Fed, FinCEN, and other regulators propose bank-like identification standards for stablecoin issuers
Under the proposal, issuers supervised by federal regulators and certain state-qualified issuers would need to verify customer identities when opening accounts, maintain records, and screen against terrorist watchlists.
The Federal Reserve is seeking feedback on a proposal that would mandate effective customer identification programs for certain payment stablecoin issuers, mirroring requirements already in place for banks and credit unions, according to a Thursday press release.
Issued alongside other agencies including the Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of the Currency (OCC), the proposal aims to implement key provisions of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act.
The rule would mandate that permitted payment stablecoin issuers (PPSIs) maintain effective customer identification programs, including verification of account holders, to combat money laundering and illicit finance risks in the stablecoin sector.
Officials emphasized that the customer identification rules will help mitigate risks in the stablecoin ecosystem while supporting innovation.
Fed Governor Michael Barr said the proposal is an important step in addressing money laundering and illicit finance risks in the stablecoin ecosystem, but cautioned that gaps remain in policing secondary market activity.
“I remain concerned, however, that the GENIUS Act regulatory framework does not do enough so far to address the risks of illicit finance conducted through secondary market transactions in payment stablecoins. While some digital asset service providers are subject to anti-money laundering and anti-terrorist financing requirements in their home jurisdiction, it is far too easy for bad actors to evade these restrictions and operate without detection when transacting in digital assets,” he stated.
Barr said he will consider public input on expanding identification requirements beyond issuers and evaluate whether the GENIUS Act framework as a whole adequately addresses illicit finance concerns.
The proposal is now open for public comment, with a 60-day window starting from its publication in the Federal Register.