Big Banks Demand Identity Checks for Secondary Stablecoin Markets

A lobbying group that represents JPMorgan Chase, Bank of America, Wells Fargo and Citi filed a comment letter with the Treasury Department's Financial Crimes Enforcement Network. The BPI asked FinCEN to extend customer identification requirements to secondary stablecoin markets, not just stablecoin issuers.

In the letter, the BPI said exchanges and other platforms with direct retail customer relationships should face the same know-your-customer rules under the Bank Secrecy Act. The group argued that most illicit activity involving stablecoins occurs on secondary markets. Issuers alone cannot effectively monitor or prevent that activity, the BPI wrote.

FinCEN's proposed rule itself acknowledges the difficulty. Expanding customer identification to secondary markets would be "practically challenging," the rule states. On blockchain networks, identities are often anonymous or pseudonymous, limiting the information issuers can collect on secondary trades. Without this extension, the BPI said, the rule would create a gap: issuers face strict requirements while exchanges handling the bulk of activity face none.

Decentralized exchanges would also be covered under the BPI's recommendation, which the letter refers to as "various types of decentralized market participants." The rule notes that because blockchains operate as decentralized algorithms, there is no central collection point for identifying information. The BPI argued that even decentralized platforms should have some form of identity verification when they establish account relationships with customers.

In May, the BPI rejected the Digital Asset Market Clarity Act, saying the bill failed to close loopholes that could allow the distribution of activity-based yield for stablecoin users. The group has taken a similar stance on the recently passed GENIUS Act, which creates a federal framework for stablecoin issuance but leaves secondary-market oversight to state regulators.

Among the BPI's banking members, JPMorgan carries an AlphaScala Alpha Score of 57, labeled Moderate, with a current price of $351.58, according to JPM's stock page. Bank of America scores 57 and Wells Fargo scores 54, as shown on BAC and WFC stock pages.

The BPI wrote that secondary market participants play a "significant role in the payment stablecoin ecosystem" and should be subject to the same identification rules as issuers.