As federal regulators draft anti-money laundering and sanctions regulations for payment stablecoin issuers, they need to address the financial crime risks posed by secondary market payment stablecoin activities, the American Bankers Association said.
In April, the Financial Crimes Enforcement Network and the Office of Foreign Assets Control – both part of the Treasury Department – proposed a rulemaking to establish anti-money laundering/countering the financing of terrorism and sanctions compliance standards for stablecoin issuers. In a letter to the agencies, ABA said any rulemaking must also cover secondary market payment stablecoin activities, such as individuals purchasing payment stablecoins from an intermediary.
“Without greater clarity around the obligations of secondary market actors, regulated financial institutions will face challenges in assessing and managing the risks associated with payment stablecoins,” ABA said.
The association had four recommendations:
- The agencies should adopt an examination framework under which all three categories of issuers are not only subject to equivalent Bank Security Act regulation, but examined for AML/CFT and sanctions compliance by the same federal banking agencies.
- FinCEN should apply the “deemed compliance” logic to the stablecoin issuer subsidiaries of insured depository institutions, allowing them to rely on their parent bank’s enterprise-wide AML/CFT program.
- The final rule should expressly confirm that it imposes obligations solely on stablecoin issuers and does not reach reserve custodian banks or other financial institutions providing services to those issuers.
- The agencies should define key terms – including “block,” “freeze,” “burn,” “reject,” “seize,” and “wallet” (or “wallet address”) – and ensure they are congruent with terms in existing OFAC regulations.
