Bank Groups Urge AML Rules for Stablecoin Markets
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- Bank Policy Institute and The Clearing House submitted joint comment letters urging U.S. regulators to expand AML oversight to stablecoin secondary markets and move away from check‑the‑box compliance.
- The comment letters argue that most illicit finance involving payment stablecoins occurs after issuance and that issuers have less visibility into secondary‑market transactions than primary ones.
- Paradigm and the Hyperliquid Policy Center warned that broad AML rules could push regulated dollar‑pegged tokens out of DeFi, contending issuers should not be held liable for post‑issuance activity they cannot control.
- Charles d’Haussy said the letters overlook that each USDC or USDT transfer runs through the issuer’s master smart contract, which can freeze and blacklist addresses in real time, and that many DeFi platforms already screen on‑chain trades.
- Offshore exchanges and unhosted wallets operating outside FATF’s Travel Rule, he added, represent the real enforcement gap rather than the compliant DeFi infrastructure.
- Dominick John noted that broader AML oversight could narrow the gap between crypto and traditional finance, yielding stronger KYC checks, clearer rules, and larger institutional flows.
Why it matters: Banks and custodians stand to gain clearer compliance guidance and reduced enforcement risk, while DeFi platforms risk tighter KYC and transaction controls; issuers avoid being held liable for post‑issuance activity, but regulators may close loopholes exploited by offshore exchanges and unhosted wallets.
