Stablecoin identification rules could skip 99% of all transactions

Five federal banking regulators want stablecoin issuers to know exactly who their customers are, but the crypto industry’s biggest lobbying group says that requirement should stop at the issuer’s front door. The Blockchain Association has told U.S. agencies that stablecoin identification rules should apply only when an issuer directly onboards a customer, not when tokens change hands afterward on the open market.

Key takeaways

• Five federal agencies — FinCEN, the OCC, the Federal Reserve, the FDIC and the NCUA — jointly proposed customer identification standards for payment stablecoin issuers in June 2026.
• Issuers would need to collect names, addresses, birth or formation dates, and identification numbers before opening an account.
• The Blockchain Association wants peer-to-peer stablecoin transfers excluded, arguing issuers don’t control or facilitate those transactions.
• Regulators estimate roughly 99% of stablecoin transaction activity happens in secondary markets, outside direct issuer oversight.
• Final rules would take effect 12 months after publication, while the GENIUS Act’s broader licensing framework kicks in on January 18, 2027.

U.S. Regulators Propose Stablecoin Customer Identification Rules

The proposal at the center of this debate came from five agencies acting together: FinCEN, the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation and the National Credit Union Administration. In June 2026, they jointly floated a customer identification program tailored to permitted payment stablecoin issuers, treating them as financial institutions under the Bank Secrecy Act — a designation that follows directly from the GENIUS Act.

The Blockchain Association filed its formal comments by the August 21 deadline and laid out its position publicly on August 24. The group broadly backed the framework but pushed for tighter definitions, protection against duplicated paperwork, and room for newer verification technology.

Five Agencies, One Compliance Standard

Under the draft rule, an issuer would generally gather a customer’s name, address, date of birth or formation, and identification number before letting them open an account. From there, the issuer would rely on documentary or non-documentary checks to build a reasonable belief that it actually knows who that customer is. Those records would need to stay on file for five years after an account closes, with verification records held for five years from the date they were created.

Where Blockchain Association Draws the Line

The core of the industry’s pushback is about scope. Blockchain Association supports identity checks at the primary market level — where issuers interact directly with customers — but wants regulators to explicitly rule out extending those same checks to independent transfers between users.

Primary Market Yes, Peer-to-Peer No

The group agreed the identification program should apply whenever an issuer maintains a direct customer relationship: issuing, redeeming, converting, repurchasing, or providing custody for a payment stablecoin all count. But it drew a firm boundary around transactions that happen without the issuer’s involvement.

“They should not extend to downstream, peer-to-peer stablecoin transactions,” the Association argued, even though regulators haven’t yet locked in that boundary. The agencies’ own draft leans the same way — simply owning or controlling an issuer’s stablecoin doesn’t create an “account,” and a transfer that only touches an issuer through its smart contract would generally sit outside the proposed rule.

Secondary Markets Dominate Stablecoin Activity

This is where the numbers matter most. Regulators themselves estimate that approximately 99% of stablecoin transaction activity occurs in secondary markets — transfers from self-hosted wallets, purchases through intermediaries, exchange trades, and direct payments to vendors. That single figure explains why the Blockchain Association is fighting so hard over definitions: if identity checks reached even a fraction of that volume, issuers would face verification obligations for activity they can’t realistically monitor or control.

The agencies appear to acknowledge this limitation directly, noting that issuers generally lack the ability to identify people using their tokens when there’s no direct interaction between the two. That’s a meaningful admission, and it suggests the final rule is likely to preserve some version of the primary-market/secondary-market split the industry is requesting — though the exact wording remains unsettled.

Timeline and Unresolved Questions

Once published in final form, the customer identification rule would give issuers 12 months to come into full compliance. No final publication date has been set yet. Meanwhile, the broader GENIUS Act framework is still on track to start restricting unlicensed payment stablecoin issuance across the U.S. on January 18, 2027 — and regulators have already missed the law’s original rulemaking deadline, which has compressed the runway issuers have to prepare.

Digital Identity and Duplicate Compliance Concerns

Two open issues could shape how burdensome the rule turns out to be in practice. First, Blockchain Association asked regulators to preserve flexibility for digital identity verification tools and interoperable credentials, rather than locking issuers into traditional documentary checks. The proposal already permits both documentary and non-documentary verification methods, and it specifically asks the public whether the final text should address digital identities or verifiable credentials outright.

Second, the group wants protection against duplicated compliance work. Stablecoin issuers routinely interact with banks, exchanges and other regulated entities that already run their own customer checks. The draft rule lets an issuer rely on identification work done by another federally regulated institution, provided that reliance is reasonable, backed by a contract, and certified annually — though the issuer itself stays on the hook for compliance. Blockchain Association is asking regulators to spell out exactly how that reliance arrangement works across affiliates, intermediaries and state-regulated entities, so companies aren’t paying twice for the same verification.

Regulators must still finalize core definitions — “account,” “customer,” and “digital asset service provider” among them — before the rule takes effect. Those definitions, along with how issuers are expected to handle direct redemptions and third-party reliance, will ultimately decide how much extra compliance work stablecoin companies face heading into the GENIUS Act’s enforcement date.

FAQ

What are the main requirements for stablecoin issuers under the proposed GENIUS Act rules?

Issuers must collect and verify customer names, addresses, birth or formation dates, and identification numbers before account creation.

Do the proposed identification rules apply to peer-to-peer stablecoin transfers?

No. The Blockchain Association and the agencies propose to exclude peer-to-peer stablecoin transfers from ID requirements, since they are treated as secondary-market activity.

When will the stablecoin identification rules under the GENIUS Act come into effect?

Final stablecoin ID rules will take effect twelve months after they are published, while the GENIUS Act’s broader enforcement begins January 18, 2027.

What is the role of digital identity verification in the proposed rules?

The proposal allows flexibility for digital identity tools and specifically asks for public feedback on whether the final rule should explicitly address digital identities or verifiable credentials.

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Article produced with the assistance of artificial intelligence and reviewed by the editorial team.