The crypto advocacy group Blockchain Association has asked federal regulators to keep stablecoin identity-verification rules anchored to direct customer relationships, warning that extending them to peer-to-peer transfers could make compliance ‘nearly impossible’ and ‘cripple the industry.’
The Comment Letter
Signed on August 21 by CEO Summer K. Mersinger, a former CFTC commissioner, the letter was addressed to five federal financial regulators: the Financial Crimes Enforcement Network, the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation, and the National Credit Union Administration.
The regulators had proposed customer identification rules as part of the process of implementing the Guiding and Establishing National Innovation for U.S. Stablecoins Act, commonly known as the GENIUS Act. Signed into law in June of last year, the GENIUS Act establishes a legal framework for the issuance and use of dollar-pegged crypto tokens inside the United States.
The proposed rules already exclude secondary transfers from Customer Identification Program requirements. The Association’s letter backed that decision and asked regulators to define the boundary more clearly, rather than opposing a position the agencies had taken.
What the Association Wants
The Blockchain Association’s core demand is that know-your-customer checks, which are similar to Bank Secrecy Act obligations, stay anchored to the primary market where issuers actually have a direct relationship with customers. The group posted on X: ‘The agencies are right that customer identification requirements should focus on where issuers actually have a direct relationship with customers: the primary market. Consistent with the GENIUS Act, they should not extend to downstream, peer-to-peer stablecoin transactions that issuers do not intermediate, facilitate, or approve.’
Specifically, the association said KYC obligations should not reach:
- Wallet-to-wallet transfers between end users
- One-off redemptions
- Technology providers serving issuers
- Business lines of an issuer unrelated to stablecoin activity
Liability and Delegation
The letter also addressed a practical compliance concern: issuers that rely on other regulated financial institutions to carry out identity checks should not automatically inherit liability if that institution fails to meet its obligations. An issuer that reasonably depends on another party’s Customer Identification Program should be shielded from automatic blame, the group argued.
Technology and Coordination Requests
The Blockchain Association also urged regulators to allow modern, interoperable identity-verification methods, including zero-knowledge proofs, stating: ‘The final rule should avoid duplicative compliance requirements and clarify that issuers have flexibility to use modern, secure methods to collect and verify customer information, including digital identity tools and other interoperable technology.’
The association also asked that the GENIUS Act identity rules be aligned with pending anti-money laundering and sanctions requirements from FinCEN and the Office of Foreign Assets Control. Staggered implementation timelines, the group argued, would force issuers to overhaul compliance systems multiple times rather than once.
Broader Advocacy Push
The stablecoin letter follows a separate amicus brief the Blockchain Association filed the previous week, urging the Supreme Court to review a ruling by a federal appeals court that allowed the Federal Reserve to deny a state-chartered crypto bank access to its payment system.
On the GENIUS Act itself, the association concluded: ‘The GENIUS Act created a landmark framework for payment stablecoins. Implementation should preserve its goals: strong safeguards, workable rules, and room for continued innovation.’
