Crypto Group Warns Regulators Against Expanding Stablecoin KYC

In brief

• The Blockchain Association urged regulators to limit stablecoin identity checks to direct relationships between issuers and customers.
• The group said identity requirements should not extend to downstream peer-to-peer stablecoin transfers.
• The association called for rules that allow issuers to use digital identity tools, including zero-knowledge proofs.

The crypto advocacy group Blockchain Association is urging federal regulators to keep identity checks limited to direct relationships between stablecoin issuers and their customers, warning that extending the requirements to peer-to-peer transfers could “cripple the industry.”

In an August 21 comment letter, addressed to the Financial Crimes Enforcement Network, the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation, and the National Credit Union Administration, the crypto group responded to customer identification rules proposed by five federal financial regulators under the Guiding and Establishing National Innovation for U.S. Stablecoins, or GENIUS Act.

The GENIUS Act was signed into law in June of last year and establishes a framework for the legal issuance and use of stablecoins, dollar-pegged crypto tokens, in the United States.