Headline: Blockchain Association Warns Regulators: Don’t Let KYC Spill Into Peer‑to‑Peer Stablecoin Transfers The crypto advocacy group Blockchain Association has pushed back on proposed identity‑verification rules for stablecoin issuers, telling federal regulators that widening KYC obligations beyond direct issuer–customer relationships would threaten the industry. In an August 21 comment letter to the Financial Crimes Enforcement Network (FinCEN), Office of the Comptroller of the Currency (OCC), Federal Reserve, FDIC and NCUA, the association—led by CEO Summer K. Mersinger, a former CFTC commissioner—responded to draft customer identification requirements tied to the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins). The GENIUS Act, signed into law in June of last year, creates a federal framework for legal issuance and use of dollar‑pegged stablecoins in the U.S. What the Blockchain Association asked for - Keep KYC focused on the “primary market”: The association backed the agencies’ decision to exclude secondary transfers from Customer Identification Program (CIP) requirements and urged regulators to clarify that identity checks should be limited to relationships where issuers directly interact with customers. “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 group wrote on X. - Don’t sweep in wallet‑to‑wallet transfers or unrelated parties: The letter said CIP rules must not encompass wallet‑to‑wallet transfers, one‑off redemptions, technology providers, or an issuer’s unrelated business lines—extensions the association argued would be “nearly impossible” to enforce and could “cripple the industry.” - Protect issuers who rely on regulated partners: If an issuer reasonably relies on a regulated financial institution to carry out customer ID checks, the issuer shouldn’t automatically be held liable if that partner later falls short, the group said. - Allow modern identity tools and avoid redundancy: The association urged regulators to permit newer, secure verification methods—digital identity tools and interoperable tech—rather than mandating duplicative compliance paths. It also asked regulators to coordinate timing with pending AML and sanctions rules from FinCEN and OFAC, warning staggered deadlines could force repeated compliance overhauls. Context and next steps The proposed rules would subject stablecoin issuers to identity‑verification obligations similar to those under the Bank Secrecy Act. The Blockchain Association’s comments follow other recent legal advocacy from the group, including an amicus brief asking the Supreme Court to review an appeals court ruling that allowed the Federal Reserve to deny a state‑chartered crypto bank access to its payment system. “The GENIUS Act created a landmark framework for payment stablecoins,” the Blockchain Association wrote. “Implementation should preserve its goals: strong safeguards, workable rules, and room for continued innovation.” Regulators are now weighing public comments as they finalize the rulebook that will shape how stablecoins operate in the U.S.—and how much compliance burden issuers must shoulder beyond direct customer relationships. Read more AI-generated news on: undefined/news