The Federal Reserve on Thursday released a proposed rule providing more specific compliance requirements for the implementation of legalized stablecoins in the United States. According to the draft, U.S. crypto service providers would be required to conduct due diligence on their customers and screen for terrorist organizations and sanctions lists when offering stablecoin-related services.
The rules focus on user identity verification
This rule, jointly proposed by the Federal Reserve, the U.S. Treasury, the Federal Deposit Insurance Corporation, and other agencies, primarily explains how the customer identification provisions of the GENIUS Act will be implemented. The act took effect last summer, formally allowing the issuance of stablecoins pegged to the U.S. dollar.
According to the draft definition, "digital asset service providers" include individuals and institutions engaged in the exchange, transfer, or custody of crypto assets in the United States. These entities are required to verify clients' names, dates of birth, and addresses, and compare this information with the terrorist lists and blacklists provided by the U.S. government.
Decentralized protocols are exempted
It is worth noting that decentralized protocols are not covered by these requirements. This arrangement also appears in the GENIUS Act and has raised concerns among some Federal Reserve officials.
While Federal Reserve Governor Michael Barr voted in favor of the proposal, he also publicly stated that the existing regulatory framework for stablecoins is still insufficient in addressing illicit financial risks in secondary market transactions, especially in the circulation of payment-type stablecoins.
The vote received majority support
The proposed rule received majority support within the Federal Reserve, with governors including former Fed Chairman Jerome Powell voting in favor. However, current Fed Chairman Kevin Warsh abstained without providing a reason.
A Federal Reserve spokesperson has not yet responded further to Warsh's abstention. According to procedure, the proposed rule will next enter a 60-day public comment period, after which regulators will decide whether to proceed with its formal implementation.
