In brief
- The Federal Reserve proposed new rules requiring U.S. crypto firms to verify stablecoin users.
- Former Fed Chair Jerome Powell backed the proposal. Current Chair Kevin Warsh abstained without explanation.
- Some officials warned about the risks posed by the rules’ exemption for decentralized protocols.
The Federal Reserve on Thursday issued a proposed rulemaking dictating how American crypto firms will have to evaluate customers and discourage money laundering now that stablecoins have been formally legalized.
The rulemaking, proposed jointly with President Donald Trump’s administration agencies including the Treasury Department and the FDIC, interprets how to implement provisions of the $GENIUS Act pertaining to customer identification requirements. The $GENIUS Act, enacted last summer, formally legalized the issuance of stablecoins—cryptocurrencies pegged to the value of the U.S. dollar.
All of the Fed’s governors, including former Fed Chair Jerome Powell, voted in favor of today’s proposed rulemaking—with one notable exception: President Trump’s new Fed Chair, Kevin Warsh, abstained.
Warsh issued no statement explaining his abstention. A Fed spokesperson did not immediately respond to Decrypt’s request for comment.
The proposed rulemaking would ensure that “digital asset service providers”—defined as any U.S. individual or entity engaged in the business of exchanging, transferring, or custodying crypto—must take certain precautions to ensure they are not facilitating stablecoin-related services for potentially criminal enterprises.
Entities must verify customers’ names, birthdates, and addresses, for instance, and also cross-reference the data with lists of terrorists and blacklisted groups provided by the U.S. government.
Notably, decentralized protocols are exempt from these requirements—a feature of the rulemaking (and the $GENIUS Act) that prompted Fed Governor Michael Barr to issue a critical statement Thursday morning, despite his vote in favor of the proposed rulemaking.
“I support the issuance of this proposal,” Barr said. “I remain concerned, however, that the $GENIUS Act regulatory framework does not do enough so far to address the risks of illicit finance conducted through secondary market transactions in payment stablecoins.”
The proposed rulemaking will now enter a 60-day period of public comment.
