Fed pushes new ID checks for all stablecoin users

The US Federal Reserve (Fed) has unveiled a new draft regulation requiring cryptocurrency companies operating in the United States to verify the identities of users engaging with stablecoin services. This proposal aims to tighten anti-money laundering measures, clarifying how customer identification rules should be applied to the booming stablecoin sector.

Stricter ID requirements for stablecoin firms

The draft regulation has been developed in coordination with the Treasury Department and the Federal Deposit Insurance Corporation (FDIC), as well as other relevant agencies dating back to the Trump administration. It provides guidance on how the customer identification requirements under last year’s GENIUS Act should be implemented. That legislation was a milestone in bringing stablecoins pegged to the US dollar into a legal framework.

Under the proposal, anyone classified as a “digital asset service provider” will need to take specific steps to comply. This category includes US-based individuals and entities offering crypto trading, transfer, or custody services. Companies must also implement additional controls to prevent stablecoin-linked services from being used by criminal organizations or illicit networks.

The new rules obligate firms to authenticate the identity details of their customers, including full names, birth dates, and addresses. These records must also be screened against government-maintained lists targeting terrorism suspects and groups that have been blacklisted for national security reasons.

Fed board vote sees key abstention

A majority of Fed board members expressed support for the new rules. Among those endorsing the proposal was former Fed Chair Jerome Powell, as cited in the official release. However, current Fed Chair Kevin Warsh abstained from voting, drawing attention to internal discussions around the measure.

Warsh did not make any public remarks regarding his decision to abstain, and a Fed spokesperson declined to comment when asked. The lack of explanation has fueled speculation about unresolved issues and debates within the central bank’s leadership regarding the details of the draft regulation.

Decentralized protocol exception draws criticism

The draft’s decision to exempt decentralized protocols from these verification requirements has sparked controversy among some officials. The same exception appears both in the proposal itself and in the GENIUS Act legislation.

Barr, a frequent commentator on financial regulation issues and current Fed board member, said he welcomed the release of the draft but cautioned that the current framework might fall short in addressing illicit finance specifically in the secondary market trading of payment stablecoins.

Public comment and next steps

The Fed’s proposed regulation now enters a 60-day public comment period. During this time, stakeholders including industry representatives, legal experts, crypto companies, and other interested parties can submit their feedback to the central bank. The final regulation will be determined following a review of these responses and could be amended accordingly.

The post Fed pushes new ID checks for all stablecoin users appeared first on COINTURK NEWS.