The Blockchain Association has urged U.S. federal regulators to narrowly define Know Your Customer (KYC) requirements for stablecoin issuers under proposed rules for the GENIUS Act. The group warned that extending these identity checks beyond direct customer relationships to peer-to-peer transfers could significantly harm the burgeoning stablecoin industry.
In a comment letter submitted on August 21, the association addressed five federal financial regulators: the Financial Crimes Enforcement Network, the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation, and the National Credit Union Administration. The letter responds to proposed rules for customer identification mandated by the GENIUS Act, which establishes a framework for stablecoin issuance and use in the United States.
The Blockchain Association believes regulators are correct in focusing customer identification on direct customer relationships, particularly in the primary market. The association interprets the GENIUS Act as not extending KYC to downstream, peer-to-peer stablecoin transactions that issuers do not intermediate, facilitate, or approve. They argue that broader requirements could be “nearly impossible” to enforce and would “cripple the industry.”
Beyond limiting the scope of KYC, the Blockchain Association sought clarity on liability for issuers relying on third-party identity checks. They requested that an issuer who reasonably relies on another institution’s Customer Identification Program should not automatically be held liable if that institution fails to meet its obligations. The association also asked regulators to allow flexibility in adopting modern methods for identity verification.
The group emphasized that the implementation of these rules should preserve the GENIUS Act’s goals: strong safeguards, workable rules, and room for continued innovation. They also requested coordination with existing anti-money laundering and sanctions requirements, such as those under the Bank Secrecy Act and enforced by the Office of Foreign Assets Control.
This submission follows recent industry advocacy by the Blockchain Association, including an amicus brief urging the Supreme Court to review a case where a federal appeals court ruled the Federal Reserve could deny a state-chartered crypto bank access to its payment system. Summer K. Mersinger, CEO of the Blockchain Association, is a former CFTC commissioner.
The exact scope and finalization of the proposed customer identification rules for stablecoin issuers remain uncertain. It is also unclear whether regulators may adopt the Blockchain Association’s recommendations regarding KYC for peer-to-peer transfers.
Why This Matters
The materials describe a narrow update: The Blockchain Association urged regulators to limit Know Your Customer (KYC) requirements for stablecoin issuers to direct customer relationships and not extend them to peer-to-peer transfers, warning that broader application could harm the industry. The exact scope and finalization of the proposed customer identification rules for stablecoin issuers.
Broader Context
Source materials place the factual news in this context: The GENIUS Act was signed into law in June of last year.
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