The US Department of the Treasury has unveiled a joint proposal with the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), outlining stringent controls for stablecoin businesses. These controls include the ability to block, freeze, and reject suspicious transactions, as well as internal protections to comply with the Bank Secrecy Act. 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 will be open for revisions before its finalization. The agencies acknowledge that financial institutions are best positioned to identify and mitigate their own risks, and the proposal focuses on effectiveness. A firm with adequate money-laundering prevention measures will generally be safe from enforcement actions unless it demonstrates a significant or systemic failure to maintain the program.
Stablecoin issuers will be expected to halt flagged transactions, devote more attention to high-risk customers and activities, and scour their records for any activity tied to individuals or entities flagged by FinCEN. They will also be required to act as allies in the agency's pursuit of entities identified as primary money laundering concerns. On the sanctions front, OFAC will require stablecoin issuers to implement risk-based safeguards for stablecoin activity on primary or secondary markets, spotting and rejecting transactions that may violate US sanctions. Treasury Secretary Scott Bessent stated that the department's efforts will protect the US financial system from national security threats without hindering American companies' ability to innovate in the payment stablecoin ecosystem.
The crypto industry, including stablecoin leaders such as Tether, Circle, Ripple, and World Liberty Financial, has been awaiting regulation to establish their assets as safe and reliable. The proposal is part of a broader effort to regulate the crypto industry, with the decentralized finance (DeFi) sector still needing to be addressed. The GENIUS Act is set to take full effect by 2027, and firms are already pursuing charters and partnerships to get involved in stablecoins. The Treasury Department's proposal is a significant step towards regulating the stablecoin industry, and its implementation will have a profound impact on the future of the crypto market.