial institutions". From mandatory suspicious activity reporting to "freeze and seize" capabilities on the secondary market, corporate treasurers must now navigate a new era of regulatory oversight. We examine the practical implications for treasury departments and the steps needed to audit your digital asset partners.
The US Treasury Department, through a joint effort by FinCEN and OFAC, has officially proposed a sweeping new rule to bring stablecoin issuers under the strict umbrella of federal anti-money laundering (AML) and sanctions regulations. This move, announced in April 2026, represents a significant regulatory shift for the digital asset sector following the passage of the GENIUS Act in 2025.
For corporate treasurers utilising or considering stablecoins for liquidity management and cross-border payments, this regulatory maturing signals both increased operational security and a new layer of compliance complexity.
Under the proposal, stablecoin providers—formally termed Permitted Payment Stablecoin Issuers (PPSIs)—are being legally defined as financial institutions. This reclassification forces issuers to abandon informal monitoring in favour of bank-like compliance structures. Key requirements include:
Standalone AML Programmes: Issuers must establish full AML and Counter-Terrorist Financing (CFT) programmes tailored to their size and complexity.
Suspicious Activity Reporting: Providers must file SARs for transactions at or above the $5,000 threshold, mirroring current banking standards.
Technical Compliance: Issuers must prove they have the technical capability to block, freeze or reject transactions upon lawful order.
Designated Oversight: Mandatory appointment of compliance officers and regular independent testing.
A significant aspect of the proposal is the Treasury’s focus on the secondary market. FinCEN and OFAC intend to hold issuers accountable for activity occurring on decentralised networks, including transfers via smart contracts that do not involve the issuer directly.
Recent industry actions illustrate the practical impact of these requirements:
Mass Wallet Freezing: By the end of 2025, major issuers including Tether and Circle had jointly frozen approximately 5,700 wallets, involving assets worth roughly $2.5 billion. Three-quarters of these assets were USDT, reflecting a proactive move to comply with law enforcement requests involving fraud and sanctions evasion.
Illicit Oil Sales Intervention: The Treasury has highlighted cases where stablecoin issuers were required to intervene when Iranian actors facilitated millions of dollars in digital assets for illicit oil sales. This demonstrates the expectation for issuers to monitor and disrupt state-sponsored sanctions evasion even after the tokens have left the primary issuance point.
Fraud Victim Response: New York State prosecutors recently criticised certain issuers for being “slow to act” in response to hacks. Under the new rules, “limited cooperation” will no longer be an option; issuers will be legally mandated to implement “freeze and seize” capabilities for tokens linked to “pig butchering” scams and other large-scale fraud networks.
The US move aligns with broader international trends, including developments in the UK. The Financial Conduct Authority (FCA) is advancing a similar framework for 2026, including 1:1 reserve backing and token-freezing requirements. This transatlantic alignment is designed to support interoperability while ensuring that foreign issuers can only access the US market if their home regime meets these stringent equivalence tests.
As these regulations move from proposal to implementation, treasury departments must evolve their internal controls. Beyond simple monitoring, teams should take the following practical steps:
Conduct Provider Due Diligence: Review your current stablecoin issuers to ensure they are already adopting bank-grade AML protocols and have a clear roadmap for federal compliance. Ask for their specific “technical capability” documentation regarding transaction blocking.
Update Investment Policies: Revise corporate investment policies to specify that only regulated stablecoins (PPSIs) meeting the new Treasury standards are permitted for liquidity buffers.
Audit Smart Contract Permissions: If your team interacts directly with DeFi protocols for yield, verify how the issuer’s “freeze” functions interact with the protocol’s liquidity. A sudden freeze on a large pool of tokens could trap your company’s liquidity even if your specific wallet is not flagged.
Review Cross-Border Workflows: Assess how these rules affect the speed of international payments. Increased screening and potential “false positive” flags may introduce latency into previously near-instant workflows.
Engage with Banking Partners: Consult with your existing financial institutions to see if they will provide custodial or gateway services for these newly regulated assets. Many banks are now integrating stablecoin support under the GENIUS Act framework, which may simplify your reporting burden.
Enhance Data Governance: Ensure your internal data frameworks can capture and store the necessary transaction metadata—such as transaction hashes and wallet addresses—required for potential audit requests under the new reporting standards