The US Department of the Treasury has unveiled a proposal that would require stablecoin issuers to establish stringent controls to detect and prevent malicious activities, including the ability to block, freeze, and reject suspicious transactions. The proposal, jointly introduced by the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), aims to bring stablecoin businesses in line with traditional financial institutions in terms of anti-money laundering and combating the financing of terrorism. The rules would also mandate stablecoin issuers to implement risk-based safeguards to identify and reject transactions that may violate US sanctions. The proposal is part of the implementation of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which was enacted last year.
The Treasury Department is seeking public comment on the proposal, which is expected to be finalized by 2027. The move is seen as a significant step towards regulating the stablecoin industry, which has been awaiting clear guidelines to operate within the US financial system. The proposal is also expected to have implications for the broader cryptocurrency market, particularly in the areas of decentralized finance (DeFi) and anti-money laundering controls.