SIFMA Urges FinCEN and OFAC to Clarify Stablecoin Rules

SIFMA urged FinCEN and OFAC to clarify and narrow their proposed AML and sanctions rules for "permitted payment stablecoin issuers."

In a comment letter on the joint FinCEN and OFAC proposed rulemaking to implement the GENIUS Act, SIFMA warned that some obligations (e.g. to block or freeze transactions in secondary markets) could be technically infeasible where payment stablecoin issuers lack sufficient visibility into transacting parties. SIFMA also asked to preserve issuer flexibility (e.g. to use different technologies and controls) add a liability safe harbor, and keep the program requirements risk-based.

On the recommendation to ensure that stablecoin issuers can fulfill their obligations, SIFMA said certain issuers often lack visibility into who holds their tokens once they trade in secondary markets and may not be able to "reject" a transaction already recorded on a blockchain. SIFMA said that the final rule should recognize those technical limits, place responsibility on other participants that have more information about wallet holders, and confirm that any freeze applies to the stablecoins, not the issuer's reserve assets. SIFMA also asked for guidance on "wrapped" or "cross-chain derivative" tokens, arguing responsibility should rest with the third party that issues them.

On the need for a safe harbor, SIFMA said issuers face civil-litigation risk if a good-faith freeze later proves mistaken, and urged the Treasury to support legislation - giving issuers a safe harbor like those under existing sanctions and anti-money-laundering laws.

On program design, SIFMA said the agencies should not impose heightened or bespoke obligations on stablecoin issuers and should exempt regulated issuers from duplicative beneficial-ownership onboarding.

SIFMA also asked for "travel rule" guidance related to payment stablecoin activity recommending "appropriately designed industry-developed solutions and standards as an acceptable means of compliance."