Stablecoin ID rules should exclude P2P transfers: BA

Blockchain Association asked five U.S. agencies to clarify that customer identification requirements under the GENIUS Act apply to direct issuer relationships, not independent peer-to-peer stablecoin transactions.

The industry group filed its comments by the Aug. 21 deadline and summarized its position on Aug. 24. It supported the proposal’s main approach but requested clearer definitions, less duplicated compliance work and explicit flexibility for digital identity tools.

FinCEN, the Office of the Comptroller of the Currency, Federal Reserve, Federal Deposit Insurance Corporation and National Credit Union Administration jointly proposed the customer identification program in June.

Stablecoin identity checks focus on direct customers

The proposed rule would require a permitted payment stablecoin issuer to establish a written, risk-based customer identification program. The program would form part of the issuer’s wider anti-money laundering and counterterrorist financing controls.

An issuer would generally collect a customer’s name, address, date of birth or formation and identification number before opening an account. It would then use documentary or non-documentary methods to form a reasonable belief that it knows the customer’s identity.

Records containing the identification information would generally remain on file for five years after the account closes. Verification records would remain available for five years after their creation.

As previously reported, U.S. regulators proposed bank-style identification requirements for stablecoin issuers. The proposal follows the GENIUS Act’s decision to treat permitted issuers as financial institutions under the Bank Secrecy Act.

Blockchain Association wants a firm P2P boundary

Blockchain Association agreed that the program should apply when an issuer maintains a direct customer relationship. Examples include issuing, redeeming, converting, repurchasing or providing custody for a payment stablecoin.

The organization said the rule should not reach transactions between users when the issuer does not intermediate, facilitate or approve them.

“They should not extend to downstream, peer-to-peer stablecoin transactions,” the Association argued, although agencies have not finalized that boundary.

The agencies’ proposal largely follows that position. It says simply owning or controlling an issuer’s stablecoin does not establish an account. A transfer involving an issuer only through its smart contract would also generally fall outside the proposed definition.

The proposal calls these interactions secondary-market activity. Examples include transfers from self-hosted wallets, purchases from intermediaries, exchange trades and direct payments to vendors.

The agencies estimated that approximately 99% of stablecoin transaction activity occurs in secondary markets. They acknowledged that issuers have limited ability to obtain identities for people using tokens without interacting with them directly.

Digital identity and duplicate checks remain contested

Blockchain Association also asked regulators to preserve flexibility in how issuers collect and verify information. It specifically supported digital identity tools and interoperable verification technology.

The proposal already permits documentary and non-documentary verification. It asks whether the final text should explicitly address digital identities or verifiable credentials and seeks feedback about their benefits and risks.

The group also requested protection against duplicative compliance obligations. Stablecoin issuers frequently interact with banks, exchanges and other regulated institutions that already conduct customer checks.

Under the proposed rule, an issuer could rely on certain work performed by another federally regulated financial institution. That reliance must be reasonable, governed by a contract and supported by annual certification. The issuer would remain responsible for compliance.

Blockchain Association wants the final rule to clarify how this arrangement works across affiliates, intermediaries and state-regulated entities.

Agencies must now complete the GENIUS Act rules

The public comment period closed Aug. 21. Regulators will now review submissions and may modify the definitions of “account,” “customer” and “digital asset service provider” before issuing a final rule.

The proposal gives issuers 12 months after the final rule’s publication to comply. No final publication date has been announced.

The wider GENIUS Act framework is expected to begin restricting unlicensed payment stablecoin issuance in the U.S. on Jan. 18, 2027. In related coverage, regulators missed the law’s original rulemaking deadline, shortening the preparation period available before the licensing framework begins.

The final customer identification rule must still operate alongside separate proposals covering licensing, reserves, anti-money laundering programs, sanctions compliance and lawful orders. The treatment of direct redemptions, digital credentials and reliance on third parties will determine how much additional work issuers face.