Notabene has submitted a detailed response to the US Treasury’s recent advance notice of proposed rulemaking (ANPRM) on GENIUS Act implementation—guidance that will shape how stablecoin issuers meet illicit finance requirements in the United States. Alongside our October 17 response to Treasury’s request for comment on innovative methods to detect illicit activity involving digital assets, our recommendations on GENIUS ACT implementation center on one main goal: shifting stablecoin compliance from after-the-fact detection to pre-transaction prevention.

By opening this rulemaking to public comment, Treasury is giving the industry a rare chance to surface operational challenges, propose technical solutions, and shape how compliance obligations become law. The decisions made in the coming months will directly influence how issuers, banks, and digital asset service providers design programs and manage risk.

In our response, we call for authorization-before-settlement, clarified Travel Rule expectations, open and interoperable standards, alignment with global frameworks, and outcome-based supervision. Drawing on operational data from our network—over $1.5 trillion in transactions across 2,000+ institutions in 100+ jurisdictions—we argue for controls that stop illicit payments before they reach the blockchain.

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What the GENIUS Act Means for US Stablecoin Regulation

The GENIUS Act, signed into law on July 18, 2025, established the first federal framework for payment stablecoins. It sets reserve, disclosure, and supervisory requirements designed to align stablecoin issuance with banking law principles like capital adequacy and consumer protection.

Most importantly for compliance teams, the GENIUS Act designates stablecoin issuers as financial institutions under the Bank Secrecy Act (BSA), bringing them under the same AML/CFT obligations as banks and other covered entities.

Since enactment in July, Treasury has been working to translate the statute into enforceable regulations. This process opened with two major consultations: a request for comment on innovative methods to detect illicit activity involving digital assets (required by the GENIUS Act) with a comment deadline of October 17, and an ANPRM on GENIUS Act implementation released September 18 with a comment deadline of November 4.

Two Consultations, One Goal: Preventing Illicit Finance

Treasury's ANPRM on GENIUS Act implementation sought public comment across six major categories: 

• Stablecoin issuers and digital asset service providers (issuance, treatment and requirements for payment stablecoins)
• Illicit finance
• Foreign payment stablecoin issuers
• Taxation
• Insurance
• Economic data

This consultation moved the conversation from law on paper to rulemaking and implementation, giving theindustry an opportunity to highlight practical challenges and propose technical solutions before final regulations are written. The most important sections for compliance leaders and market participants centered on illicit finance and Travel Rule compliance, where Treasury explicitly sought input on how stablecoin issuers and their partners should design AML/CFT frameworks.

The separate request for comment on innovative methods to detect illicit activity asked specifically about tools that regulated financial institutions use or could use to detect illicit activity involving digital assets. Treasury highlighted APIs, artificial intelligence, digital identity verification, and blockchain monitoring as areas of particular interest. The GENIUS Act requires Treasury to use public comments to inform research on the effectiveness, costs, privacy and cybersecurity risks, and other considerations related to these tools.

Together, these consultations signal Treasury's focus on operational readiness and AML/CFT safeguards as stablecoin regulation moves from statute to practice.

Illicit Finance and Travel Rule: Treasury's Compliance Expectations for Stablecoins

The ANPRM reiterates that stablecoin issuers will be treated as financial institutions under the BSA, making them subject to the full range of AML/CFT obligations including customer identification, due diligence, Travel Rule, and reporting requirements.

By opening the door to public comment, Treasury is providing the industry with an opportunity to highlight practical challenges, propose technical solutions, and influence how compliance frameworks will be written into law. For issuers, banks, and digital asset service providers, this means that the decisions made over the coming months will directly affect how they design compliance programs, structure partnerships, and approach risk management. In other words, the ANPRM is where law begins to meet practice.

Treasury's ANPRM invited comments on whether distributed ledger design creates barriers to meeting AML/CFT obligations. The request for comment on innovative methods asked directly about the role of APIs, AI-driven monitoring, blockchain analytics, and digital identity solutions in enabling compliance at scale.

These consultations signal that both stablecoin issuers and banks are converging under a shared set of expectations for mitigating illicit finance risk.

What We Told Treasury

Our responses to both consultations focused on a fundamental compliance challenge: crypto's "settle first, ask questions later" architecture. Traditional payments authorize before settling. Blockchain transactions invert this. Once a private key holder initiates a transaction, it executes without the recipient's consent, leaving minimal opportunity for preventive controls.

In our ANPRM response, we recommended five core measures for stablecoin regulation:

1. Mandate authorization before settlement. Require Travel Rule data exchange, sanctions screening, and beneficiary verification before a permitted payment stablecoin issuer reveals a settlement address or executes a transfer. This restores standard payment discipline and creates a window to block illicit payments before they happen.

