The Blockchain Association is pressing U.S. federal regulators to keep stablecoin identity checks limited to direct relationships between issuers and their customers, warning that extending those rules to peer-to-peer transfers could 「cripple the industry」.
In an August 21 comment letter, the crypto advocacy group responded to customer identification rules proposed by five federal financial regulators under the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or the GENIUS Act. The letter was addressed to the Financial Crimes Enforcement Network, the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation, and the National Credit Union Administration.
The GENIUS Act was signed into law in June of last year. It created a framework for the legal issuance and use of stablecoins in the United States, referring to crypto tokens pegged to the U.S. dollar.
Primary market, not downstream transfers
Signed by Blockchain Association CEO Summer K. Mersinger, a former commissioner at the Commodity Futures Trading Commission, the letter supported the regulators’ decision to keep secondary transfers outside Customer Identification Program requirements. At the same time, the group asked the agencies to draw clearer boundaries around when those requirements apply.
In a post on X, the association said: 「The agencies are right that customer identification requirements should focus on where issuers actually have a direct relationship with customers: the primary market.」 It added that, consistent with the GENIUS Act, those requirements should not extend to downstream peer-to-peer stablecoin transactions that issuers do not intermediate, facilitate, or approve.
The proposed federal rules for implementing the GENIUS Act would require stablecoin issuers to verify the identities of direct customers under standards similar to those used in the Bank Secrecy Act. These checks are commonly referred to as KYC, short for know-your-customer requirements.
The Blockchain Association said those checks should not be expanded to cover wallet-to-wallet transfers, one-off redemptions, technology providers, or an issuer’s unrelated business activities. Broader rules, the group argued, would be 「nearly impossible」 to enforce and could 「cripple the industry」.
Letter follows a recent Supreme Court filing
The comment letter came a week after the association submitted an amicus brief urging the U.S. Supreme Court to review a separate dispute. In that case, a federal appeals court ruled that the Federal Reserve could deny a state-chartered crypto bank access to its payment system.
Liability protections and newer identity tools
The association also asked for protections for issuers that rely on regulated financial institutions to carry out identity checks. According to the group, an issuer that reasonably relies on another institution’s Customer Identification Program should not automatically be held liable if that institution fails to meet its obligations.
It also wants regulators to permit newer methods of identity verification. In the letter, the association wrote: 「In addition to clarifying certain key definitions, the final rule should avoid duplicative compliance requirements and clarify that issuers have flexibility to use modern, secure methods to collect and verify customer information, including digital identity tools and other interoperable technology.」
Call for coordination with AML and sanctions rules
The group also asked regulators to align the stablecoin rules with pending anti-money laundering and sanctions requirements being developed by FinCEN and the Office of Foreign Assets Control. Staggered compliance deadlines, it said, could force issuers to update their compliance systems again and again.
The association described the GENIUS Act as having created 「a landmark framework for payment stablecoins.」 It said implementation should preserve the law’s stated goals: strong safeguards, workable rules, and room for continued innovation.