The Bank Policy Institute, a trade group representing major U.S. banks, is urging the U.S. Financial Crimes Enforcement Network to broaden proposed customer identification requirements for the stablecoin sector. In comments on FinCEN’s draft rule for permitted payment stablecoin issuers, the group said identity checks should not stop at issuers themselves.
BPI argued that exchanges and other platforms with direct retail customer relationships handle a large share of stablecoin buying and selling and therefore should also fall under Customer Identification Program requirements. The request would push anti-money-laundering obligations further into secondary markets, where stablecoins often change hands after issuance.
Banks target gaps in the proposed rule
FinCEN’s proposal focuses on a “Permitted Payment Stablecoin Issuer Customer Identification Program.” BPI said that approach leaves out parts of the market that are central to how retail users actually acquire and trade payment stablecoins.
In its comment letter, the group said exchanges and similar intermediaries that establish account relationships for stablecoin activity should be made explicitly subject to Customer Identification Program obligations under the Bank Secrecy Act. According to BPI, those firms play a significant role in the stablecoin ecosystem because they facilitate a substantial portion of purchases and sales.
Focus on secondary-market activity
A central point in the banks’ argument is that much illicit activity involving stable assets occurs in secondary markets rather than at the point of issuance. On that basis, BPI said applying identification rules only to issuers would miss an important part of the compliance picture.
The proposal described by BPI would cover exchanges and other platforms that interact directly with retail customers but are not currently captured by the rule as drafted. That would extend scrutiny to the venues where users trade stablecoins after they have entered circulation.
Practical limits acknowledged by FinCEN
FinCEN’s own proposal, as described in the source article, recognizes that broader information collection in secondary markets could bring benefits but would also be “practically challenging.” That caveat is especially relevant in blockchain-based trading, where the counterparties behind transactions may not be readily identifiable.
The rule notes that customers trading stablecoins onchain are often anonymous or pseudonymous. It also states that blockchains are decentralized by design, meaning there is frequently no single point where identifying information is gathered, and that issuers have only limited ability to collect customer data once tokens are circulating in secondary markets.
Potential reach and next step
If FinCEN were to move in the direction urged by BPI, the compliance burden around payment stablecoins could widen beyond issuers to include more of the trading infrastructure around them. The source article also says decentralized exchanges would fall under the scope of secondary-market oversight.
For now, the confirmed development is BPI’s submission of its comment letter on the proposed rule. The next step is FinCEN’s consideration of those comments as it decides whether the final framework for permitted payment stablecoin issuers should remain focused on issuers or extend identity-check expectations to secondary-market platforms as well.
Source: news.bitcoin.com