Fed Proposes Bank-Level ID Checks for Stablecoin Issuers

Current U.S.-based stablecoin operators include Tether, the company behind USDT, and Circle, which manages USDC. Several established banks have also launched their own stablecoin offerings in recent months.

The GENIUS Act gives regulators 18 months from enactment to finish rulemaking, or 120 days after they complete the process, whichever comes first. FinCEN, Treasury's anti-financial crime arm, has separately advanced its own proposals targeting illicit financing under the same law. The FDIC proposed in April that federal deposit insurance for stablecoin issuers would not extend to individual token holders.

Not all board members think the current proposal goes far enough. Federal Reserve Governor Michael Barr said the GENIUS Act framework does not adequately address illicit finance risks in secondary market transactions. "Bad actors" can too easily "evade these restrictions" during digital asset trading, Barr said. The 130-page proposal explicitly asks for feedback on whether identity verification should cover secondary market operations.

Congress has not set a schedule for the Digital Asset Market Clarity Act, companion legislation that would reshape how agencies oversee crypto markets more broadly. Capitol Hill observers expect possible passage before the August recess, though Democratic concerns about conflicts of interest could slow it down.