US agencies propose KYC rules for stablecoin issuers under GENIUS Act amendments

The Federal Reserve and several other US financial agencies want stablecoin issuers to run customer identity checks, keep the data, and screen users against sanctions and terrorism lists. For licensed US issuers such as Circle, that means stablecoin onboarding starts looking a lot more like a bank account opening process.

1. The proposal would add know-your-customer (KYC) requirements to the GENIUS stablecoin framework through amendments. Under the draft, US-licensed issuers would have to verify users when an account is opened, store the information collected, and screen against terrorism and sanctions lists.
2. For individuals, issuers would need to collect full name, date of birth, and residential address. For legal entities, the required data would include company registration details and address. Issuers would also need to request tax identification numbers or identity document data, and they would be allowed to use verification results previously obtained by banks and other financial institutions.
3. The draft also treats stablecoin issuers as financial institutions for purposes of compliance with terrorism financing and anti-money laundering (AML) rules. But the obligation is limited to direct interaction between the issuer and the customer. Secondary-market activity, including transactions through smart contracts, would not fall under the new requirements.
4. The rules would apply only to stablecoin issuers licensed in the US, including Circle, which issues USDC. Issuers without a US license, including Tether, the issuer of USDT, would remain outside the scope of the proposed regime.
5. Alongside the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) took part in drafting the amendments. Separately, the OCC published a draft reporting rule that would require issuers to disclose the composition and fair value of reserve assets weekly, and to provide quarterly data on the largest wallet holders, trading volumes, counterparties, and issuance and redemption volumes.

The Federal Reserve Board has also proposed removing “reputational risk” from the criteria banks use when deciding whether to serve clients, including crypto companies. For PSPs and banking partners, the direction of travel is clear: more formalized due diligence on the front end, more reporting on the back end.