US Banks Urge Regulators to Tighten KYC Rules for Stablecoin Secondary Markets

U.S. banks have urged regulators to apply know-your-customer requirements to the secondary market for stablecoins, including crypto exchanges.

Bitcoin.com reported on Aug. 23 that the Bank Policy Institute recently submitted a comment letter to the Financial Crimes Enforcement Network, the U.S. Treasury bureau responsible for combating financial crime. BPI's members include major U.S. banks such as JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co.

BPI said customer identification program requirements should also cover crypto exchanges and platforms that are not currently within FinCEN's supervisory scope. Any company that manages customer accounts and supports stablecoin transactions should be subject to identity verification obligations under the Bank Secrecy Act, it wrote.

"Secondary-market operators such as crypto exchanges handle substantial trading volume in the stablecoin ecosystem," BPI said. "Most illicit activity also occurs in this area."

BPI also urged regulators to bring decentralized finance operators, including decentralized exchanges, under supervision.

In May, BPI also argued that the U.S. crypto market structure bill known as the CLARITY Act should bar stablecoin rewards. Without that restriction, exchanges or affiliated companies, rather than issuers, could effectively offer users rewards resembling interest, BPI said.