The Blockchain Association is asking U.S. regulators to keep customer-identification requirements for permitted payment stablecoin issuers focused on their direct customers, rather than extending those duties across the wider stablecoin ecosystem.
The industry group submitted comments on a proposed customer identification framework under the GENIUS Act, arguing that regulators should provide clearer boundaries around who qualifies as a customer and when an account is established. The debate comes as regulators work to establish how traditional anti-money laundering and know-your-customer requirements should apply to stablecoins and the people and businesses that use them.
Blockchain Association draws a line between issuers and stablecoin users
The Blockchain Association’s position centers on the distinction between a stablecoin issuer’s direct customers and people who use the token after it has been issued. In its comment on the proposed permitted payment stablecoin issuer customer identification program, the association says customer identification requirements should generally apply when a permitted payment stablecoin issuer has a direct relationship with a customer. This can include activities such as the issuance or redemption of stablecoins.
The association is seeking a clearer boundary for transactions that take place afterward. Once stablecoins have been issued, they can be transferred between wallets and users without each participant having a direct relationship with the original issuer. The group’s position is that those secondary-market transactions should not, by themselves, create a customer-identification obligation for the issuer. The point was also highlighted by the association in its X posts, which accompanied its comments on the proposed framework.
The distinction is important because stablecoin transactions can involve several parties. An issuer may have a direct relationship with an exchange or another customer, while the stablecoin can subsequently move between other wallets. Under the association’s approach, the issuer’s KYC responsibility would remain tied to its own customer relationship rather than extending automatically to everyone who later receives the token.
A discussion on Reddit reflects some of the questions users have about this distinction. The original post describes the proposed requirements as similar to bank-style KYC, while one commenter points out that identity verification occurs at a particular point in time and does not necessarily provide visibility into what happens after funds move through the wider ecosystem. The discussion illustrates the broader question of whether identifying customers at the issuer level is sufficient for monitoring activity involving stablecoins further along the transaction chain.
Group Seeks Clearer Definitions And Flexible Compliance Rules
Other than the scope of customer identification, the Blockchain Association is asking regulators to clarify several definitions that could determine when the proposed requirements apply. In its comment letter, the group raises questions around terms including “customer” and “account.” It also addresses how certain digital asset businesses and individual transactions should be treated under the framework.
A broad definition could cause an interaction that does not establish an ongoing relationship with an issuer to be treated like a traditional customer account. The association is therefore asking for clearer treatment of certain one-time activities, including interactions involving redemption. The group is also calling for flexibility in how issuers meet their identification requirements. Rather than prescribing a single technical method for verifying customers, its comments support allowing issuers to use different approaches that satisfy the regulatory standard.
The association has also raised the issue of coordinating the customer identification requirements with other compliance rules being developed under the GENIUS Act. Its comments argue for an implementation approach that avoids unnecessary duplication for regulated issuers.
The association summarized its position in the 3rd X post, following its earlier posts about the proposed rules. The comments do not seek to remove KYC requirements for permitted stablecoin issuers. Instead, they focus on how these requirements should be defined and where an issuer’s responsibility should end. The resulting rules will determine how regulators distinguish between a direct issuer-customer relationship and transactions involving stablecoins after they enter circulation.
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