Stablecoin Issuers Face New AML and Identity Verification Requirements

U.S. financial regulators and the FED have proposed new customer identification requirements for payment stablecoin issuers, signaling a major step in extending anti-money laundering (AML) obligations across the digital asset sector.

The proposal was jointly issued by the Federal Reserve Board, the Financial Crimes Enforcement Network, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the National Credit Union Administration as part of the implementation of the GENIUS Act.

Under the proposal, permitted payment stablecoin issuers would be treated as financial institutions under the Bank Secrecy Act (BSA) and required to establish customer identification programs (CIPs) similar to those already used by banks, broker-dealers, and other regulated entities.

The proposed framework would require issuers to verify customer identities during onboarding, maintain records of identity information, and conduct screening against government watchlists. Institutions would also be expected to adopt risk-based controls to identify potential risks of money laundering, terrorist financing, and sanctions evasion.

The move reflects growing regulatory concern around the increasing role of stablecoins in payments, cross-border transfers, trading activity, and digital asset ecosystems. Regulators argue that applying consistent customer due diligence standards across traditional and digital finance sectors is necessary to address illicit finance vulnerabilities while supporting responsible innovation.

For compliance teams, the proposal could significantly reshape onboarding and governance requirements. Stablecoin issuers may need to strengthen know-your-customer (KYC) controls, enhance recordkeeping processes, clarify customer ownership structures, and establish clearer accountability for identity verification across distribution channels and third-party intermediaries.

The proposal also forms part of a broader regulatory framework under the GENIUS Act, which includes licensing requirements, reserve standards, risk management expectations, and additional AML/CFT obligations for stablecoin providers. Public comments will remain open for 60 days following publication in the Federal Register.

While the rule is not yet final, it signals a clear regulatory direction: stablecoin issuers are increasingly expected to operate under compliance standards comparable to those applied throughout the traditional financial sector.

Compliance Takeaway:

The proposal would bring stablecoin issuers firmly within established AML and KYC frameworks. Digital asset firms should begin assessing customer identification processes, governance controls, recordkeeping practices, and sanctions screening capabilities ahead of final GENIUS Act implementation.