Fed Proposes KYC Rules for Stablecoin Issuers Under New Law

The Federal Reserve proposed new customer identification requirements for stablecoin issuers on Tuesday, aligning them with the same know-your-customer rules that apply to banks. The proposal follows the passage of the GENIUS Act, which created a federal framework for stablecoins in the United States.

The rule would require stablecoin issuers to verify the identity of anyone using their tokens for transactions above a certain threshold, similar to how banks handle wire transfers. Issuers would also need to maintain records of transactions and report suspicious activity to the Treasury Department's Financial Crimes Enforcement Network.

The Fed's proposal is the first major regulatory step under the GENIUS Act, which President Trump signed into law in March. The law gave the Fed and the Office of the Comptroller of the Currency authority to oversee stablecoin issuers that choose federal rather than state regulation.

Stablecoin issuers that opt for a federal charter would fall under the Fed's supervision. Those that remain state-regulated would follow rules set by their home state, though the Fed's proposal could set a baseline that states adopt.

The proposal drew criticism from some crypto industry groups, who said the rules would impose costs that smaller issuers cannot absorb. The Blockchain Association said the requirements could push innovation offshore. The Fed said the rules are necessary to prevent money laundering and protect the financial system.

The public comment period runs 60 days. The Fed said it expects to finalize the rule by the end of the year.