#The Federal Reserve may require stablecoins to implement bank-level KYC


The Federal Reserve and regulators are pushing for stablecoin rules under the GENIUS Act. A proposal was introduced in April, with new developments in June: requiring licensed payment stablecoin issuers (PPSI) to establish bank-level AML/CFT procedures, including written KYC, customer due diligence, beneficial ownership information, SAR reporting, sanctions compliance, and more.

USDT (Tether), with its unconventional origins, faces higher adaptation costs; USDC (Circle), being more compliant from the start, finds it relatively easier. But for ordinary users, on-chain experience will worsen—KYC will be strengthened during mint/redeem processes, privacy will decrease, and DeFi freedom will be limited.

I personally dislike this approach of “sacrificing retail users for institutions.” Compliance bringing in institutional money is good, but on-chain freedom is gradually being eroded. USDT users might suffer even more, with the highest adaptation costs. If fully implemented, on-chain trading volume will definitely be affected. Are you ready to be banked?
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