The US Department of the Treasury has proposed a set of rules for stablecoin issuers, which would require them to establish robust controls to detect and prevent illicit activities. The proposal, put forth by the Treasury's Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC), outlines the measures that stablecoin businesses must take to comply with the Bank Secrecy Act.
These measures include the ability to block, freeze, and reject transactions, as well as internal protections to prevent money laundering and terrorist financing. The proposal is part of the implementation of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which aims to regulate the stablecoin industry. The Treasury Department is seeking public comment on the proposal, which is expected to be finalized by 2027.
The regulations would require stablecoin issuers to have programs in place to identify and evaluate their money laundering and terrorist financing risks, and to devote more attention and resources to higher-risk customers and activities. The issuers would also be expected to cooperate with US authorities in pursuing individuals and entities flagged as primary money laundering concerns. Additionally, the proposal requires stablecoin issuers to implement risk-based safeguards for stablecoin activity on primary and secondary markets, and to spot and reject transactions that may violate US sanctions.
The proposal is seen as a significant step towards regulating the stablecoin industry, which has been awaiting clear guidelines on how to operate within the US financial system. The regulations are expected to provide a framework for stablecoin issuers to operate safely and reliably, while also protecting the US financial system from national security threats.