Washington, D.C. – Regulators should apply customer-identification requirements to stablecoin secondary market participants and clarify ambiguous terms to bolster safeguards across the payment stablecoin ecosystem, the Bank Policy Institute and The Clearing House Association said in a comment letter filed today.  

What’s Happening. The letter responded to a proposal by Treasury’s Financial Crimes Enforcement Network and the federal banking agencies on customer ID requirements for payment stablecoin issuers. It comes as banking regulators are implementing the GENIUS Act enacted last year, specifying obligations for stablecoin issuers under that law. The Bank Secrecy Act has rules regarding Customer Identification Programs, or CIP, and this proposal outlines how CIP rules should apply to stablecoin issuers. 

“FinCEN and the banking agencies have made a constructive effort to ensure that stablecoin platforms know their customers. Targeted clarifications would strengthen the proposal by aligning it with the technical features of payment stablecoins, the Bank Secrecy Act and implementation of the GENIUS Act. These changes would reduce uncertainty and support effective implementation across the payment stablecoin ecosystem.” – Bank Policy Institute and The Clearing House Association  

Recommendations. The associations recommended that regulators: 

• Apply customer ID requirements to the stablecoin secondary market. Digital asset service providers, or DASPs, play a significant role in the payment stablecoin ecosystem, facilitating a significant portion of the purchase and sale of payment stablecoins. They therefore have many customer relationships. The secondary market for stablecoins is where the majority of illicit stablecoin activity occurs. FinCEN and the agencies should clarify that DASPs that establish account relationships with customers to facilitate stablecoin activity are subject to CIP requirements under the BSA. 
• Clarify how stablecoin CIP requirements apply when a customer seeks to redeem his payment stablecoin directly, and allow stablecoin issuers to decline to onboard customers presenting risk. If the individual is unfamiliar to the stablecoin issuer and fails to meet the firm’s compliance standards, the issuer should be able to decline to onboard that individual as a customer. 
• Clarify ambiguity in proposed definitions, such as those of “customer” and “account.” The definitions of these terms should capture the range of customer relationships that may arise in the payment stablecoin ecosystem, including relationships established through direct redemption and other direct interactions with an issuer.

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The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations and represents the financial services industry with respect to cybersecurity, fraud and other information security issues.

The Clearing House Association L.L.C., the country’s oldest banking trade association, is a nonpartisan organization that provides informed advocacy and thought leadership on critical payments-related issues. Its sister company, The Clearing House Payments Company L.L.C., owns and operates core payments system infrastructure in the U.S., clearing and settling more than $2 trillion each day.

Tara Payne
Bank Policy Institute
tara.payne@bpi.com

Greg MacSweeney
The Clearing House
gregory.macsweeney@theclearinghouse.org