Blockchain Association urges regulators to keep P2P stablecoin transfers outside new ID rules

The Blockchain Association is pressing U.S. regulators to draw a clear boundary in customer identification rules being developed under the GENIUS Act: apply them to issuer-to-customer relationships, not routine peer-to-peer stablecoin transfers. In formal comments submitted by the Aug. 21 deadline and outlined again on Aug. 24, the group said it backs the proposal's aim of curbing illicit finance. It also called for tighter definitions, less duplicative compliance, and explicit support for modern digital identity tools. What's in the proposal FinCEN and four banking agencies — the Office of the Comptroller of the Currency, the Federal Reserve, the FDIC and the NCUA — jointly proposed in June a customer identification program (CIP) requirement for permitted payment stablecoin issuers. The draft would require issuers to maintain a written, risk-based CIP as part of broader anti-money-laundering and counter-terrorist-financing controls. Before opening an account, issuers would typically collect a customer's name, address, date of birth (or formation date for entities) and an identification number, then verify identity using documentary or non-documentary methods. Account records would be retained for five years after closure, and verification records for five years after creation. Where the industry wants the line The Association said CIP obligations should attach when an issuer has a direct relationship with a customer, such as issuing, redeeming, converting, repurchasing or providing custody for a payment stablecoin. It argued the rules should not extend to downstream peer-to-peer transfers where the issuer does not intermediate, facilitate or approve the transaction. Regulators' draft largely reflects that approach. It says mere ownership or control of a token does not create an “account,” and that transfers that touch an issuer only through a smart contract generally fall outside the proposed definition. The proposal groups these interactions as “secondary market activity” — including transfers from self-custodied wallets, exchange trading, purchases through intermediaries and direct payments to merchants — and estimates roughly 99% of stablecoin transactions take place there. Agencies also noted issuers have limited ability to obtain user identities absent direct interaction. Digital ID flexibility and reducing duplicated checks The Blockchain Association asked regulators to preserve flexibility in how issuers collect and verify customer information, including explicit recognition of digital identity tools and interoperable verification technology. The proposal already permits both documentary and non-documentary verification and asks whether the final text should address digital identities and verifiable credentials. The Association urged regulators to do so, citing the potential for more efficient, privacy-preserving compliance. The group also warned about redundant compliance burdens because stablecoin issuers often interface with banks, exchanges and other regulated entities that already perform customer due diligence. The draft rule would allow an issuer to rely on certain identity work performed by another federally regulated financial institution if the reliance is reasonable, governed by contract and certified annually, while keeping the issuer responsible for compliance. The Association asked for clearer guidance on how reliance should work across affiliates, intermediaries and state-regulated entities. What comes next With comments now closed as of Aug. 21, agencies will review submissions and may refine key definitions such as “account,” “customer” and “digital asset service provider” before finalizing the rule. Issuers would have 12 months from publication of the final rule to comply. No publication date has been announced. Bigger picture The CIP proposal follows the GENIUS Act's designation of permitted payment stablecoin issuers as financial institutions under the Bank Secrecy Act. The GENIUS framework is expected to restrict unlicensed payment stablecoin issuance in the U.S. starting Jan. 18, 2027. Regulators missed the law's original rulemaking deadline, tightening the implementation runway. The final CIP requirements will need to align with other pending proposals covering licensing, reserve requirements, AML programs, sanctions compliance and lawful orders. How agencies treat direct redemptions, digital credentials and reliance on third parties is expected to materially affect issuers' compliance costs.