The US Department of the Treasury has unveiled a proposal that would require stablecoin issuers to establish comprehensive controls to detect and prevent illicit transactions, including the ability to block, freeze, and reject suspicious activities. The proposal, jointly developed 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 (AML/CFT) regulations. The proposed rules would also require stablecoin issuers to implement risk-based safeguards to identify and report potentially sanctioned transactions. The move is part of the US government's efforts to regulate the stablecoin industry, following the passage of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act.
The proposal is open for public comment and is expected to be finalized by 2027. The regulations would apply to stablecoin issuers, including major players such as Tether, Circle, and Ripple, and would require them to maintain robust AML/CFT programs, including the ability to identify and report suspicious transactions. The proposal also emphasizes the importance of cooperation between stablecoin issuers and government agencies in combating illicit finance. The US Treasury Secretary stated that the proposed regulations would protect the US financial system from national security threats while allowing American companies to continue innovating in the stablecoin ecosystem.
The proposal has been welcomed by the stablecoin industry, which has been seeking clarity on regulations to establish their assets as safe and reliable. However, some tensions remain in the wider crypto community, which has historically been skeptical of government regulation.
The proposed regulations are part of a broader effort by US financial regulators to establish guardrails for the crypto industry, with other agencies, such as the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp, also introducing their own proposals.