U.S. regulators have introduced a proposal requiring certain payment stablecoin issuers to verify customer identities as part of the new GENIUS Act framework.
Summary
- Regulators suggest that specific payment stablecoin issuers establish customer identification programs similar to those used by banks and credit unions.
- The GENIUS Act proposal requires issuers to authenticate customer identities, classifying eligible payment stablecoin issuers as financial institutions under the Bank Secrecy Act.
- Stablecoin transactions in secondary markets are generally exempt from customer identification requirements, limiting the rules to direct issuer-customer relationships.
On Thursday, the Federal Reserve Board announced its intention to gather public feedback on a collective proposal that mandates covered stablecoin issuers to maintain effective Customer Identification Programs (CIPs).
This proposal was issued alongside the Financial Crimes Enforcement Network, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration.
A comprehensive 117-page notice released by these agencies indicates that the rule aims to implement components of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, commonly referred to as the GENIUS Act. The proposal would categorize allowed payment stablecoin issuers as financial institutions under the Bank Secrecy Act, requiring them to establish customer identification procedures.
Public comments on this proposal will be accepted for 60 days after its publication in the Federal Register.
Rule to impose bank-like identity verification for stablecoin issuers
The agencies have noted that permitted payment stablecoin issuers must collect and verify customer data before forming an account relationship. Required information typically includes the customer’s name, address, date of birth or formation, and identification number.
This proposal would also obligate issuers to adopt risk-based protocols aimed at ensuring they know each customer’s genuine identity. Regulators have pointed out that these procedures should consider the issuer’s size, business model, customer demographics, account types, and account establishment methods.
“This is a significant step to ensure that permitted payment stablecoin issuers are compliant with Bank Secrecy Act regulations,” remarked NCUA Chairman Kyle Hauptman, adding that the proposal aligns with existing customer identification protocols adopted by credit unions and sets standards for verifying account holders.
“It establishes clear standards for the identification and verification of account holders while safeguarding the interests of credit unions and their members. By implementing strong customer identification requirements, we enhance our commitment to combatting money laundering and terrorist financing within our financial system.”
This proposal follows earlier NCUA rulemakings regarding payment stablecoins. Last month, the agency proposed a rule establishing operational and risk management standards for licensed payment stablecoin issuers, alongside another proposal from February 2026 addressing applications from issuers under its jurisdiction.
Regulators exempt most secondary market transactions
The proposed rule differentiates between direct interactions with a stablecoin issuer and transactions occurring elsewhere in the market.
Regulators clarified that customer identification requirements would be applicable when a user establishes a formal relationship with a permitted payment stablecoin issuer through activities such as issuance, redemption, custody, reserve management, or other authorized services.
The agencies suggested that simply holding or transferring a payment stablecoin would not create an account relationship with the issuer. They indicated that secondary market activities, such as transfers between users and transactions conducted through intermediaries, typically would not activate customer identification obligations for the stablecoin issuer.
The agencies expressed that enforcing customer identification requirements for every stablecoin transfer could be impractical as issuers generally do not maintain direct relationships with users involved in secondary market transactions.
This proposal follows a recent bipartisan letter from U.S. senators advocating for the Treasury Department to ensure a role for state regulators within the GENIUS Act. Led by Senator Cynthia Lummis, lawmakers requested clearer guidance on how states can obtain certification for their own stablecoin regulatory frameworks in a letter to Treasury Secretary Scott Bessent dated June 16.
The GENIUS Act allows issuers with less than $10 billion in outstanding stablecoins to operate under certified state regulatory systems. The customer identification proposal highlights that its requirements will apply not only to federally regulated issuers but also to those operating under state frameworks approved by the law.
