Summary
- The Bank Policy Institute and The Clearing House assert that anti-money laundering (AML) regulations for stablecoins should extend to transactions occurring after tokens are issued.
- They called on regulators to prioritize higher-risk activities over mere compliance checks.
- Industry experts highlighted the necessity of addressing AML gaps in stablecoins without placing accountability on firms lacking oversight, as reported to Decrypt.
U.S. banking associations are urging regulators to clarify oversight of stablecoin transactions post-issuance, marking a new chapter in the ongoing policy debate. Earlier this week, crypto companies expressed concerns that extensive anti-money laundering regulations might drive regulated dollar-backed tokens out of the decentralized finance (DeFi) landscape.
In two joint comment letters released on Wednesday, the Bank Policy Institute and The Clearing House criticized existing regulations for not adequately addressing the responsibilities of DeFi firms, specific digital asset custodians, and exchanges. They contend that the majority of illicit activities take place after tokens are issued, hence the importance of oversight in secondary markets as regulators consider how to enforce stablecoin AML guidelines.
RELEASE: A More Effective AML Regime Puts Flexibility First
Read the letter from BPI and The Clearing House: https://t.co/t3HREzmvUP
— Bank Policy Institute (@bankpolicy) June 10, 2026
In their letters, the banking groups advocated for a regulatory approach centered on “flexibility,” allowing banks to direct their resources towards “the most pressing threats” rather than merely fulfilling compliance requirements. They emphasized the need for addressing deficiencies in the regulation of secondary stablecoin markets.
Within the stablecoin letter, the groups acknowledged that the Financial Crimes Enforcement Network and the Office of Foreign Assets Control have “correctly recognized” that “most illicit finance involving payment stablecoins occurs on the secondary market.” They noted that permitted payment stablecoin issuers “may have less information on secondary market transactions than on primary market transactions.”
Stablecoins are cryptocurrencies designed to maintain a value pegged to another asset, typically a fiat currency like the U.S. dollar. Issuers are responsible for creating and redeeming these tokens and managing the reserves that back them. Under the GENIUS Act, these issuers can be classified as permitted payment stablecoin issuers, allowing them to issue payment stablecoins in the United States.
This week, crypto investment firm Paradigm and the Hyperliquid Policy Center warned that sweeping AML regulations could expel regulated dollar tokens from the decentralized finance ecosystem. They argued that stablecoin issuers should not be held accountable for activities they cannot oversee or control once tokens enter secondary markets.
Regulatory Checks and Controls
The letters from the banking and crypto sectors highlight a rising conflict regarding how regulators should approach stablecoin transactions after issuance without assigning liability to issuers for transactions they cannot monitor.
Charles d’Haussy, CEO of the dYdX Foundation, pointed out that the submissions overlook existing compliance mechanisms that are already incorporated into major stablecoins and utilized by DeFi platforms.
“What is missing from both submissions is a basic technical fact: AML monitoring in stablecoins does not stop at issuance,” d’Haussy remarked to Decrypt.
Every transfer of USDC or USDT is processed through the issuer’s master smart contract, which employs freeze and blacklist controls “executing in real time,” d’Haussy explained. He added that most prominent DeFi platforms also conduct on-chain trade screenings. In his opinion, this makes the regulatory gap “narrower than either letter acknowledges.”
“The real enforcement challenge lies with offshore exchanges and unhosted wallets that operate outside the FATF’s Travel Rule framework, not with the compliant DeFi infrastructure that is already fulfilling its role,” d’Haussy stated.
In addition to the technical aspects of monitoring, expanded oversight could facilitate the growth of stablecoin markets by “narrowing the gap” between crypto markets and traditional finance, according to Dominick John, an analyst at Zeus Research, who shared his insights with Decrypt.
For DeFi firms, custodians, and exchanges, enhanced oversight could lead to stricter KYC checks and transaction regulations, resulting in “clearer rules, enhanced trust, and increased institutional flows,” he added.