The Federal Reserve, Treasury Department and several U.S. financial regulators released a proposed rule Wednesday that would require stablecoin issuers to implement customer identification programs matching those imposed on traditional banks and brokerages. The move represents the latest major step in implementing last year's Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, the first comprehensive federal crypto legislation to reach President Trump's desk.

Market Context

The GENIUS Act, signed into law last year, mandated that stablecoin issuers be treated like traditional financial firms under the Bank Secrecy Act. The proposed rule marks the transition from preliminary guidance issued in September—which drew 450 public comments—to a formal notice of proposed rulemaking (NPRM) that will undergo another comment period before becoming final. Major stablecoin operators including Tether (USDT) and Circle (USDC) have dominated the U.S. dollar-pegged token market, though traditional financial institutions are increasingly entering the space as regulatory clarity emerges.

Analysis

The joint rulemaking involves the Fed, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., National Credit Union Administration and Treasury's Financial Crimes Enforcement Network (FinCEN). Under the proposal, permitted payment stablecoin issuers (PPSIs) must establish reasonable procedures for verifying identities of account holders, maintaining records including name, address and other identifying information, and screening customers against government-provided lists of known or suspected terrorists. The requirements mirror existing obligations for banks handling fiat currency.

Fed Governor Michael Barr raised concerns about the framework's scope in a statement accompanying the proposal. 'I remain 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 said, noting that while some digital asset service providers face anti-money laundering requirements in their home jurisdictions, bad actors can evade restrictions when transacting in digital assets. Barr indicated he would focus on whether identification provisions should extend to secondary market activity.

Key Numbers

- 60-day public comment period opened by the Fed and partner agencies

- 450 comments received during September's preliminary guidance phase

- Two major stablecoin issuers dominate the space: Tether (USDT) and Circle (USDC)

- FinCEN pursuing a separate but related rule on GENIUS Act anti-money laundering provisions for issuers

What to Watch

The 60-day comment period will determine how industry participants shape the final rule. Market participants should monitor whether the agencies expand ID requirements beyond primary issuance to secondary market transactions, as Barr suggested. The interaction between this joint rule and FinCEN's parallel rulemaking on AML provisions could create compliance complexity for stablecoin issuers preparing for the GENIUS Act framework. Final rules are not expected until after the comment period closes and regulators review feedback.