Crypto Group Urges Regulators to Keep Stablecoin KYC Away From Wallet Transfers

In a Friday (Aug. 21) comment letter, the digital-asset trade group broadly endorsed proposed rules requiring permitted payment stablecoin issuers to maintain customer identification programs, or CIPs, comparable to those used by banks and other financial institutions under the Bank Secrecy Act.

But the association said the final rules must clearly limit those requirements to primary-market relationships in which an issuer deals directly with a customer, warning that extending customer-identification requirements to downstream wallet transfers could “cripple the industry.” The rules should not cover secondary-market transfers between third-party wallets that an issuer does not intermediate, facilitate or approve, the group said.

The joint proposal was issued by the Financial Crimes Enforcement Network (FinCEN), Office of the Comptroller of the Currency (OCC), Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration. It implements a provision of the GENIUS Act requiring permitted issuers to verify the identities of their account holders.

The association supports the agencies’ decision to define an “account” around the existence of a formal relationship between an issuer and a customer. That approach applies identity checks at centralized points where an issuer exercises operational control, including issuance, fiat conversion, reserve management and some redemptions.