Fed Pitches Stablecoin ID Checks—Warsh Goes Rogue With the Lone Abstain 🪙

The U.S. Federal Reserve on Thursday issued a proposed rulemaking requiring crypto firms to verify customers and screen for illicit finance activity tied to stablecoins, the digital tokens pegged to the U.S. dollar that were formally legalized under the GENIUS Act last summer. The rule was proposed jointly with the Treasury Department, the FDIC, FinCEN, the OCC, and the NCUA, and interprets how digital asset service providers—defined as any U.S. individual or entity engaged in exchanging, transferring, or custodying crypto—must implement the customer identification provisions of the GENIUS Act. Under the proposal, entities would be required to verify customers' names, birthdates, and addresses and cross-reference that data against U.S. government lists of terrorists and blacklisted groups, with compliance standards described as comparable to those applied to banks and credit unions.

The Fed Board voted in favor of the proposal, with all governors supporting it—including former Fed Chair Jerome Powell—with one exception: President Donald Trump's new Fed Chair, Kevin Warsh, who abstained. Warsh issued no statement explaining his abstention, and a Fed spokesperson did not immediately respond to a request for comment. Fed Governor Michael Barr voted in favor but attached a critical statement, saying, "I support the issuance of this proposal. 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." Decentralized protocols are exempt from the new requirements, a carve-out Barr flagged as a gap in his remarks. The proposal will now enter a 60-day public comment period following publication in the Federal Register.

The rulemaking arrives as the Federal Reserve held its benchmark interest rate steady on Wednesday, maintaining a target range for the federal funds rate of 3.5% to 3.75%—the fourth hold of the year—while policymakers monitor inflation and economic data complicated by geopolitical tensions in the Middle East involving the U.S., Israel, and Iran. NCUA Chairman Kyle Hauptman separately welcomed the joint proposal, framing it as the next step in finalizing stablecoin oversight under the GENIUS Act framework.

Separately, Ireland's government on Thursday published a new National Risk Assessment on money laundering, terrorist financing, and proliferation financing, accompanied by a 30-point action plan. The assessment identifies the misuse of crypto-assets as one of a range of evolving threats, citing increasingly sophisticated fraud and emerging technologies.