Headline: Blockchain Association Urges Regulators to Limit Stablecoin KYC to Issuer-Customer Relationships, Warns Wider Rules Could “Cripple the Industry” The crypto industry’s leading trade group is pressing federal regulators to keep identity checks narrowly focused on the direct relationship between stablecoin issuers and their customers — and to avoid turning peer-to-peer token transfers into a compliance minefield. In a comment letter dated August 21, the Blockchain Association urged five federal agencies — the Financial Crimes Enforcement Network (FinCEN), the Office of the Comptroller of the Currency (OCC), the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) — to limit Customer Identification Program (CIP) requirements to the “primary market.” The letter responds to proposed rules to implement the GENIUS Act, the law enacted last June that creates a federal framework for dollar‑pegged stablecoins. The proposed federal rules would require stablecoin issuers to verify the identities of their direct customers under standards similar to the Bank Secrecy Act — commonly called KYC (know your customer). But the Blockchain Association, led by CEO Summer K. Mersinger (a former CFTC commissioner), applauded regulators’ initial decision to exclude secondary, downstream transfers from those CIP obligations and urged clearer boundaries so issuers aren’t on the hook for transactions they don’t control. “Customer identification requirements should focus on where issuers actually have a direct relationship with customers: the primary market,” the group wrote on X. “Consistent with the GENIUS Act, they should not extend to downstream, peer-to-peer stablecoin transactions that issuers do not intermediate, facilitate, or approve.” The letter warns that expanding CIP duties to wallet-to-wallet transfers, one-off redemptions, technology providers, or an issuer’s unrelated business lines would be “nearly impossible” to enforce and could “cripple the industry.” Key asks in the Blockchain Association’s submission include: - Confirming that CIP/KYC obligations apply only to customers with a direct relationship to the issuer (the primary market), and not to downstream peer-to-peer transfers the issuer neither intermediates nor approves. - Protecting issuers who reasonably rely on regulated financial institutions to perform CIPs, so they’re not automatically liable if those partners fail to meet obligations. - Allowing modern, digital identity methods — interoperable tech and other secure tools — so issuers have flexibility in how they collect and verify customer information. - Coordinating GENIUS Act implementation with pending AML and sanctions rules from FinCEN and the Office of Foreign Assets Control (OFAC) to avoid staggered deadlines that would force repetitive compliance overhauls. The filing follows related advocacy from the Blockchain Association: last week it submitted an amicus brief urging the U.S. Supreme Court to review an appeals-court dispute in which a federal panel upheld the Federal Reserve’s ability to deny a state‑chartered crypto bank access to the Fed’s payment system. The group framed its position as consistent with the goals of the GENIUS Act: safeguard consumers and the financial system while preserving workable rules and room for innovation. As regulators move from statute to rulemaking, the fight over where and how KYC applies to stablecoins will shape who can issue and use dollar‑pegged tokens in the U.S. — and how burdensome compliance will be for the broader crypto ecosystem. Read more AI-generated news on: undefined/news