The Federal Reserve has launched a proposed rulemaking on a stablecoin customer-screening rule that accompanies the GENIUS Act, spelling out the KYC and screening obligations US crypto firms must apply to customers when issuing or circulating stablecoins. According to Decrypt’s reporting, former Board Chair Jerome Powell voted in support of the proposal, while current Chair Kevin Warsh chose to abstain—and that abstention is arguably more telling than the rule’s substance itself. It suggests continued internal disagreement at the top of the Fed over how far, and where, stablecoin oversight should extend. This marks the first concrete federal-level move to “codify” stablecoin KYC obligations since the GENIUS Act passed.
What This Actually Means for USDT Card Users
Let’s start with the bottom line: this rule governs the compliance obligations of stablecoin issuers and US crypto firms—it does not directly regulate the virtual card in your wallet. But there is a transmission path worth understanding.
The vast majority of USDT virtual cards serving global users—including our editorially recommended MPCard (an Asia-Pacific-routed Visa), Bybit Card, and RedotPay—have issuing entities and clearing rails based outside the United States. These cards handle fiat spending funded by USDT top-ups; they are not themselves “stablecoin issuers,” so the KYC provisions in the new rule carry no direct enforcement power over them.
What this rulemaking actually reaches is US-direct-issued products and issuers dependent on US-licensed channels. MPCard’s US Direct variant is currently suspended from issuance—and that’s no coincidence. Products directly connected to the US market have historically been the most sensitive to shifts in federal regulatory timing.
Expected timeline:
- Within 7 days: No functional changes to any card. The proposal enters a comment period, and proposals typically take a quarter or more to move from proposal to effective rule.
- Within 30 days: Watch for an official response from Tether, the USDT issuer. Under the GENIUS Act framework, the threshold for offshore issuers to access the US market is a central issue.
- Within 90 days: US-direct-issued products (such as a potential US Direct relaunch) may need to add stricter customer-screening steps, making new-user onboarding heavier.
If you primarily use a USDT card to subscribe to dollar-denominated services like ChatGPT Plus or Claude Code, your current billing flow is unaffected—those transactions run through Visa/Mastercard clearing rails and don’t touch stablecoin-issuer-side KYC.
Historical Context: How This Differs from Past Events
Placing this within the broader timeline helps clarify things.
In March 2023, USDC briefly depegged due to its deposit exposure at Silicon Valley Bank—that was a market risk event, with regulators reacting after the fact. The 2024 SEC-Coinbase litigation was fundamentally a classification dispute over whether certain assets counted as securities, and it never produced a codified rule. This time is different—it’s implementing detail that follows the GENIUS Act’s passage, the “law is settled, now we’re writing the operating manual” stage.
In other words: the dominant theme of stablecoin regulation over the past few years has been the ambiguous “should this be regulated, and by whom” debate. We’re now entering the execution layer of “exactly how.” Warsh’s abstention shows the implementation details remain contested, but the broader direction—stablecoin KYC will be codified—is no longer reversible.
For cardholders, this means compliance risk is shifting from “sudden account-freeze risk” toward “predictable process friction.” That’s considerably friendlier than the 2023-style depeg, which came with no warning at all.
Regulatory Boundaries: What’s Clear Now, What Remains Gray
The current legal landscape can be drawn roughly as follows:
- Clearly required: Stablecoin issuers and crypto firms operating within the United States must perform customer screening—this is jointly established by the GENIUS Act and the Fed’s new rule.
- Gray area: The path where offshore issuers (like Tether) serve users outside the US, whose spending is then facilitated by third-party card issuers, still leaves jurisdictional boundaries in dispute.
- Clearly not prohibited: Individuals holding and using USDT cards from offshore, compliant issuers for spending abroad falls outside the scope of this rule.
US-based users should also consult our US compliance guide to understand the federal stance on crypto payments overall. Asia-Pacific users can cross-reference our Hong Kong compliance guide and Singapore compliance guide—these two jurisdictions’ regulatory paths for stablecoin issuers diverge from the Fed’s approach, making them a useful window for tracking whether “regulatory arbitrage” space is narrowing.
Key Milestones Worth Watching
- Comment period deadline: Watch federalreserve.gov for the announced end date of the comment period—this is the first hard milestone marking the shift from “proposal” to “effective rule.”
- Tether’s official response: Whether the USDT issuer adjusts its compliance architecture for the US market will directly affect every card built on USDT as its underlying asset.
- Signals of an MPCard US Direct relaunch: If the US-direct-issued product announces a relaunch, changes to its onboarding flow will be the most tangible sign of the new rule taking effect.
- Warsh’s follow-up statements: Whether the current Chair’s abstention evolves into a more explicit policy split will determine how strictly the rule is ultimately enforced.
Editorial Recommendation
If you hold a globally issued USDT card (MPCard, Bybit Card, RedotPay, etc.), no action is needed. Your card’s functionality, top-up process, and spending chain remain unaffected by this proposal for the foreseeable future.
If you’re planning to apply for a new US-direct-issued product, we’d suggest holding off until the comment period closes and implementation details firm up—onboarding requirements and availability will be clearer then, helping you avoid pitfalls during this regulatory vacuum.
If you mainly use a USDT card for dollar-denominated subscriptions, keep using it as usual, but consider spreading your USDT reserves across more than one card—a basic hedge against any single issuer’s compliance adjustments. To compare current options side by side, see our 2026 USDT Card Top 5 and Lowest-Fee Card Picks.
Regulation is tightening, but it’s tightening through “predictable process,” not “surprise account freezes.” For long-term cardholders, that’s actually a stabilizing signal.