The Federal Reserve Board on Thursday proposed the introduction of a customer ID program that would hold stablecoin issuers to the same regulatory standards as traditional banks and credit unions. The development comes at a time when the adoption of stablecoins and their integration into the traditional banking fabric is visibly expanding.
Fed Governor Michael Barr has previously expressed worries that the stablecoin-focussed GENIUS Act falls short in addressing risks related to illegal finance. This proposed customer ID verification system is expected to bring more transparency into stablecoin-fueled finances.
The proposal has been backed by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the National Credit Union Administration.
In an official statement. “the proposal seeks to provide an appropriately tailored regime that mitigates potential illicit finance risks while protecting the U.S. financial system and national security interests.”
As of now, an elaborate blueprint of how exactly would this system shape-up remains unclear. But, since the Feds wish for the system to resemble that deplolyed by traditional banks, the system could use advanced AI systems to verify physical identification of stablecoin users along with some form of a biometric layer to prevent fraudsters from exploiting stolen IDs.
For now, the Federal Reserve Board has given a 60-day period inviting comments on the proposal.
Source: Federal Reserve
More details on the proposal are expected close to September. Meanwhile, U.S.-based traditional banks will continue exploring stablecoin-focussed services to cater to the diversifying need of payment options by their retail and institutional clients.
Stripe, Visa, and Mastercard are among TradFi giants working to launch a stablecoin platform to facilitate cross-bank transactions using these digital assets.
