Treasury to Propose Stablecoin Reserve Rule Requiring 100 Percent Treasuries and Real-Time Sanctions Screening

Treasury Draft Rule Targets Major Stablecoin Issuers

The U.S. Department of the Treasury plans to propose a rule this week that would require dollar-backed stablecoin issuers with more than $10 billion in circulation to hold reserves entirely in U.S. Treasury securities and overnight reverse repurchase agreements, according to two Treasury officials familiar with the matter. The proposal, set for publication in the Federal Register on February 3, would also mandate that issuers freeze wallets linked to sanctioned entities within 24 hours of an Office of Foreign Assets Control update, the officials said.

The rule marks the most significant federal move to regulate stablecoins since congressional talks on the GENIUS Act stalled in late 2025. The officials said Treasury Secretary Scott Bessent has signed off on the draft and intends to announce it at a Treasury press conference on Tuesday morning. The proposal would take effect on March 1, 2026, with full compliance required by June 30, according to a copy of the draft reviewed by The Alamo Post.

Under the draft, issuers below the $10 billion threshold would receive a temporary exemption until June 30, but they must submit monthly reserve attestations to the Financial Crimes Enforcement Network starting March 15. The rule would apply to any stablecoin marketed as backed by the U.S. dollar and available to U.S. persons, regardless of where the issuer is incorporated, the officials said. Violators would face civil penalties of up to $50,000 per day and potential referral to the Justice Department for criminal prosecution.

Reserve and Reporting Requirements Detailed

The reserve provisions would prohibit holdings in commercial paper, corporate bonds, or money-market instruments other than those issued or fully guaranteed by the federal government, according to a lobbyist briefed on the draft. Issuers would need to provide weekly public disclosures of reserve composition and daily reports to the Federal Reserve Bank of New York on redemption capacity. The lobbyist said the draft language was shared with counsel for Circle, Tether, and Paxos on January 28 during a closed-door meeting at the Treasury Department.

The sanctions-screening component would require issuers to integrate real-time monitoring of OFAC's Specially Designated Nationals list into their smart-contract and custody systems, a bank compliance officer familiar with the rulemaking said. Any wallet address added to the list would need to be blocked before the next U.S. business day. The compliance officer, whose bank processes stablecoin redemptions for institutional clients, said the requirement would force issuers to build automated kill-switch mechanisms into token contracts.

Circle Internet Financial, issuer of USDC, held roughly $32 billion in circulation as of January 30, according to its most recent attestation. Tether, issuer of USDT, reported approximately $137 billion in circulation, though U.S. persons are technically prohibited from using its platform under a 2021 settlement with the New York Attorney General. Paxos, which issues PayPal USD and Pax Dollar, had roughly $4 billion combined in circulation. The rule would immediately cover Circle and Tether if either continues to serve U.S. users, the officials said.

The bank compliance officer said the reporting requirements would mirror parts of the Bank Secrecy Act and would require stablecoin issuers to file suspicious activity reports for transactions above $10,000. Treasury expects the cost of compliance to fall most heavily on smaller issuers and offshore firms that rely on correspondent banking relationships in New York, the officer said.

Industry Pushback and What Comes Next

Industry groups have already begun drafting response letters, according to the lobbyist. The Chamber of Digital Commerce is expected to argue that the 24-hour freeze requirement is technically impossible for decentralized protocols and could push activity offshore. Blockchain Association chief executive Kristin Smith is scheduled to meet with Treasury Under Secretary for Domestic Finance Nellie Liang on February 4 to discuss the draft, the lobbyist said.

Congressional staff on the House Financial Services Committee were briefed on the proposal on January 29, according to three aides familiar with the meeting. The aides said Republicans on the panel support the reserve restrictions but have concerns about giving the Fed broad reporting authority without explicit statutory backing. Democrats have pressed for even stricter limits, including a ban on algorithmic stablecoins and a 1:1 redemption guarantee, the aides said.

The Treasury officials said the rule is designed to fill a gap left by the collapse of stablecoin legislation in the previous Congress and to address warnings from the Financial Stability Oversight Council that a run on a major stablecoin could threaten short-term funding markets. The officials expect the proposal to draw hundreds of public comments during a 60-day comment period closing on April 4. A final rule could be issued by late summer, with enforcement handled jointly by Treasury, the Fed, and the Securities and Exchange Commission.

Watch for the Federal Register notice on Tuesday, the industry meeting with Liang on Wednesday, and any statement from the White House Office of Management and Budget, which received the final draft for review on January 30.