U.S. banking trade groups argue secondary market gaps enable illicit activity, calling for clearer AML rules for stablecoin transactions post-issuance.
U.S. banking trade groups are pushing regulators to clarify oversight of stablecoin transactions beyond issuance, citing risks in secondary markets. The Bank Policy Institute and The Clearing House argued in joint letters that current rules fail to address illicit activity occurring after stablecoins are issued, particularly in decentralized finance (DeFi) and exchanges.
The groups noted that most illicit finance involving stablecoins happens in secondary markets, where issuers often lack visibility. They urged regulators to prioritize flexibility, allowing banks to focus on high-risk threats rather than rigid compliance measures. The letters targeted agencies like FinCEN and OFAC, which have acknowledged secondary market vulnerabilities.
The push follows warnings from crypto firms earlier this week that broad anti-money laundering (AML) rules could drive regulated dollar-pegged tokens out of DeFi. Regulators are currently weighing how to implement stablecoin AML frameworks.