The US spends roughly $26 billion a year on anti-money laundering compliance across its financial institutions. The recovery rate on criminal proceeds? Less than 1%. Coin Center wants regulators to keep that track record in mind before extending the same framework to stablecoin issuers.

The crypto policy nonprofit submitted comments to the US Treasury on October 20, 2025, laying out its position on how AML obligations should apply to permitted payment stablecoin issuers, or PPSIs, under the GENIUS Act. The core argument: issuers should only be responsible for know-your-customer and AML compliance at the point where stablecoins are issued or redeemed, not when users send tokens to each other on public blockchains.

What the GENIUS Act actually does

Signed into law on July 18, 2025, the GENIUS Act created the first federal regulatory framework specifically for payment stablecoins. Among its many provisions, the legislation directs the Financial Crimes Enforcement Network, better known as FinCEN, to consider PPSIs as financial institutions under the Bank Secrecy Act.

That designation carries weight. Being classified as a BSA financial institution means stablecoin issuers would potentially need to implement the same kinds of compliance programs that banks and money services businesses already maintain. Think suspicious activity reports, customer identification programs, and transaction monitoring systems.

FinCEN and the Office of Foreign Assets Control followed up on April 10, 2026, with a proposed rule that would require PPSIs to build out a comprehensive five-pillar AML compliance program along with other stringent measures. The comment period on that proposal stays open until June 9, 2026.

The on-ramp vs. the highway

Coin Center’s position is that regulators should station their checkpoints at the on-ramps and off-ramps, the moments when a user converts dollars into stablecoins or redeems stablecoins back into dollars. Those are the points where an issuer has a direct customer relationship and can meaningfully verify identity.

What Coin Center opposes is requiring issuers to monitor peer-to-peer transfers between wallets on public networks. The organization argues this approach would effectively turn stablecoin issuers into surveillance nodes, watching every transaction that touches their tokens regardless of whether the parties involved have any direct relationship with the issuer.

A stablecoin issuer has no customer relationship with someone who receives tokens in a peer-to-peer transfer. They have no way to verify that person’s identity, no contractual obligation, and no meaningful enforcement mechanism. Requiring issuers to monitor those transfers anyway would create, in Coin Center’s framing, a pervasive surveillance environment that risks user privacy and security without proportionate crime-fighting benefits.

Privacy-preserving compliance as an alternative

Rather than building a panopticon into stablecoin infrastructure, Coin Center advocates for regulators to embrace privacy-preserving technologies. The organization specifically points to zero-knowledge proofs as a tool that could enable compliance at those crucial on-ramps and off-ramps without stripping users of their anonymity during ordinary transactions.

Zero-knowledge proofs are cryptographic methods that let one party prove something is true without revealing the underlying data. A user could prove they’re not on a sanctions list without handing over their full identity to every intermediary in the transaction chain.

The $26 billion annual cost of AML compliance across US financial institutions dwarfs the amount of illicit finance actually intercepted. With less than 1% of criminal proceeds recovered, Coin Center’s implicit question is why regulators would replicate that model in a new industry.

What this means for investors

If FinCEN adopts a narrow approach, limiting AML obligations to issuer-customer interactions at minting and redemption, it preserves the utility of stablecoins as a peer-to-peer payment tool. If regulators require comprehensive on-chain monitoring, the compliance costs could be enormous, potentially consolidating the market further around a handful of well-capitalized players like Circle and Tether.

With the comment period open until June 9, 2026, every stablecoin issuer, user, and investor has a stake in how that question gets answered.