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The largest US banking lobby has asked federal regulators to extend customer identification requirements beyond stablecoin issuers to the exchanges and platforms where tokens actually change hands. The Bank Policy Institute and The Clearing House filed a joint comment letter as the window closed on the proposed rule for permitted payment stablecoin issuers.
Their request is specific. FinCEN and the banking agencies should clarify that digital asset service providers establishing account relationships with customers to facilitate stablecoin activity are themselves subject to CIP requirements under the Bank Secrecy Act.
The proposal as drafted stops at the issuer's door, covering only primary-market activity when a customer mints or redeems directly. Everything that happens afterward, across exchanges, custodians, and wallets, falls outside it.
BPI members include JPMorgan, Bank of America, Wells Fargo, and Citi. The Clearing House is owned by the largest US commercial banks.
Key Takeaways
- BPI and The Clearing House filed a joint comment letter asking regulators to reach secondary-market platforms.
- The proposed rule covers primary-market activity only, applying when customers deal directly with an issuer.
- FinCEN itself has acknowledged that most illicit stablecoin activity occurs on secondary markets.
- The American Bankers Association filed separately, arguing the formal relationship standard does not fit issuer business models.
- Agencies warned a broader rule could cripple the industry by creating a global identification obligation.
What the Banks Are Asking For
The letter frames the request as clarification rather than expansion. BPI argues that platforms interacting directly with retail customers already establish the kind of account relationship that triggers CIP obligations elsewhere in the Bank Secrecy Act framework, and that regulators should say so explicitly.
The tone was constructive rather than adversarial. BPI said FinCEN and the banking agencies made a constructive effort to ensure stablecoin platforms know their customers, and that targeted clarifications would strengthen the proposal by aligning it with the technical features of payment stablecoins.
The American Bankers Association filed its own letter with a different angle. It argued CIP obligations should not be limited to customers with whom issuers have a formal relationship, describing that as a banking concept that does not fit issuer business models, and said the rule should state that purchasing or redeeming directly from an issuer requires opening an account.
The consistency of the banking position is notable. BPI and The Clearing House made the same argument on the FinCEN and OFAC anti-money laundering proposal in June and on the FDIC compliance standards in August, which we covered in our FDIC compliance standards analysis.
The Agencies' Counterargument
Regulators anticipated this objection and addressed it directly in the proposal. Treating every stablecoin transfer as creating a customer relationship with the issuer would impose what they called a global obligation to collect and verify user information, which they said could cripple the industry.
The technical reasoning is harder to dismiss than the policy one. A smart contract interaction does not yield the information needed to verify identity, so a CIP obligation triggered by any transfer would be unenforceable regardless of how desirable it might be.
The agencies also acknowledged the gap rather than denying it. FinCEN has recognised that most illicit stablecoin activity occurs on the secondary market, and the proposal explicitly requested comment on whether the requirements should be refined to account for it.
Dissent came from inside the system as well. Federal Reserve Governor Michael Barr said the GENIUS Act framework does not do enough so far to address illicit finance conducted through secondary-market transactions, which gives the banks' argument institutional backing beyond the lobby itself.
Why This Matters for Stablecoins
The competitive dimension is impossible to separate from the compliance one. Banks operate under full CIP obligations, and every requirement extended to exchanges narrows a cost differential that currently favours crypto platforms.
That does not make the argument wrong. Enforcement cases this year have repeatedly traced large flows through secondary markets that no primary-market rule would have touched, including the $6.3 billion moved through the sanctioned exchange Shelbit with roughly 88% settling on Tron in dollar stablecoins.
The counterpoint from the industry is that issuer-level controls already work. Tether has frozen hundreds of millions in sanctioned addresses this year, and that capability operates regardless of whether a holder ever completed a CIP process, a pattern we tracked in our June 2026 stablecoin report.
The practical consequence would fall on exchanges. Extending CIP to platforms with direct retail relationships would mean identity verification at a layer that currently operates under money transmitter rules rather than bank-equivalent standards.
What Happens Next
FinCEN and the five agencies now review the comment file before issuing a final rule. Any decision to extend the perimeter would likely require a separate rulemaking rather than an adjustment to this one, given the scope difference.
The timeline pushes well into next year. A final CIP rule would take effect twelve months after issuance, so compliance obligations begin in 2027 at the earliest even on the current narrow scope.
The broader framework remains unfinished around it. GENIUS Act rulemaking has run behind schedule since the July 18 statutory deadline, a delay we tracked in our GENIUS Act rulemaking analysis, with full implementation not expected until 2028.
The unresolved question is whether regulators want a rule that reaches secondary markets or one that can actually be complied with. Those may not be the same rule, and the comment file now contains detailed arguments on both sides.
Conclusion
The banks have made the strongest available version of an argument regulators had already flagged themselves. Most illicit stablecoin activity happens after tokens leave the issuer, and a rule scoped to issuers cannot address it.
The agencies have made an equally serious argument in return. A requirement that cannot be technically implemented is not a safeguard, and a global identity obligation on bearer instruments moving through smart contracts is closer to a prohibition than a compliance standard.
What the filing changes is that the question is now formally on the record from the institutions with the most to gain from answering it one way. How FinCEN resolves it will set the perimeter for stablecoin compliance in the United States for years.
FAQ:
1. What did the banking groups ask for?
The Bank Policy Institute and The Clearing House filed a joint comment letter asking FinCEN and the federal banking agencies to clarify that digital asset service providers establishing account relationships with customers to facilitate stablecoin activity are subject to customer identification program requirements under the Bank Secrecy Act.
2. What does the proposed rule currently cover?
The rule applies to primary-market activity only, meaning direct interaction between a customer and a permitted payment stablecoin issuer through issuing, converting, redeeming, repurchasing, burning, or reissuing tokens. Secondary-market activity, where a user's only interaction with the issuer is through a smart contract, falls outside its scope.
3. Why did the agencies limit the rule to primary markets?
FinCEN and the agencies said treating every stablecoin transfer as creating a customer relationship would impose a near-impossible global obligation to collect and verify user information, which they warned could cripple the industry. They also noted that a smart contract interaction does not yield the information needed to verify identity.
4. Who is behind the Bank Policy Institute?
BPI is a trade association whose members include JPMorgan, Bank of America, Wells Fargo, and Citi. It filed jointly with The Clearing House, a payments company owned by the largest US commercial banks, and both have made similar arguments on prior GENIUS Act rulemakings including the FinCEN and OFAC anti-money laundering proposal and the FDIC compliance standards.
5. When will the rule be finalised?
The comment period closed on August 21, 2026, and FinCEN and the five agencies now review submissions before issuing a final rule. Any final CIP rule would take effect twelve months after issuance, so compliance obligations would not begin until 2027 at the earliest.
Disclaimer:
This content is provided for informational and educational purposes only and does not constitute financial, investment, legal, or tax advice; no material herein should be interpreted as a recommendation, endorsement, or solicitation to buy or sell any financial instrument, and readers should conduct their own independent research or consult a qualified professional.
