The Bank Policy Institute (BPI) — a member organization comprising banking giants such as JPMorgan, Bank of America, Wells Fargo, and Citi, among others — has proposed extending identity verification requirements to the secondary markets for stablecoins.
In a comment letter regarding the "Customer Identification Program for Issuers of Hosted Stablecoins" proposed by the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN), the group called for applying the provisions of the Customer Identification Program (CIP) to exchanges and other platforms that directly interact with retail customers and are not covered by supervision under the proposed rule.
BPI emphasized that these organizations "play a significant role in the hosted stablecoin ecosystem, facilitating a substantial portion of hosted stablecoin buying and selling transactions," where, according to the association, most illicit activity related to stable assets occurs.
The letter recommended clarifying in the proposed rule that exchanges and other platforms that establish customer relationships by opening accounts to facilitate stablecoin transactions "are subject to CIP requirements under the Bank Secrecy Act (BSA)."
If this provision is included in the rule, it would impose an additional burden on issuers, as the proposed rule itself explains that extending information collection to secondary markets would be "practically infeasible," even if it would yield significant benefits.
Decentralized exchanges, referred to in BPI's recommendations as "various types of decentralized market participants," would also fall under secondary market oversight.
Nevertheless, the proposed rule acknowledges that for secondary market customers trading stablecoins directly on the blockchain, identities "often remain anonymous or pseudonymous."
"Blockchains are inherently decentralized algorithms, so there is often no central node where identifying information is collected," the rule explains, adding that "issuers have limited ability to collect information about customers on the secondary market."
In May, BPI, along with other banking organizations, opposed the current version of the Digital Asset Market Structure Act because it did not address "loopholes" that could be exploited to distribute activity-based yields to stablecoin users.
