OFAC and FinCEN issue a joint proposed rule for Permitted Payment Stablecoin Issuers

OFAC and FinCEN have jointly proposed new regulations under the GENIUS Act that require permitted payment stablecoin issuers (PPSIs) to implement comprehensive, risk-based economic sanctions compliance programs. To meet these regulatory obligations, issuers must deploy robust internal controls and technological capabilities to actively block, freeze, reject, and even "burn" impermissible transactions across both their primary and secondary stablecoin markets. Because PPSIs are explicitly categorized as U.S. persons under the proposed framework, they face strict civil liability for any sanctions violations, which includes failures to prevent blocked individuals from interacting with their underlying smart contracts.