Powell Backs Fed Stablecoin ID Rules; Chair Warsh Abstains
The Fed proposed a rule requiring U.S. crypto firms to verify stablecoin users’ identities. Former chair Jerome Powell supported it; new chair Kevin Warsh abstained.
The Federal Reserve on Thursday proposed a rule that would require U.S. crypto firms to verify the identities of users who exchange, transfer or hold stablecoins for others. The proposal drew support from former Fed chair Jerome Powell; current Fed chair Kevin Warsh abstained from the vote and did not provide an explanation.
The rulemaking was issued jointly with the Treasury Department and the FDIC and interprets customer identification provisions in the GENIUS Act, which legalized dollar-pegged stablecoins last summer. Under the proposal, any U.S. person or entity engaged in exchanging, transferring or custodying crypto on behalf of others would be designated a “digital asset service provider” and subject to customer verification rules.
Designated providers would need to collect and verify customers’ names, dates of birth and addresses. Firms would also be required to screen collected information against U.S. government terrorist and sanctions lists to limit the risk of illicit finance linked to stablecoins.
The Fed framed the requirements as measures to prevent stablecoin-related services from being used to facilitate criminal activity and to align oversight responsibilities among federal agencies. A Fed spokesperson did not immediately provide additional comment on Warsh’s abstention.
Decentralized, noncustodial blockchain protocols are excluded from the proposed requirements. Fed Governor Michael Barr supported issuing the proposal but warned that the GENIUS Act framework “does not do enough so far to address the risks of illicit finance conducted through secondary market transactions in payment stablecoins.” Barr added that he remains concerned about secondary-market activity that could evade provider-based controls.
The proposal will be open for a 60-day public comment period. Regulators will review feedback from the public and industry before deciding whether to finalize the rule. If adopted, U.S. crypto firms classified as digital asset service providers would need to implement identity‑verification processes and screening systems, which could lead to changes in compliance, custody and onboarding procedures across the industry.
Next steps hinge on public comments and on how regulators address the exemption for decentralized protocols.
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