The US Department of the Treasury has unveiled a proposal that would require stablecoin issuers to establish stringent controls to detect and prevent illicit transactions, including the ability to block, freeze, and reject suspicious activities. The proposed rules, jointly introduced by the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), aim to bring stablecoin firms in line with traditional financial institutions in terms of anti-money laundering and combating the financing of terrorism. The proposal is part of the implementation of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which was passed last year. The rules would require stablecoin issuers to implement risk-based safeguards, monitor transactions, and report suspicious activities to the authorities.
The proposal is open for public comment and may undergo revisions before being finalized. The Treasury Department's effort is seen as a significant step towards regulating the stablecoin industry, which has been seeking clarity on its regulatory obligations. The proposal is expected to have a significant impact on the industry, with major players such as Tether, Circle, and Ripple likely to be affected.
The rules would also require stablecoin issuers to cooperate with the authorities in identifying and preventing illicit activities, including those related to sanctions. The proposal is part of a broader effort by the US government to regulate the cryptocurrency industry, with other regulatory bodies such as the Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency also introducing their own proposals.
The GENIUS Act is expected to come into full effect by 2027, and firms are already taking steps to comply with the new regulations, including seeking charters and partnerships to operate in the stablecoin space.