U.S. Proposes Bank-Style KYC Rules for Stablecoin Issuers

Stablecoin Issuers Get Bank-Style KYC

The joint proposal would require an issuer to form a reasonable belief that it knows the true identity of each customer. Before opening an account, the issuer would collect a name, address, date of birth for an individual or formation date for an entity, and a tax or other government identification number.

Verification could use documents such as a driver’s license, passport, business license or articles of incorporation. The rule would also allow non-documentary methods, including contacting the customer, comparing information with consumer reporting data, checking references with other financial institutions or obtaining a financial statement.

If verification fails, an issuer’s program would need to explain when it will refuse an account, restrict its use, close it or file a suspicious activity report. Records containing customer identification information would generally be retained for five years after an account closes, while verification records would be kept for five years after they are made.

The draft also allows an issuer to rely on another regulated financial institution for parts of the process when the customer has a relationship with both firms. That provision matters because large stablecoin issuers often mint and redeem through exchanges, market makers, banks and other institutions that already run KYC programs.

The approach pushes stablecoin issuance closer to conventional financial plumbing. It also supports products built around regulated reserves, such as the recently launched State Street stablecoin reserve fund, because issuers would face bank-like controls on both the assets backing tokens and the customers accessing primary issuance.

Secondary Stablecoin Transfers Stay Outside

The most consequential language is what the proposal excludes. An “account” would not include activity where no formal relationship exists and the issuer is involved only through a smart contract. Ownership or control of a permitted payment stablecoin by itself would also not create an account.

The agencies described the primary market as direct activity with an issuer, including minting and redemption. Secondary-market activity can include buying tokens through an intermediary, sending a stablecoin from a self-hosted wallet to a friend’s wallet or using stablecoins to pay for goods and services.

That means the proposal is not a rule requiring every USDT or USDC holder to register with Tether or Circle. A customer who goes directly to an issuer for issuance, redemption, custody or another formal service would face identity checks. A person who receives the token elsewhere would not become the issuer’s CIP customer solely by holding it.

Regulators considered a broader approach and rejected it as operationally unrealistic. The filing said treating every holder as having an issuer relationship would effectively create a global collection and verification obligation that could be “nearly impossible” to implement and could cripple the industry.

The exclusion does not make secondary transfers invisible to regulation. Exchanges and money transmitters can have separate Bank Secrecy Act duties, and the GENIUS Act requires issuers to maintain the technological capability to comply with lawful orders. The proposal only defines the issuer’s customer identification boundary.

Daily Crypto Briefs’ broader GENIUS Act stablecoin breakdown explains how permitted issuers, reserves and U.S. platform restrictions fit together. This new rule adds the account-opening layer without converting every blockchain address into an issuer account.

GENIUS Act Comment Window Opens

The agencies are asking for comments on the definition of an account, reliance on other financial institutions, digital identity tools, implementation costs and the treatment of existing customers. Treasury previously received about 450 timely comments on its wider GENIUS Act implementation notice, according to the proposal.

Comments on this rule will be due 60 days after publication in the Federal Register. The document lists separate docket identifiers for each agency, including FinCEN-2026-0101 and OCC-2026-0331, but the final calendar deadline was not yet inserted in the pre-publication version.

The agencies proposed making the final rule effective 12 months after issuance. That runway would give issuers time to write procedures, connect verification systems, negotiate reliance agreements and determine which existing customer records are sufficient.

The rule could raise compliance costs for smaller issuers, but it also provides a clearer perimeter for wallets and secondary trading. The distinction may reduce uncertainty for payment products that need regulated issuance without forcing identity collection at every peer-to-peer transfer.

Banking groups, crypto issuers, exchanges and privacy advocates are likely to focus on how broadly regulators define a formal relationship. The archive’s U.S. crypto policy guide tracks the wider move from enforcement disputes toward written rules across stablecoins, market structure and tax reporting.

Market sentiment remains weak while the policy framework advances. Alternative.me’s Crypto Fear and Greed Index stood at 15, or Extreme Fear, on June 18, compared with 25 one month earlier.

What remains unknown is whether the agencies will keep the direct-relationship boundary unchanged after public comments and how future issuers will structure access through exchanges, banks and wallets. The next concrete event is Federal Register publication, which will start the 60-day comment clock.