2. Clarify Travel Rule obligations for stablecoin issuers. Issuers should collect, verify, and transmit originator and beneficiary data pre-transaction. They should verify beneficiary information before execution and collect minimally necessary counterparty information to enable sanctions screening.

3. Require open, interoperable standards. Issuers should use open messaging and authorization standards like IVMS-101 for data format and TAP for pre-transaction authorization. This prevents proprietary fragmentation and enables cross-border interoperability.

4. Coordinate with global precedents. Align US requirements with FATF Recommendation 16 and frameworks in jurisdictions like Hong Kong, Singapore, and the EU so US-regulated stablecoins can interoperate globally.

5. Measure what matters. Evaluate issuers on pre-transaction authorization rates, time-to-respond, Travel Rule responsiveness, and freeze actions taken, not just SAR counts.

How Innovative Tools Enable Compliance at Scale

In our response on innovative methods to detect illicit activity, we demonstrated how APIs, the Travel Rule, and pre-transaction authorization protocols work together to prevent illicit finance rather than merely detecting it after the fact.

APIs serve as the critical infrastructure for real-time compliance data exchange—connecting systems, counterparties, and authorization processes. They allow institutions to perform crucial checks in milliseconds, such as querying sanctions databases via API keys and verifying counterparty information to coordinate rapid authorization decisions. This speed is essential given blockchain’s near-instant settlement finality, and is particularly important for sanctions enforcement, where timing determines whether illicit transactions can be intercepted.

When implemented securely through APIs and pre-transaction authorization, the Travel Rule enables the transmission of compliance information at scale using standardized formats such as IVMS-101.

Most importantly, APIs enable holistic, pre-transaction risk assessment. Our system integrates connections to multiple risk intelligence sources—including sanctions screening providers and blockchain analytics platforms—into a configurable policy engine. This allows institutions to embed their own risk frameworks into automated decisioning. The result is an automated, pre-settlement risk determination that reflects each institution’s compliance posture while ensuring illicit finance risks are identified and mitigated before blockchain settlement occurs.

The Travel Rule as Prevention Control

The Travel Rule, formally codified in FinCEN's regulation 31 CFR § 1010.410(f), requires financial institutions to obtain, hold, and transmit required originator and beneficiary information for transactions of $3,000 or more. When implemented pre-transaction, the Travel Rule becomes a prevention control rather than an after-the-fact record-keeping rule.

Through the Transaction Authorization Protocol (TAP), originator and beneficiary institutions exchange data and settlement instructions before a transaction is broadcast. Both sides screen for sanctions and other AML/CFT risks. This prevents inadvertent transfers to designated parties and gives institutions a defensible basis to halt or refuse settlement in real time.

FATF guidance makes clear that the Travel Rule's core purpose extends beyond information transmission. Institutions must use this information to "take freezing actions and prohibit transactions with designated persons and entities." When correctly implemented through pre-transaction authorization, institutions gain the ability to screen both originators and beneficiaries against OFAC's SDN List before any funds move, detect indirect exposure to sanctioned parties through the payment chain, block transactions in real time before irreversible settlement, and maintain compliance even when customers attempt to send funds to sanctioned counterparties.

Beyond Illicit Finance: Foreign Issuers, Taxation, and Economic Data

The ANPRM solicits input on several additional fronts. One is the oversight of foreign stablecoin issuers, a category that raises questions about cross-border supervision and market access. Another is the treatment of taxation and insurance, which could affect both issuers' reporting requirements and consumer protections. Treasury is also asking how to design economic data collection frameworks that can capture the systemic and macroeconomic impacts of stablecoins.

These areas show that regulators are thinking beyond compliance mechanics to the wider implications of stablecoins for financial stability, market integrity, and consumer confidence.

What This Means for Stablecoin Issuers, Banks, and Compliance Teams

For the US market, these consultations create stronger incentives for onshore issuance under a compliant framework. For banks, they clarify partnership opportunities with issuers but also raise diligence requirements as both sides come under converging AML/CFT obligations.

For compliance teams, the message is clear: Travel Rule readiness and robust AML infrastructure are now table stakes.

Our platform enables secure interoperability between issuers, banks, and intermediaries by supporting counterparty identification, identity verification, and compliant transaction data-sharing. These are the capabilities Treasury is emphasizing as essential for stablecoin issuers to meet regulatory expectations. With proper implementation, stablecoin systems can prevent illicit activity before settlement rather than detecting it afterward, provide transparency through immutable audit trails while preserving legitimate privacy, and enable real-time compliance at global scale.

Read our full response to Treasury here.

Sources

• Treasury ANPRM Press Release
• Unpublished Federal Register PDF
• Treasury RFC (Aug 18, 2025)