The Federal Reserve has released a draft rule that would require mandatory identity checks for stablecoin users in the United States through obligations placed on digital asset service providers. Under the proposal, firms would need to verify a customer’s name, date of birth, and address, then screen that information against US government lists that include terror suspects and sanctioned individuals.
Draft rule implements customer identification standards under the GENIUS Act
The proposal was developed in coordination with agencies from the Trump administration, including the Treasury Department and the Federal Deposit Insurance Corporation. It is designed to clarify how customer identification provisions in the GENIUS Act should be enforced. That law took effect last summer and created a legal framework for issuing stablecoins pegged to the US dollar.
Under the text, any individual or entity classified as a “digital asset service provider” would be required to adopt specific safeguards. The scope covers US-based people and organizations involved in buying, selling, transferring, or storing crypto assets. The draft also says firms must add controls intended to stop stablecoin-related services from being used by criminal networks or illicit organizations.
Board vote included a notable abstention
Most members of the Fed’s Board of Governors supported the proposal. The draft states that former Fed Chair Jerome Powell voted in favor, while current Fed Chair Kevin Warsh abstained. Warsh did not explain the abstention, and a Fed spokesperson did not immediately respond to requests for comment, leaving open questions about internal disagreement over the rule.
Exemption for decentralized protocols becomes a flashpoint
The proposal exempts decentralized protocols from these requirements, and the same carve-out appears in the GENIUS Act. That exception has already drawn criticism from some officials. Fed Board Member Michael Barr said he supports releasing the proposal, but warned that the existing framework under the GENIUS Act may not adequately address illegal financing risks tied to secondary-market transactions involving payment stablecoins.
Barr’s comments place attention on the limits of the current framework rather than on identity checks alone. Secondary-market activity, along with the treatment of decentralized protocols, is emerging as one of the main pressure points in the debate around the draft.
Public comment period will run for 60 days
The Fed’s proposal has now entered a 60-day public comment period. During that window, industry participants, legal experts, companies, and other interested parties can submit their views on the draft. Whether the final text is revised will depend on the feedback received during this stage.