Blockchain Association: Stop KYC Checks at Stablecoin Issuance

The Blockchain Association told five federal regulators Friday that identity-verification rules for stablecoin issuers should stop at the moment a coin is issued or redeemed.

The trade group's comment letter closed the public comment window on a joint proposed rule from FinCEN, the Office of the Comptroller of the Currency, the Federal Reserve, the FDIC and the National Credit Union Administration. The rule implements the GENIUS Act's customer identification requirement for what the law calls permitted payment stablecoin issuers.

The Blockchain Association backs the regulators' framing: identification duties should apply only where an issuer has a direct relationship with a customer, through issuance, redemption or custody. It wants that limit written more precisely.

The letter asks regulators to confirm that four situations do not create an "account" that would trigger identification duties. Those are a one-off redemption from someone who never opened an account, an issuer's vendor and service-provider contracts, an issuer's unrelated lines of business, and redemptions routed through another regulated institution such as an exchange.

It also asks that issuers not be held liable when a bank they reasonably relied on for identity checks fails at its own job. And it asks that issuers be allowed to collect identifying information electronically through third parties, rather than only directly from customers, and that this rule's start date line up with a related, still-pending anti-money-laundering rule.

The group grounds its core ask in the GENIUS Act's own text, which requires issuers to verify the identities of "account holders with the permitted payment stablecoin issuer," not everyone who later receives that stablecoin in a wallet-to-wallet transfer.