Powell Backs Fed Stablecoin Rules; Warsh Abstains

Fed Proposes New Rules for Crypto Firms Following Stablecoin Legalization

The Federal Reserve unveiled proposed regulations on Thursday that will govern how U.S. cryptocurrency firms must vet their customers and combat money laundering, now that stablecoins have been officially legalized.

The rulemaking, developed in conjunction with agencies from President Donald Trump’s administration, including the Treasury Department and the FDIC, outlines the implementation of customer identification provisions within the GENIUS Act. This legislation, passed last summer, formally sanctioned the issuance of stablecoins, which are cryptocurrencies designed to maintain a stable value, typically pegged to the U.S. dollar.

All members of the Federal Reserve’s board of governors voted in favor of the proposed rulemaking. However, a notable abstention came from Kevin Warsh, President Trump’s appointed Fed Chair. Warsh offered no public explanation for his decision, and a Fed spokesperson did not immediately respond to requests for comment.

Under the proposed rules, “digital asset service providers”—defined as any U.S. individual or entity involved in the exchange, transfer, or custody of cryptocurrency—will be required to implement specific safeguards. These measures are intended to prevent the facilitation of stablecoin-related services for illicit organizations.

These requirements include verifying customer names, birthdates, and addresses, and cross-referencing this information with government-provided lists of terrorists and sanctioned individuals or groups.

A significant aspect of the proposed rules, mirroring the GENIUS Act itself, is the exemption for decentralized protocols. This exemption drew criticism from Fed Governor Michael Barr, who, despite voting for the proposal, issued a statement expressing his reservations.

“I support the issuance of this proposal,” Barr stated. “I remain concerned, however, 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.”

The proposed rulemaking will now undergo a 60-day public comment period.