The Bank Policy Institute (BPI), which represents major US banks including JPMorgan, Bank of America, Wells Fargo and Citi, has called for customer identification requirements to be extended to secondary markets for stablecoins.
In a comment letter submitted to the Financial Crimes Enforcement Network (FinCEN), the banking group said cryptocurrency exchanges and other platforms dealing directly with retail customers should be required to verify their users’ identities.
The letter responded to FinCEN’s proposed “Permitted Payment Stablecoin Issuer Customer Identification Program”, issued by the US Department of the Treasury. The proposal would apply Customer Identification Program (CIP) rules to stablecoin issuers.
However, BPI argued that the measures should also cover exchanges and other platforms that establish account relationships with customers in order to facilitate stablecoin transactions, even where those businesses do not fall under the proposed rule’s direct oversight.
The organisation said those firms “play a significant role in the payment stablecoin ecosystem, facilitating a significant portion of the purchase and sale of payment stablecoins”. It added that most illicit activity involving stable assets occurs in those parts of the market.
BPI recommended that the final rule make clear that exchanges and other platforms handling those customer relationships are “subject to CIP requirements under the Bank Secrecy Act (BSA).”
Customer identification rules require financial institutions to collect information used to establish and verify a customer’s identity. Applying those requirements beyond stablecoin issuers would increase the compliance responsibilities of businesses operating in secondary markets.
The proposed rule itself acknowledges that extending information collection to those markets would be “practically challenging”, although it says the change could provide significant benefits.
BPI’s recommendation would also cover decentralised exchanges. The group referred in its submissions to “various types of decentralized market participants”, placing them within the scope of potential oversight of secondary stablecoin markets.
At the same time, the proposed rules recognise the difficulty of identifying people who trade stablecoins directly on a blockchain. Such customers are “often anonymous or pseudonymous.”
“Blockchains are by nature decentralized algorithms, so there is often no central collection point at which identifying information is collected,” the proposal says. It also states that “issuers have a limited ability to collect customer information on the secondary market.”
The latest intervention follows an earlier disagreement between BPI and other banking organisations over US digital-asset legislation. In May, the groups rejected the current version of the Digital Asset Market Clarity Act, arguing that it did not close “loopholes” that could allow stablecoin users to receive activity-based yield.
US banks are starting to feel pressure from the cryptocurrency world as the recently approved GENIUS Act opens the door…
