Fed Demands Bank-Grade ID Programs From Stablecoin Issuers

The U.S. Federal Reserve and four partner agencies proposed on June 18 requiring payment stablecoin issuers to adopt the same customer identification rules banks follow. The proposal targets a blind spot in digital asset oversight: stablecoins can move across borders with speed and limited identity checks.

The rule would force issuers to set up formal Customer Identification Programs, or CIP, mirroring what the Fed already demands from banks and credit unions. It was published jointly by five agencies, a sign of coordinated enforcement across the U.S. financial system.

Fed Governor Michael S. Barr backed the proposal but warned that the bigger problem may not be covered yet. “I remain concerned that the GENIUS Act regulatory framework does not do enough so far to address the risks of illicit finance conducted through secondary market transactions in payment stablecoins,” Barr said in a statement.

The GENIUS Act is the main legislative vehicle for stablecoin oversight in the U.S. Barr’s argument is simple: even if every primary issuer screens its customers, bad actors can still move stablecoins through unregulated secondary platforms. He pointed out that some digital asset service providers face anti-money laundering rules in their home jurisdictions but sidestep them in practice. “It is far too easy for bad actors to evade these restrictions and operate without detection when transacting in digital assets,” he said.

Barr said he will review public comments on whether the new CIP rule should extend to secondary market activity. That review could lead to additional rulemaking beyond the current proposal.

The stablecoin market now exceeds $300 billion in total supply across major issuers. That scale has drawn regulatory attention because stablecoins function like digital cash, allowing near-instant value transfer without traditional intermediary oversight.

The proposal lands as traditional finance deepens ties to the sector. State Street Investment Management launched a dedicated money market fund for stablecoin issuers on June 8, a sign of growing institutional demand for yield-bearing collateral behind the tokens.

Public comments are due 60 days after the proposal appears in the Federal Register. Issuers, banks, consumer groups, and legal experts will have that window to argue for narrower or broader rules. Barr's explicit focus on secondary markets suggests this may be the first of several regulatory steps, not the last.