The Blockchain Association is asking U.S. regulators to draw a clear line between regulated stablecoin issuer relationships and ordinary peer-to-peer transactions.
In comments submitted ahead of the Aug. 21 deadline, the crypto industry group broadly supported proposed customer-identification requirements under the GENIUS Act but argued that the rules should apply primarily when a stablecoin issuer has a direct relationship with a customer. It also called for clearer definitions, reduced duplication in compliance procedures and explicit recognition of digital identity technologies.
The joint proposal was issued in June by FinCEN, the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation and the National Credit Union Administration.
Proposed rules would introduce bank-style identity checks
Under the proposed framework, permitted payment stablecoin issuers would need to establish written, risk-based customer identification programs as part of their broader anti-money-laundering and counterterrorism-financing controls.
Issuers would generally be required to obtain information such as a customer’s name, address, date of birth or business formation details and an identification number.
They would then need to verify that information using documentary or alternative verification methods and maintain the relevant records for specified periods after an account is closed or verification is completed.
The proposal follows the GENIUS Act’s classification of permitted stablecoin issuers as financial institutions under the Bank Secrecy Act, bringing them closer to traditional financial institutions in terms of compliance responsibilities.
Industry group seeks clear P2P exemption
The Blockchain Association’s main concern is how far those requirements could extend beyond an issuer’s direct customers.
The organization supports applying customer-identification requirements when an issuer directly provides services such as:
- Issuing stablecoins
- Redeeming tokens
- Converting or repurchasing stablecoins
- Providing custody
- Maintaining a direct customer account
However, it argues that the requirements should not extend to transactions taking place independently between stablecoin users when the issuer does not facilitate, approve or intermediate the transaction.
This distinction is particularly important for transfers involving self-custody wallets and decentralized transactions.
The agencies’ proposal already appears to move in that direction. Simply holding or controlling an issuer’s stablecoin would not, by itself, create an account relationship. Likewise, a transaction that interacts with an issuer only through its smart contract would generally not establish the type of customer relationship covered by the proposed rule.
Most stablecoin activity happens outside issuer relationships
Regulators estimate that roughly 99% of stablecoin transaction activity takes place in secondary markets rather than directly through issuers.
That includes transactions involving self-hosted wallets, exchanges, intermediaries, merchant payments and other forms of direct token transfers.
The agencies recognize a practical limitation: issuers generally cannot identify every individual who interacts with their tokens when those users never establish a direct relationship with the issuer.
For the Blockchain Association, preserving that distinction is essential to preventing stablecoin issuers from being burdened with compliance obligations they cannot realistically fulfill.
Digital identity tools could reduce compliance costs
The industry group is also calling for regulators to allow greater use of digital identity technologies.
The proposed rules permit both documentary and non-documentary methods of verifying customers, but regulators have asked whether the final framework should specifically recognize digital identities and verifiable credentials.
Blockchain Association supports that flexibility, arguing that interoperable digital identity systems could make verification faster while maintaining regulatory safeguards.
Such tools could become increasingly important as stablecoin issuers serve customers across multiple platforms and jurisdictions.
Regulators also face the problem of duplicate KYC checks
Another issue involves customers who already undergo identity verification at banks, exchanges or other regulated financial institutions.
Stablecoin issuers may encounter customers whose information has already been collected and verified elsewhere. Requiring every institution to repeat the same process could increase compliance costs without necessarily providing significantly greater protection.
The proposed framework allows issuers to rely under certain circumstances on customer-identification work performed by another federally regulated financial institution.
That arrangement would require reasonable reliance, a formal agreement and annual certification, while the stablecoin issuer would ultimately remain responsible for meeting its regulatory obligations.
Blockchain Association wants regulators to provide more clarity on how such arrangements would work across affiliates, intermediaries and state-regulated financial institutions.
Regulators now move toward final GENIUS Act rules
The public-comment period ended Aug. 21, leaving federal agencies to review industry feedback before producing final regulations.
Among the issues regulators may refine are the definitions of “account,” “customer” and “digital asset service provider.”
Under the proposal, stablecoin issuers would receive 12 months after publication of the final rule to become compliant.
The broader GENIUS Act framework is expected to impose restrictions on unlicensed payment-stablecoin issuance in the United States beginning Jan. 18, 2027.
The customer-identification framework will also need to operate alongside other rules covering stablecoin licensing, reserve requirements, anti-money-laundering controls, sanctions compliance and responses to lawful government orders.
The key issue: where regulation stops
The final rules could have a significant impact on how stablecoin companies design their compliance systems.
A broad interpretation could potentially require issuers to devote resources to monitoring activity occurring far beyond their direct customer relationships. A narrower framework would focus regulatory responsibilities on points where issuers actually interact with customers and control the relevant financial services.
For the crypto industry, the central question is therefore straightforward:
How can regulators enforce strong identity and anti-money-laundering standards without turning stablecoin issuers into gatekeepers for every transaction involving their tokens?
The answer will help determine whether U.S. stablecoin regulation can combine traditional financial safeguards with the open, permissionless nature of blockchain networks.
