Fed proposes mandatory ID checks for all US stablecoin users

The US Federal Reserve (FED) has published a new draft regulation that would require all crypto companies operating in the United States to verify the identities of their stablecoin users. The proposal outlines how customer identification rules aimed at curbing money laundering and illicit finance risks will be applied to stablecoin-related services.

Stablecoin firms face new verification rules

The draft regulation was prepared in cooperation with institutions under the Donald Trump administration, including the Treasury Department and the FDIC. It interprets how customer identification requirements under the GENIUS Act, which took effect last summer, will be enforced. This law created a legal framework for the issuance of stablecoins pegged to the US dollar.

According to the draft, individuals and entities regarded as “digital asset service providers” must take specified measures. This includes all US-based individuals and organizations that offer crypto asset trading, transfer, or custody services. Companies will be required to implement extra controls to prevent stablecoin-related services from being used by criminal organizations or other illicit entities.

The rules specify that companies must confirm customers’ names, dates of birth, and addresses. In addition, this information will need to be compared with US government records regarding terror watchlists and blacklisted organizations.

Split vote among FED officials

Most members of the FED’s board of governors supported the proposal. The document reveals that former FED Chair Jerome Powell was among those voting in favor. However, current FED Chair Kevin Warsh abstained from the vote.

Warsh has not provided any public explanation for his abstention. The FED’s spokesperson also declined to comment when asked. This lack of clarity has raised questions about which aspects of the proposal are under debate within the institution.

Exclusion of decentralized protocols raises concerns

One point of controversy is the draft’s decision to exempt decentralized protocols from these obligations. This exception appears both in the regulatory proposal and the GENIUS Act itself, and has drawn criticism from some officials.

Michael Barr, who frequently comments on financial regulation, supported the release of the proposal but noted concerns that the current framework may be inadequate for managing illicit finance risks, particularly those that could arise in secondary market activities. Barr is a prominent voice on the FED’s board regarding regulatory matters.

Next steps: 60-day public comment period

The FED’s proposed regulation now enters a 60-day period for public comment. During this window, industry representatives, legal experts, companies, and other stakeholders will be able to submit their input. It remains to be seen whether changes will be made before the regulation is finalized.

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