The Federal Reserve, Treasury Department, and other financial regulators have unveiled a proposed rule aimed at establishing identification standards for stablecoin users. This initiative aligns with the implementation of the GENIUS Act, which seeks to regulate stablecoin issuers similarly to traditional financial institutions.
Released on Thursday, the draft rule mandates that stablecoin issuers comply with the Bank Secrecy Act, requiring them to implement customer identification processes. This move is intended to mitigate risks associated with money laundering and the financing of terrorism.
According to the proposal, stablecoin issuers must develop reasonable procedures for verifying the identities of individuals opening accounts. This includes maintaining records of identifying information, such as names and addresses, and screening against government lists of known or suspected terrorists.
The Federal Reserve has initiated a 60-day public comment period, inviting feedback from stakeholders. This collaborative effort involves several agencies, including the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.
Previously, in September, regulators had sought preliminary comments to guide the GENIUS Act’s implementation, receiving 450 responses. The current stage is termed a “notice of proposed rulemaking,” which allows for further public input before final rules are established.
In parallel, the Treasury’s Financial Crimes Enforcement Network is working on its own regulations to enforce the anti-money laundering provisions of the GENIUS Act.
While companies like Tether and Circle have led the stablecoin market, traditional financial firms are increasingly entering this space. Despite the ongoing regulatory developments, competition remains intense among stablecoin issuers.
Fed Governor Michael Barr expressed concerns regarding the adequacy of the GENIUS Act in addressing illicit finance risks associated with secondary market transactions involving stablecoins. He emphasized the need for careful consideration of whether identification requirements should extend to these activities.
U.S. financial regulators have proposed new identification standards for stablecoin users, aligning with the GENIUS Act. The initiative aims to enhance compliance and mitigate risks associated with illicit finance.
Source: CoinDesk