Banks Tell FDIC: Stablecoin Issuers, Not Banks, Police Wallets

Banks that would hold reserve accounts for stablecoin issuers want the issuers, not the banks, to own wallet screening and secondary-market monitoring. The position came in comments on a Federal Deposit Insurance Corp. rulemaking covering Bank Secrecy Act and sanctions compliance for permitted payment stablecoin issuers. The comment period closed Tuesday, Aug. 4.

Under the proposal, Financial Crimes Enforcement Network and Office of Foreign Assets Control requirements would move inside the agency's supervisory and enforcement framework for stablecoin issuers affiliated with state nonmember banks and state savings associations. The FDIC would also notify FinCEN at least 30 days before certain supervisory or enforcement actions.

ICBA Draws the Line at the Reserve Account

The Independent Community Bankers of America drew the sharpest boundary. A community bank holding reserve or operating accounts should monitor its customers and accounts, the group said in its letter. It should not "be expected to police secondary-market transfers, wallet-level activity or product-specific risks" outside its control. Blockchain analytics and wallet screening should remain issuer responsibilities.

A wallet, exchange or payment intermediary may hold customer and transaction data the issuer never sees. The issuer still bears regulatory responsibility for controls performed by that intermediary. ICBA recommended issuers continue due diligence on third parties, and said outsourcing identity checks or monitoring should not relieve an issuer of accountability.

The compliance-responsibility question is already being tested in private infrastructure. Mastercard is testing a single-audit stablecoin compliance channel with Borderless.xyz, an arrangement meant to give multiple parties one compliance view. Mastercard's Alpha Score on AlphaScala sits at 71/100, rated Moderate, in the Financials sector.

ICBA also pressed for operational evidence. Issuers should test monitoring systems, document alert thresholds, assess false positives and false negatives, preserve investigation records and show how alerts were escalated or closed. The group opposed exemptions unless they provide "equivalent transparency, traceability, and enforcement value."

International Bancshares Corp. pushed the frame wider. Strong anti-money laundering and sanctions standards are necessary, the bank said in its letter. The proposal, in its view, addresses only one component of stablecoin risk. International Bancshares cited fraud, consumer harm, sanctions evasion, deposit displacement and wider instability as problems that applying existing compliance rules to a new product will not resolve.

Sanctions screening is where policy meets execution. ICBA said issuers should be able to identify, block, freeze or reject prohibited activity. The list of complications is long: mixers, wallet obfuscation, chain-hopping, sanctioned jurisdictions and transfers that cross between on-chain and off-chain systems. Periodic screening against a sanctions list would not be enough.

The group put the burden on product design as much as staffing. "If a PPSI designs a product that can move value across wallets, platforms or jurisdictions faster than its sanctions controls can operate, that design choice should not become a basis for reduced accountability," the letter said.

Redemption and the Secondary-Market Gap

Redemption produced the clearest example of the gap between a rule on paper and the same rule under stress. A holder may acquire stablecoins through an exchange or wallet without a direct relationship with the issuer. If the exchange fails or suspends withdrawals, that holder may approach the issuer for cash. The issuer then must identify and screen someone it may never have seen before, while processing a potentially large volume of requests.

ICBA found tension between that obligation and a framework that may not require issuers to monitor secondary-market activity continuously. It urged the FDIC to require contingency procedures covering identification, sanctions screening, suspicious activity escalation, staffing, liquidity and communications.

The Bank Policy Institute and The Clearing House, in a joint letter, said the proposal leaves a gap once payment stablecoins move beyond the issuer into the secondary market. The FDIC proposal focuses on supervised issuers. The associations want exchanges, custodians, digital asset service providers and other intermediaries that facilitate secondary-market transactions to face clearer AML and sanctions obligations. Without that clarification, banks may remain responsible for risks created by payment activity over which they have limited information or control.

Across the comment letters, the ask is the same: compliance obligations should follow whoever holds the information and operational control. State-chartered banks see that allocation as a viable path into stablecoin issuance, reserve banking, custody and payment services. The risk they flag is federal supervisory lag, with overlapping FDIC, FinCEN and OFAC processes potentially producing slower decisions for state-affiliated issuers than federally supervised ones face. The FDIC's final rule will settle how much of a stablecoin payment a bank must be able to see and which controls FinTech partners may perform.