Federal Agencies Propose Identity Verification Rule for Stablecoin Issuers

Five federal agencies are seeking public comment on a proposal to require certain payment stablecoin issuers to maintain a customer identification program.

“The proposal would introduce requirements for these stablecoin issuers that are comparable to customer identification program requirements for banks and credit unions,” the Federal Reserve Board said in a Thursday (June 18) press release.

The joint proposed rule was issued by the Fed, the Financial Crimes Enforcement Network (FinCEN), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA).

FinCEN also shared a link to a Notice of Proposed Rulemaking in a Thursday press release.

The proposal is designed to implement provisions of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), which requires that permitted payment stablecoin issuers be treated as financial institutions under the Bank Secrecy Act and maintain customer identification programs, FinCEN said in its release.

“The proposal seeks to provide an appropriately tailored regime that mitigates potential illicit finance risks while protecting the U.S. financial system and national security interests,” FinCEN said.

The proposed rule would require the customer identification program to include risk-based procedures for verifying the identity of each customer, procedures for maintaining a record of all information obtained through the customer identification program, procedures for determining whether a customer appears on government lists of known or suspected terrorists or terrorist organizations, procedures for notifying customers that the stablecoin issuer is requesting information to verify their identities, and procedures for specifying when a stablecoin issuer may rely on another federally regulated financial institution’s performance of a procedure, according to a FinCEN fact sheet.

NCUA Chairman Kyle Hauptman said in a Thursday press release that the joint proposed rule “sets clear standards for identifying and verifying account holders and safeguards the interests credit unions and their members. By establishing robust customer identification requirements, we are reinforcing our commitment to preventing money laundering and terrorist financing in our financial system.”

Federal Reserve Board Governor Michael S. Barr said in a Thursday statement that he supports the issuance of the proposal but remains concerned 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.”

Barr added that he will “carefully review comments in response to the proposal’s questions regarding whether any portions of the CIP [customer identification program] rule should be extended to secondary market activity.”