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1h ago

U.S. Treasury Invites Feedback on DeFi Identity Checks in Stablecoin Rules

Running until October 17, the public comment period will gather industry feedback on integrating digital identity checks into DeFi smart contracts.

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Overview

  • The Treasury’s request for comment solicits feedback on application programming interfaces, artificial intelligence and blockchain monitoring alongside digital identity verification to curb illicit finance in crypto.
  • One proposal would embed KYC and AML checks directly into DeFi smart contracts, a move that critics warn could erode pseudonymity and stifle innovation.
  • Banking groups led by the Bank Policy Institute contend that stablecoin yield loopholes could divert as much as $6.6 trillion in deposits from traditional lenders and are pressing regulators to extend oversight to affiliates and exchanges.
  • The GENIUS Act requires stablecoin issuers to maintain full reserves, submit to regular audits, meet transparency standards and accept federal oversight for the largest firms.
  • After the October 17 deadline, the Treasury will report its findings to Congress and may draft formal regulations ahead of next year’s statutory enforcement dates.